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FORM 8-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
CURRENT REPORT
Pursuant to Section 13 or 15 (d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) May 17, 1996
WEST COAST ENTERTAINMENT CORPORATION
(Exact Name of Registrant as specified in its charter)
DELAWARE 0-333-00272 04-3278751
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(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification No.)
incorporation)
9990 Global Road, Philadelphia, Pa. 19115
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (215) 677-1000
N/A
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(Former name or former address, if changed since last report)
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Item 2 Acquisition or Disposition of Assets
Recent Acquisitions
On May 17, 1996, West Coast Entertainment Corporation (the "Company")
acquired from seven selling groups and four West Coast Video franchisees
(collectively, the "Sellers") a total of 172 video specialty stores, plus
franchisor's rights in regard to 20 franchised stores.
The Company intends to extend the West Coast Video name and logo and its
registered trademark The Movie Buff's Movie Store , as soon as practicable, to
the acquired stores (other than the 13 West Coast Video franchised stores,
which already operate under the West Coast Video trade name).
The Company also intends to integrate the acquired stores into the
Company's management information, telecommunications, management, marketing,
finance and accounting, entertainment purchasing, distribution, retail
operations and merchandising systems as soon as is feasible, at an estimated
cost of $0.9 million over an 18 month period following closing of the
acquisitions (the "Acquisitions"). The Company expects the aggregate costs of
converting the acquired stores to West Coast signage and format to be
approximately $2.3 million over an 18- month period following consummation of
the Acquisitions.
The terms of the Acquisitions were negotiated at arm's length. In
connection with the Acquisitions, certain of the Sellers and their affiliates
entered into consulting and/or employment agreements with the Company. These
include one person who has become Executive Vice President -- Corporate Retail
Operations and Development and a director of the Company and nine other persons
who have become Vice Presidents or Regional Vice Presidents, but have not become
executive officers or directors, at annual salaries ranging from $75,000 to
$210,000.
Set forth below is a brief description of each of the Acquisitions:
<TABLE>
<CAPTION>
Number of Owned
and Operated
Name of Seller(s) Stores Locations
- ----------------- --------------- ---------
<S> <C> <C>
Palmer Corporation and New York and New Jersey
certain affiliates
("Palmer Video")........ 43(1)
American Video, Inc. and Indiana, Kentucky and Ohio
certain affiliates
(collectively, "Red
Giraffe") .............. 31
</TABLE>
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<TABLE>
<S> <C> <C>
4 unaffiliated West Coast Massachusetts
Video(R) franchisees (the
"Massachusetts
Franchisees")........... 13(2)(3)
5 other unaffiliated Pennsylvania, Ohio, New Jersey,
selling groups.......... 85(4) Virginia, Arkansas, Oklahoma,
Texas, Louisiana and Florida
Total 172
</TABLE>
____________
(1) Includes (a) one store owned by 142nd Retail Associates, a partnership in
which the Company acquired the 51% partnership interest theretofore owned
by a subsidiary of Palmer Corporation while the remaining 49% partnership
interests continue to be owned by their present owners, William J. Krasny
and Cosmo Robles, neither of whom is affiliated with Palmer Corporation or
the Company, and (b) one store owned by 38th Retail Associates Limited
Partnership, in which the Company acquired the 50% general partnership
interest theretofore owned by a subsidiary of Palmer Corporation while the
remaining 50% limited partnership interest continues to be owned by the
estate of Abraham Stelnik, which is not affiliated with Palmer Corporation
or the Company.
(2) Includes four stores owned by HB Associates, Inc., two stores owned by Best
Entertainment, Inc., six stores owned by New Age Entertainment, Inc. and
one store owned by Video Innovators, Inc.
(3) Excludes four Massachusetts Franchisee stores which the company has an
option to purchase on or before August 1996, January 1997, March 1997 and
July 1997, respectively.
(4) Consists of 46 stores owned by Vidko Inc., Kobie-Co Movie Outlet and
Anthony Cocca's Videoland, Inc. (collectively, "Videoland"), 12 stores
owned by Video Giant, Inc. ("Video Giant"), 12 stores owned by A-Z Video
Systems, Inc. ("A-Z Video"), 12 stores owned by Showtime, Inc. ("Showtime
Video") and three stores owned by certain corporations under common control
("Video Video").
Financial statements for certain of the Sellers are listed in Item 7.
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Consideration Paid
In connection with the Acquisitions, the Company paid aggregate
consideration (excluding related costs) of $76.4 million, consisting of $52.4
million payable in cash and $24.0 million payable in shares of Common Stock
(1,843,720 shares valued for this purpose at the initial public offering price
of $13.00 per share in the Company's recent initial public offering (the "Public
Offering") which was consummated concurrently with the Acquisitions).
The following table sets forth the consideration paid for the stores
acquired in connection with the Acquisitions and the related indebtedness for
borrowed money of the Sellers that was assumed and repaid by the Company
concurrently with the closing of the Acquisitions:
<TABLE>
<CAPTION>
Cash Common Stock Type of
-------------------- ------------------
Amount %(1) Amount %(1) Total(2) Acquisition
-------------- ---- ----------- ----- -------------- -----------
<S> <C> <C> <C> <C> <C> <C>
Palmer Video $10,039,444 50% $10,039,484 50% $20,078,928(3) Merger
Red Giraffe 11,486,250(4) 70 4,838,886 30 16,325,136(4) Asset
(5) Purchase
4 Massachusetts
Franchisees 11,675,000(6) 100 11,675,000(6) Asset
Purchase
5 Other
Unaffiliated
Selling Groups:
A-Z Video(7) 4,300,000 100 4,300,000 Asset
Purchase
Showtime Video 3,500,000 100 3,500,000(5) Stock
Purchase
Video Giant 1,710,016 19 7,289,984 81 9,000,000(5) Merger
Video Video 2,500,000 100 2,500,000 Asset
Purchase
Videoland 7,200,000 80 1,800,006 20 9,000,006(5) Asset
----------- ----------- ----------- Purchase
Total $52,410,710 $23,968,360 $76,379,070
=========== =========== ===========
</TABLE>
___________
(1) Percentage of total consideration for each of the Acquisitions
represented by the cash component and by the stock component (if any),
respectively.
(2) Subject to subsequent post-closing adjustment based upon the amount by
which each acquiree's working capital, as defined, or cash available at
closing, or the amount of sick pay and vacation pay then accrued,
exceeded or was less than a specified amount and the amount of certain
prepaid rentals, insurance premiums and other prepaid expenses. Depending
upon the results of a post-closing review, the base price may increase
or decrease.
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A portion of the total purchase price was used to pay certain
outstanding accounts payable of certain Sellers.
(3) Excludes approximately $921,000 of liabilities of this Seller paid at
closing by the Company in accordance with the terms of the Merger
Agreement.
(4) Includes approximately $2.7 million of indebtedness for borrowed money of
the Red Giraffe group which was assumed and repaid by the Company.
(5) Excludes payments of cash and/or Common Stock to be made to these Sellers
at specified times following the respective opening dates of certain newly
opened stores included in the Acquisitions (four Red Giraffe stores, two
Showtime Video stores, one Video Giant store and 12 Videoland stores) in an
amount determined on the basis of certain financial measurements for such
stores for specified 12-month or other periods. The amount to be paid for
the Video Giant store has been determined to be $570,620, consisting of
$28,531 paid in cash and $542,089 payable in June 1996 in shares of Common
Stock (41,699 shares valued for this purpose at the initial public offering
price in the Public Offering of $13.00 per share). In preparing the pro
forma financial statements contained in the registration statement for the
Public Offering, the Company estimated the total of all such contingent
payments for the 19 stores at $3.4 million. Upon consummation of the
Acquisition of Showtime Video, the Company advanced $250,000 to such Seller
to defray certain build-out and operating expenses of these stores; such
advances will be applied as an offset against payments, if any, made in
respect of newly opened stores.
(6) Excludes $1,295,925 (11.1% of the purchase price payable to the Sellers in
these acquisitions) paid to the former owner of West Coast and its
affiliates (the "WCEI Companies") and Jules E. Gardner and Kenneth R.
Graffeo, two former executive officers of the WCEI Companies (who are now
executive officers of the Company), pursuant to the terms of the
acquisition by the Company of the franchise-related operating assets of the
WCEI Companies in July 1995.
(7) An executive officer of the Company, Donald R. Thomas, was an executive
officer of, and had a 2% equity interest in, this seller.
A portion of the net proceeds of the Public Offering, together with $1.7
million of borrowings under the Company's credit facility with PNC Bank, N.A.
which is described in Item 5 of this Report, was used to finance the cash
portion of the
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purchase price of the Acquisitions ($52.4 million, subject to adjustment as
described in the notes to the above table) and approximately $3.5 million of
acquisition costs and $0.3 million relating to the acceleration of obligations
to the former owners of the WCEI Companies (including the amounts described in
note (6) to the above table).
Item 5 Other Events
On May 17, 1996, the Company entered into a Credit Agreement with PNC Bank,
N.A. providing for a $60 million credit facility (the "Credit Facility"), a
portion of which has been used to refinance certain indebtedness of the Company
and an additional portion of which is currently available, subject to certain
conditions, for general corporate purposes and future acquisition financing. The
Credit Facility consists of a two-year revolving credit facility followed by a
three-year term loan. Borrowings under the facility are available for working
capital, capital expenditures, refinancing of previously existing indebtedness
and for certain permitted acquisition financing. The maximum amount available
for borrowing at any time will equal 2.75 times the Company's operating cash
flow (as defined for the purposes of the Credit Facility) during the previous
four quarters. At the Company's option, interest rates will vary from either
PNC Bank's base rate, as defined, to 1% above such base rate, or from the
Eurodollar rate, as defined, to 2.5% above such Eurodollar rate, in each case
depending on the ratio of the Company's total debt to operating cash flow, as
defined. Borrowings are secured by a first security interest in substantially
all of the Company's assets, including the stock of its subsidiaries. Borrowings
are subject to various conditions including compliance with certain financial
tests and ratios.
The outstanding principal amount of borrowings under the Credit Facility
was $4.8 million at May 17, 1996 and $4.8 million on the date of filing of this
Report.
Item 7. Financial Statements, Pro Forma Financial
Information and Exhibits.
(a) The financial statements of the businesses acquired, prepared pursuant
to Rule 3-05 of Regulation S-X, are included in the definitive
Prospectus forming part of the Registration Statement of the
Registrant on Form S-1 (File No. 333-00272) dated May 14, 1996 (pages
F-1 through F-155) filed as Exhibit 28 and are incorporated by
reference herein.
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(b) The pro forma financial information required pursuant to Article 11 of
Regulation S-X is included in the definitive Prospectus forming part
of the Registration Statement of the Registrant on Form S-1 (File No.
333- 00272) dated May 14, 1996 (pages 14 through 24) filed as Exhibit
29 and is incorporated by reference herein.
(c) Exhibits
EXHIBIT
NO. DESCRIPTION
10.1 - Asset Purchase Agreement by and among the Registrant, A-Z Video
Systems, Inc., Donald R. Thomas, Art H. Thomas, Harry M. Smith and
Dwight M. Thomas, dated as of January 11, 1996 (incorporated by
reference to Exhibit 10.1 to the Company's Registration Statement on
Form S-1 (File No. 333-00272))
10.2 - Asset Purchase Agreement by and among the Registrant, American Video,
Inc., Red Giraffe Video, Inc., The Lancaster Group, Inc., Nolan Allen,
Michael Cappy and P.R. Lancaster, dated as of January 11, 1996, the
first amendment thereto dated March 25, 1996 and waiver dated March
12, 1996 (incorporated by reference to Exhibit 10.2 to the Company's
Registration Statement on Form S-1 (File No. 333-00272))
10.3 - Asset Purchase Agreement by and among the Registrant, Anthony Cocca's
Videoland, Inc. and Anthony Cocca, dated as of January 11, 1996
(incorporated by reference to Exhibit 10.3 to the Company's
Registration Statement on Form S-1 (File No. 333-00272))
10.4 - Asset Purchase Agreement by and among the Registrant, Vidko, Inc.,
Kobie-Co Movie Outlet and Anthony Cocca, dated as of January 11, 1996
(incorporated by reference to Exhibit 10.4 to the Company's
Registration Statement on Form S-1 (File No. 333-00272))
10.5 - Asset Purchase Agreement by and between the Registrant and Best
Entertainment, Inc., dated as of January 11, 1996 (incorporated by
reference to Exhibit 10.5 to the Company's Registration Statement on
Form S-1 (File No. 333-00272))
10.6 - Asset Purchase Agreement by and between the Registrant and HB
Associates, Inc., dated as of January 11, 1996 (incorporated by
reference to Exhibit 10.6 to the Company's Registration Statement on
Form S-1 (File No. 333-00272))
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10.7 - Asset Purchase Agreement by and between the Registrant and New Age
Entertainment, Inc., dated as of January 11, 1996 (incorporated by
reference to Exhibit 10.7 to the Company's Registration Statement on
Form S-1 (File No. 333-00272))
10.8 - Merger Agreement by and among the Registrant, RKT Subsidiary Corp.,
Palmer Corporation and the Stockholders named therein, dated as of
January 11, 1996, as amended (the "Palmer Merger Agreement")
(incorporated by reference to Exhibit 10.8 to the Company's
Registration Statement on Form S-1 (File No. 333-00272))
10.9 - Stock Purchase Agreement by and among the Registrant, Showtime, Inc.
and Clemens J. Wadle, dated as of January 11, 1996 (incorporated by
reference to Exhibit 10.9 to the Company's Registration Statement on
Form S-1 (File No. 333-00272))
10.10 - Merger Agreement by and among the Registrant, RKT Merger Co., Video
Giant Inc. and the Stockholders named therein, dated as of January
11, 1996 (incorporated by reference to Exhibit 10.10 to the Company's
Registration Statement on Form S-1 (File No. 333-00272))
10.11 - Asset Purchase Agreement by and between the Registrant and Video
Innovators, Inc., dated as of January 11, 1996 (incorporated by
reference to Exhibit 10.11 to the Company's Registration Statement on
Form S-1 (File No. 333-00272))
10.12 - Asset Purchase Agreement by and among the Registrant, Video Video of
Westfield, Inc., Video Video of Parsippany, Inc., Video Video of
Chatham, Inc. and Harold Rosenbaum, dated as of January 11, 1996, and
the first amendment thereto dated February 19, 1996 (incorporated by
reference to Exhibit 10.12 to the Company's Registration Statement on
Form S-1 (File No. 333-00272))
10.13 - Form of Employment Agreement between the Registrant and Peter Balner
(incorporated by reference to Exhibit 10.25 to the Company's
Registration Statement on Form S-1 (File No. 333-00272))
10.14 - Letter Agreement regarding the payment of a fee to West Coast Video
Enterprises, Inc., West Coast Entertainment, Inc., West Coast
Services, Inc., Game Power Headquarters, Inc., Premier Advertising,
Inc., Jules Gardner and Kenneth Graffeo upon the purchase by West
Coast Franchising Company of Existing Franchises dated
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July 12, 1995 (incorporated by reference to Exhibit 10.34 to the
Company's Registration Statement on Form S-1 (File No. 333-00272))
10.15 - Form of Employment Agreement for Regional Vice Presidents
(incorporated by reference to Exhibit 10.50 to the Company's
Registration Statement on Form S-1 (File No. 333-00272))
10.16 - Form of Registration Rights Agreement to be executed by and between
the Registrant and the Purchasers named therein (incorporated by
reference to Exhibit 10.56 to the Company's Registration Statement on
Form S-1 (File No. 333-00272))
10.17 - Credit Agreement by and among the Registrant and its subsidiaries
(the "Borrowers") and PNC Bank, National Association, as agent for
itself and for certain other participants to be subsequently
ascertained (the "Lenders") dated May 17, 1996
10.18 - Revolving Credit Note dated May 17, 1996 issued by the Borrowers to
the Lenders
10.19 - Term Note dated May 17, 1996 issued by the Borrowers to the Lenders
10.20 - Pledge Agreement dated May 17, 1996 between the Borrowers and the
Lenders
10.21 - Security Agreement dated May 17, 1996 between the Borrowers and the
Lenders
23.1 - Consent of Price Waterhouse LLP
23.2 - Consent of Carpenter & Mountjoy, PSC
23.3 - Consent of Miller, Glusman, Footer & Magarick, P.C.
23.4 - Consent of KPMG Peat Marwick LLP related to Lancaster Group, Inc.
23.5 - Consent of KPMG Peat Marwick LLP related to Palmer Corporation
23.6 - Consent of KPMG Peat Marwick LLP related to Videosmith Incorporated
9
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99.1 - The financial statements of the businesses acquired, prepared pursuant
to Rule 3-05 of Regulation S-X, are included in the definitive
Prospectus forming part of the Registration Statement of the
Registrant on Form S-1 (File No. 333-00272) dated May 14, 1996 (pages
F-1 through F-155) filed as Exhibit 28 and are incorporated by
reference herein.
99.2 - The pro forma financial information required pursuant to Article 11 of
Regulation S-X is included in the definitive Prospectus forming part
of the Registration Statement of the Registrant on Form S-1 (File No.
333- 00272) dated May 14, 1996 (pages 14 through 24) filed as Exhibit
29 and is incorporated by reference herein.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
WEST COAST ENTERTAINMENT
CORPORATION
By: /s/ Donald R. Thomas
------------------------------
Donald R. Thomas
Chief Operating Officer
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EXHIBIT 10.17
CREDIT AGREEMENT
AMONG
WEST COAST ENTERTAINMENT CORPORATION,
VIDEOSMITH, INCORPORATED,
PALMER WEST COAST CORPORATION,
RKT MERGER CO.,
SHOWTIME, INC.,
VIDEO GIANT INC.
AND
WEST COAST FRANCHISING COMPANY
AS BORROWERS,
THE SEVERAL LENDERS FROM TIME TO TIME
PARTIES HERETO
AND
PNC BANK, NATIONAL ASSOCIATION,
AS AGENT
DATED AS OF MAY 17, 1996
$60,000,000 CREDIT FACILITY
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TABLE OF CONTENTS
Page
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SECTION 1. DEFINITIONS .................................................. 1
1.1 Defined Terms .................................................... 1
1.2 Other Definitional Provisions .................................... 21
SECTION 2. LOANS AND TERMS OF COMMITMENTS ............................... 21
2.1 Revolving Credit Commitments ..................................... 21
2.2 Revolving Credit Notes ........................................... 22
2.3 Procedure for Revolving Credit Loans ............................. 22
2.4 Term Loans ....................................................... 24
2.5 Term Notes ....................................................... 24
2.6 Procedure for Term Loans ......................................... 24
2.7 Repayment of Term Loans .......................................... 25
2.8 Fees ............................................................. 25
2.9 Interest Rates and Payment Dates ................................. 26
2.10 Default Interest ................................................. 26
2.11 Inability to Determine Interest Rate ............................. 27
2.12 Termination, Reduction and Extension of Commitments .............. 27
2.13 Optional Prepayment of Loans ..................................... 29
2.14 Mandatory Prepayments ............................................ 30
2.15 Illegality ....................................................... 31
2.16 Requirements of Law .............................................. 31
2.17 Taxes ............................................................ 33
2.18 Indemnity ........................................................ 34
2.19 Pro Rata Treatment of Loans and Payments;
Commitment Fees .................................................. 35
2.20 Payments ......................................................... 35
2.21 Conversion and Continuation Options .............................. 36
2.22 Minimum Amounts of Tranches; Maximum
Number of Tranches ............................................. 37
2.23 Use of Proceeds .................................................. 37
SECTION 3. REPRESENTATIONS AND WARRANTIES ............................... 37
3.1 Financial Condition .............................................. 37
3.2 No Change ........................................................ 38
3.3 Corporate Existence; Compliance with Law ......................... 38
3.4 Corporate Power; Authorization;
Enforceable Obligations .......................................... 39
3.5 No Legal Bar ..................................................... 39
3.6 No Material Litigation ........................................... 40
3.7 No Default ....................................................... 40
3.8 Taxes ............................................................ 40
3.9 Federal Regulations .............................................. 40
3.10 ERISA ............................................................ 40
3.11 Investment Company Act ........................................... 41
3.12 Purpose of Loans ................................................. 41
3.13 Environmental Matters ............................................ 41
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Page
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3.14 No Material Misstatements ........................................ 43
3.15 Title to Properties .............................................. 43
3.16 Intellectual Property ............................................ 43
3.17 No Burdensome Restrictions, List of Subsidiaries ................. 44
3.18 Security Interests ............................................... 44
3.19 Acquisitions ..................................................... 44
3.20 Senior Debt Status ............................................... 45
3.21 Solvency ......................................................... 45
3.22 Public Utility Holding Company Act ............................... 45
3.23 Insurance ........................................................ 45
3.24 Material Contracts; Franchise Agreements ......................... 46
SECTION 4. CONDITIONS PRECEDENT ......................................... 46
4.1 Conditions to Initial Extension of Credit ........................ 46
4.2 Conditions to Each Loan .......................................... 48
SECTION 5. AFFIRMATIVE COVENANTS ........................................ 49
5.1 Financial Statements ............................................. 49
5.2 Certificates; Other Information .................................. 50
5.3 Payment of Obligations ........................................... 52
5.4 Conduct of Business and Maintenance of Existence ................. 52
5.5 Maintenance of Insurance; Property ............................... 52
5.6 Inspection of Property; Books and Records; Discussions ........... 53
5.7 Notices .......................................................... 54
5.8 Environmental Laws ............................................... 54
5.9 Management Changes ............................................... 55
5.10 Further Assurances ............................................... 55
5.11 Subordination of Intercompany Loans,
Other Loans and Advances to the Borrowers ........................ 55
5.12 Pledge of Property ............................................... 56
SECTION 6. NEGATIVE COVENANTS ........................................... 56
6.1 Financial Condition Covenants .................................... 56
6.2 Limitation on Liens .............................................. 57
6.3 Limitation of Indebtedness ....................................... 58
6.4 Limitations on Fundamental Changes ............................... 58
6.5 Limitation on Sale of Assets ..................................... 58
6.6 Limitation on Distributions ...................................... 59
6.7 Transactions with Affiliates ..................................... 59
6.8 Sale and Leaseback ............................................... 59
6.9 Limitation on Contingent Obligations ............................. 60
6.10 Limitation on Investments, Loans and Advances .................... 60
6.11 Limitation on Optional Payments and
Modifications of Subordinated Debt ............................... 60
6.12 Limitation on Negative Pledge Clauses ............................ 60
6.13 Fiscal Year ...................................................... 61
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Page
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6.14 Limitation on Conduct of Business ................................ 61
6.15 Landlord Waivers ................................................. 61
6.16 Changes in Organizational Documents .............................. 61
6.17 Store Openings ................................................... 61
SECTION 7. EVENTS OF DEFAULT ............................................ 61
7.1 Events of Default ................................................. 61
SECTION 8. THE AGENT .................................................... 65
8.1 Appointment ...................................................... 65
8.2 Delegation of Duties ............................................. 65
8.3 Exculpatory Provisions ........................................... 65
8.4 Reliance by Agent ................................................ 66
8.5 Notice of Default ................................................ 66
8.6 Non-Reliance on Agent and Other Banks ............................ 67
8.7 Indemnification .................................................. 67
8.8 Agent in Its Individual Capacity ................................. 68
8.9 Release of Liens ................................................. 68
8.10 Successor Agent .................................................. 68
8.11 Beneficiaries .................................................... 68
SECTION 9. MISCELLANEOUS ................................................ 69
9.1 Amendments and Waivers ........................................... 69
9.2 Notices .......................................................... 69
9.3 No Waiver, Cumulative Remedies ................................... 70
9.4 Survival of Representations and Warranties ....................... 70
9.5 Payment of Expenses and Taxes .................................... 71
9.6 Successors and Assigns ........................................... 72
9.7 Disclosure of Information ........................................ 76
9.8 Adjustments; Set-off ............................................. 76
9.9 Counterparts ..................................................... 77
9.10 Severability ..................................................... 77
9.11 Power of Attorney ................................................ 77
9.12 Integration ...................................................... 78
9.13 GOVERNING LAW .................................................... 78
9.14 Submission To Jurisdiction; Waivers .............................. 78
9.15 Acknowledgements ................................................. 79
9.16 No Right of Contribution ......................................... 79
9.17 WAIVERS OF JURY TRIAL ............................................ 79
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SCHEDULES
SCHEDULE I Bank and Commitment Information
SCHEDULE II Existing Liens
SCHEDULE 3.1(b) List of Historical Statements
SCHEDULE 3.1(c) List of Projections
SCHEDULE 3.15 List of Real Property
SCHEDULE 3.17 List of Subsidiaries
SCHEDULE 3.18 List of Filing Locations
SCHEDULE 3.23 Insurance
SCHEDULE 3.24 Material Contracts
SCHEDULE 4.1(b)(ii) List of Permitted Exceptions
SCHEDULE 6.3 Existing Indebtedness
SCHEDULE 6.9 Existing Contingent Obligations
EXHIBITS
EXHIBIT A-1 Form of Revolving Credit Note
EXHIBIT A-2 Form of Term Note
EXHIBIT B Form of Assignment and Assumption Agreement
EXHIBIT C Form of Pledge Agreement
EXHIBIT D Form of Security Agreement
EXHIBIT E Form of Notice of Borrowing
EXHIBIT F Form of Legal Opinion of Hale and Dorr
EXHIBIT G Form of Landlord Waiver
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CREDIT AGREEMENT
AGREEMENT, dated as of May 17, 1996, among WEST COAST ENTERTAINMENT
CORPORATION, a Delaware corporation (the "Company") VIDEOSMITH INCORPORATED, a
Massachusetts corporation, WEST COAST FRANCHISING COMPANY, a Delaware
corporation, PALMER WEST COAST CORPORATION, a Delaware corporation, RKT MERGER
CO., a Delaware corporation, SHOWTIME, INC., a Virginia corporation, VIDEO GIANT
INC., a Texas corporation (collectively, the "Borrowers"), the several banks and
other financial institutions from time to time parties hereto (the "Banks") and
PNC BANK, NATIONAL ASSOCIATION, as agent for the Banks hereunder (in such
capacity, the "Agent").
W I T N E S S E T H
In consideration of the promises and the agreements hereinafter set
forth, and intending to be legally bound hereby, the parties hereto hereby agree
as follows:
SECTION 1. DEFINITIONS
1.1 Defined Terms. As used in this Agreement, the following terms shall
have the following meanings:
"Acquisition Agreements": the collective reference to the purchase and
sale agreements between or among the Company and/or one or more other Borrowers
as purchasers, and certain other Persons, as sellers, relating to the
Acquisitions.
"Acquisitions": the acquisitions by the Company and certain of the
Borrowers of 171 owned and operated video specialty stores (including 13 stores
owned by franchisees of the Company and one store scheduled to open in April
1996) plus certain rights in regard to 20 additional stores franchised by one of
the companies that is being acquired, all as described in the Form S-1.
"Affiliate": as to any Person, any other Person which, directly or
indirectly, through one or more intermediaries, controls, or is controlled by,
or is under common control with, such Person and any member, director, officer
or employee of any such Person. For purposes of this definition, "control" shall
mean the power, directly or indirectly, either to (a) vote 10% or more of the
securities having ordinary voting power for the election of directors of such
Person or (b) direct or in effect cause the direction of the management and
policies of such Person whether by contract or otherwise.
<PAGE> 7
"Agreement": this Credit Agreement, as amended, supplemented or
otherwise modified from time to time.
"Allowable Debt Component": at any date, an amount equal to (a) 2.75
divided by (b) the Purchase Price Aggregate Multiple on such date.
"Applicable Margin": on any date, for a Base Rate Loan or Eurodollar
Loan, the percentage per annum set forth below in the column entitled Base Rate
or Eurodollar Rate, as appropriate, opposite the Total Debt/OCF Ratio shown on
the last Total Debt/OCF Ratio Certificate delivered by the Borrowers to the
Agent pursuant to subsection 5.2(c) prior to such date:
<TABLE>
<CAPTION>
Eurodollar
Level Total Debt/OCF Ratio Base Rate Rate
- ----- -------------------- --------- ----------
<S> <C> <C> <C>
I Less than 1.00 to 1.0 0 1.50%
II Less than 1.50 to 1.0 .25 1.75%
but greater than or
equal to 1.00 to 1.0
III Less than 2.00 to 1.0 .5 2.00%
but greater than or
equal to 1.50 to 1.0
IV Less than 2.50 to 1.0 .75 2.25%
but greater than or
equal to 2.00 to 1.0
V Greater than or equal 1.00 2.50%
to 2.50 to 1.0
</TABLE>
; provided, however, that (a) in the event that no Total Debt/OCF Ratio
Certificate has been delivered for a fiscal quarter prior to the last date on
which it can be delivered without violation of subsection 5.2(c), the Applicable
Margin from such date until such Total Debt/OCF Ratio Certificate is actually
delivered shall be that applicable when the Total Debt/OCF Ratio is equal to or
greater than 2.50 to 1.0, (b) in the event that the actual Total Debt/OCF Ratio
for any fiscal quarter is subsequently determined to be greater than that set
forth in the Total Debt/OCF Ratio Certificate for such fiscal quarter, the
Applicable Margin shall be recalculated for the applicable period based upon
such actual Total Debt/OCF Ratio and (c) anything in this definition to the
contrary notwithstanding, until receipt by the Agent of the Total Debt/OCF Ratio
Certificate for the fiscal quarter ended April 30, 1996, the Applicable Margin
shall be that applicable when the Total Debt/OCF Ratio is at Level I. Any
additional interest on the Loans resulting from the operation of clause (b)
above shall be payable by the Borrowers jointly and
2
<PAGE> 8
severally to the Banks within five (5) days after receipt of a written demand
therefor from the Agent.
"Asset Sale": means any sale, lease, transfer or other disposition of
assets (each referred to for the purposes of this definition as a "disposition")
by the Company or any Subsidiary (other than a disposition by a Borrower to a
different Borrower), other than (a) dispositions of inventory in the ordinary
course of business, (b) dispositions of surplus or obsolete inventory or
equipment, waste or by-product material in the ordinary course of business and
(c) dispositions of Permitted Investments.
"Assignment and Acceptance": an assignment and acceptance entered into
by a Bank and a Purchasing Bank, and accepted by the Agent, in the form of
Exhibit B attached hereto, or such other form as shall be approved by the Agent.
"Available Commitments": at any particular time, an amount equal to the
excess, if any, of the Commitments at such time over the aggregate unpaid
principal amount of the Revolving Credit Loans outstanding at such time.
"Base Rate": for any day, a rate per annum equal to the greater of (a)
the Prime Rate in effect on such day and (b) the Federal Funds Effective Rate in
effect on such day plus 1/2 of 1%. If for any reason the Agent shall have
determined (which determination shall be conclusive absent manifest error) that
it is unable to ascertain the Federal Funds Effective Rate for any reason,
including the inability or failure of the Agent to obtain sufficient quotations
in accordance with the definition of such term, the Base Rate shall be
determined without regard to clause (b) of the first sentence of this definition
until the circumstances giving rise to such inability no longer exist. Any
change in the 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, as the case may be.
"Borrowing Date": any Business Day on which a Loan is to be made at the
request of the Borrowers under this Agreement.
"Business Day": a day other than a Saturday, Sunday or other day on
which commercial banks in Philadelphia, Pennsylvania are authorized or required
by law to close; provided, however, that, when used in connection with a
Eurodollar Loan, the term "Business Day" shall also exclude any day on which
banks are not open for dealings in dollar deposits in the London Interbank
Market.
3
<PAGE> 9
"Capital Lease": at any time, a lease with respect to which the lessee
is required to recognize the acquisition of an asset and the incurrence of a
liability in accordance with GAAP.
"Capital Lease Obligations": of any Person as of the date of
determination, the obligations of such Person to pay rent and other amounts
under any Capital Lease.
"Capital Stock": any and all shares, interests, participations or other
equivalents (however designated) of capital stock of a corporation, any and all
equivalent ownership interests in a Person (other than a corporation) and any
and all warrants or options to purchase any of the foregoing.
"Cash Flow": for any period and with respect to any business or segment
acquired by a Borrower, the net income (or loss) before income tax for such
business or segment determined in accordance with GAAP plus the amount of any
interest expense, depreciation and amortization deducted from earnings in
determining such net income (or loss) minus the greater of (a) the aggregate
purchase price for all video cassettes and game inventory purchases (or like
inventory purchases) for such period by such business or segment and (b) an
amount equal to 22.5% of the gross revenue of such business or segment derived
in such period from the rental of videos, game cassettes or any other similar
merchandise as determined in accordance with GAAP; provided that, there also
shall be excluded from such net income (or loss) (a) any addition for
non-operating gains during such period (including without limitation,
extraordinary or unusual gains, gains arising from the discontinuance of
operations or gains arising from the sale of capital assets) and (b) any
subtraction for non-operating losses during such period (including, without
limitation, extraordinary or unusual losses, losses from the discontinuance of
operations or losses arising from the same of capital assets).
"Change of Control": (a) any Person or group of Persons (within the
meaning of Sections 13(d) and 14(d) of the Exchange Act) (other than any
combination of Ralph W. Standley, III, M. Trent Standley and/or T. Kyle
Standley, the Company's existing executive officers, the Company's Continuing
Directors and trusts for the benefit of themselves and their family members)
shall have acquired beneficial ownership (within the meaning of Rule 13d-3
promulgated by the Securities and Exchange Commission under the Exchange Act) of
20% or more of the outstanding shares of any class of outstanding common stock
of the Company or (b) Continuing Directors shall cease to constitute a majority
of the board of
4
<PAGE> 10
directors of the Company. "Continuing Director" shall mean at any date a member
of the Company's board of directors who was either a member of such board on the
Closing Date or was nominated for election to such board by at least two-thirds
of the Continuing Directors then in office.
"Closing Date": the first date on which all of the conditions precedent
set forth in Section 4.1 have been satisfied or waived by the Agent.
"Code": the Internal Revenue Code of 1986, as amended from time to
time.
"Collateral": all property and interests in property and proceeds
thereof now owned or hereafter acquired by any Borrower in or upon which a lien
shall be created or purported to be created under any of the Security Documents.
"Commitment": as to any Bank, the obligation of such Bank to make
Revolving Credit Loans in an aggregate principal at any one time outstanding not
to exceed the amount set forth opposite such Bank's name on Schedule I hereto
under the caption "Commitment," as such amount may be changed from time to time
in accordance with the provisions of this Agreement.
"Commitment Fees": those certain fees payable to the Banks on the
Available Commitments as described in subsection 2.8(a).
"Commitment Fee Rate": on each day during each fiscal quarter of the
Company, the percentage per annum set forth below opposite the Total Debt/OCF
Ratio shown on the Total Debt/OCF Ratio Certificate delivered to the Agent
pursuant to subsection 5.2(c) for the immediately preceding fiscal quarter:
<TABLE>
<CAPTION>
Level Total Debt/OCF Ratio Commitment Fee Rate
- ----- -------------------- -------------------
<S> <C> <C>
I Less than 1.00 to 1.0 .375%
II Less than 1.50 to 1.0 but
greater than or equal to
1.00 to 1.0 .375%
III Less than 2.00 to 1.0 but
greater than or equal to
1.50 to 1.0 .50%
IV Less than 2.50 to 1.0 but
greater than or equal to
2.00 to 1.0 .50%
</TABLE>
5
<PAGE> 11
<TABLE>
<S> <C> <C>
V Greater than or equal to
2.50 to 1.0 .50%
</TABLE>
; provided, however, that, (a) in the event that no Total Debt/OCF Ratio
Certificate has been delivered for a fiscal quarter prior to the last day of the
next succeeding fiscal quarter, the Commitment Fee Rate during such fiscal
quarter shall be that applicable when the Total Debt/OCF Ratio is equal to or
greater than 2.50 to 1.0, (b) in the event that the actual Total Debt/OCF Ratio
for any fiscal quarter is subsequently determined to be greater than that set
forth in the Total Debt/OCF Ratio Certificate for such fiscal quarter, the
Commitment Fee Rate shall be recalculated for the applicable period based upon
such actual Total Debt/OCF Ratio and (c) anything in this definition to the
contrary notwithstanding, until receipt by the Agent of the Total Debt/OCF Ratio
Certificate for the fiscal quarter ended April 30, 1996, the Commitment Fee Rate
shall be that applicable when the Total Debt/OCF Ratio is at Level I. Any
additional Commitment Fees that are due to the Banks resulting from the
operation of clause (b) above shall be payable by the Borrowers jointly and
severally within five (5) days after receipt of a written demand therefor from
the Agent.
"Commitment Percentage": as to any Bank at any time, the percentage
which such Bank's Commitment then constitutes of the aggregate Commitments at
such time (or, at any time after the Commitments shall have expired or
terminated, the percentage which the aggregate principal amount of such Bank's
Loans then outstanding bears to the aggregate principal amount of all Loans then
outstanding).
"Commitment Period": the period from and including the date hereof to
but not including the Revolving Credit Termination Date, or such earlier date on
which the Commitments shall terminate as provided herein.
"Commonly Controlled Entity": an entity, whether or not incorporated,
which is under common control with the Company within the meaning of Section
4001 of ERISA or is part of a group which includes the Company and which is
treated as a single employer under Section 414(b), (c), (m) or (o) of the Code.
"Consolidated Interest Expense": for any period, the amount of cash
interest expense paid or required to be paid by the Company and its Subsidiaries
for such period in accordance with GAAP.
"Consolidated Net Income": for any fiscal period, the net income (or
loss) after income taxes of the Company and its
6
<PAGE> 12
Subsidiaries for such period determined on a consolidated basis in accordance
with GAAP.
"Consolidated Net Worth": as of the date of determination, all items
which in conformity with GAAP would be included under shareholders' equity on a
consolidated balance sheet of the Company and its Subsidiaries at such date.
"Consolidated Tangible Net Worth": as of the date of determination,
Consolidated Net Worth at such date less, to the extent included therein, all
intangible assets of the Company and its Subsidiaries.
"Contingent Obligation": as to any Person any guarantee of payment or
performance by such Person of any Indebtedness or other obligation of any other
Person, or any agreement to provide financial assurance with respect to the
financial condition, or the payment of the obligations of, such other Person
(including, without limitation, purchase or repurchase agreements, reimbursement
agreements with respect to letters of credit or acceptances, indemnity
arrangements, grants of security interests to support the obligations of another
Person, keepwell agreements and take-or-pay or through-put arrangements) which
has the effect of assuring or holding harmless any third Person against loss
with respect to one or more obligations owed to such third Person; provided,
however, the term Contingent Obligation shall not include endorsements of
instruments for deposit or collection in the ordinary course of business. The
amount of any Contingent Obligation of any Person shall be deemed to be the
lower of (a) an amount equal to the stated or determinable amount of the primary
obligation in respect of which such Contingent Obligation is made and (b) the
maximum amount for which such contingently liable Person may be liable pursuant
to the terms of the instrument embodying such Contingent Obligation, unless such
primary obligation and the maximum amount for which such contingently liable
Person may be liable are not stated or determinable, in which case the amount of
such Contingent Obligation shall be such contingently liable Person's maximum
reasonably anticipated liability in respect thereof as determined by the Company
in good faith.
"Contractual Obligation": as to any Person, any provision of any
security issued by such Person or any provision of any agreement, instrument or
other undertaking to which such Person is a party or by which it or any of its
property is bound.
"Default": any of the events specified in Section 7, whether or not any
requirement for the giving of notice, the
7
<PAGE> 13
lapse of time, or both, or any other condition precedent therein set forth, has
been satisfied.
"Distribution": in respect of any corporation, (a) dividends or other
distributions on Capital Stock of the corporation (except distributions in
common stock of such corporation); (b) the redemption or acquisition of such
stock or of warrants, rights or other options to purchase such stock (except
when solely in exchange for common stock of such corporation); and (c) any
payment on account of, or the setting apart of any assets for a sinking or other
analogous fund for, the purchase, redemption, defeasance, retirement or other
acquisition of any share of any class of Capital Stock of such corporation or
any warrants or options to purchase any such stock.
"Dollars" and "$": dollars in lawful currency of the United States of
America.
"Environmental Laws": any and all foreign, Federal, state, local or
municipal laws, rules, orders, regulations, statutes, ordinances, codes, decrees
or binding requirements of any Governmental Authority, or binding Requirement of
Law regulating, relating to or imposing liability or standards of conduct
concerning protection of the environment, as now or may at any time hereafter be
in effect.
"ERISA": the Employee Retirement Income Security Act of 1974, as
amended from time to time.
"Eurocurrency Reserve Requirements": for any day as applied to a
Eurodollar Loan, the aggregate (without duplication) of the rates (expressed as
a decimal fraction) of reserve requirements in effect on such day (including,
without limitation, basic, supplemental, marginal and emergency reserves under
any regulations of the Board of Governors of the Federal Reserve System or other
Governmental Authority having jurisdiction with respect thereto) dealing with
reserve requirements prescribed for eurocurrency funding (currently referred to
as "Eurocurrency Liabilities" in Regulation D of such Board) maintained by a
member bank of such System.
"Eurodollar Base Rate": with respect to any Eurodollar Loan for any
Interest Period, an interest rate per annum (rounded upwards, if necessary, to
the next 1/16 of 1%) equal to the rate determined by the Agent in accordance
with its usual procedures at which deposits in Dollars approximately equal in
principal amount to the Agent's portion of such Eurodollar Loan for a maturity
equal to the applicable Interest Period are offered by banks in the London
Interbank Market to prime banks in immediately available funds in the
8
<PAGE> 14
London Interbank Market at approximately 11:00 a.m., London Time, two Business
Days prior to the commencement of such Interest Period.
"Eurodollar Loan": any Loan bearing interest at a rate determined by
reference to the Eurodollar Rate.
"Eurodollar Rate": with respect to each day during each Interest Period
pertaining to a Eurodollar Loan, a rate per annum determined for such day in
accordance with the following formula (rounded upward to the nearest 1/1OOth of
1%):
Eurodollar Base Rate
----------------------------------------
1.00 - Eurocurrency Reserve Requirements
"Event of Default": any of the events specified in Section 7, provided
that any requirement for the giving of notice, the lapse of time, or both, or
any other condition, has been satisfied.
"Excess Operating Cash Flow": for any period, an amount equal to OCF
for such period minus interest expense for such period (to the extent paid or
payable in cash), minus required amortization of Indebtedness (other than
Revolving Credit Loans) for such period minus consolidated income tax expense
for such period exclusive of any deferred portion thereof.
"Exchange Act": the Securities and Exchange Act of 1934, as amended.
"Existing Credit Agreement": means the Revolving Credit and Term Loan
Agreement, dated as of July 12, 1995, among certain of the Borrowers and PNC
Bank, National Association, as heretofore amended, supplemented or otherwise
modified.
"Federal Funds Effective Rate": 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 on the next
succeeding 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 the day of such transactions received by the Agent from three
Federal funds brokers of recognized standing selected by it.
"Fee Letter": the letter agreement between the Company, the Agent and
PNC Securities Corp. dated February 27, 1996 in which the Company agrees, among
other things, to pay such parties the fees provided in such letter, as the same
may be amended, supplemented or otherwise modified from time to time.
9
<PAGE> 15
"Form S-1": that certain Registration Statement of the Company on Form
S-1 (No. 333-00272) (including amendments thereto) initially filed with the
Securities and Exchange Commission on or about January 11, 1996.
"GAAP": at any time with respect to the determination of the character
or amount of any asset or liability or item of income or expense, or any
consolidation or other accounting computation, generally accepted accounting
principles as in effect on the date of, or at the end of the period covered by,
the financial statements from which such asset, liability, item of income, or
item of expense, is derived, or, in the case of any such computation, as in
effect on the date when such computation is required to be determined.
"Governmental Authority": any nation or government, any state or other
political subdivision thereof and any entity exercising executive, legislative,
judicial, regulatory or administrative functions of or pertaining to government.
"Indebtedness": of any Person at any date:
(a) all indebtedness of such Person for borrowed money or for the
deferred purchase price of property or services (other than current trade
liabilities incurred in the ordinary course of business and payable in
accordance with customary practices),
(b) any other indebtedness which is evidenced by a note, bond,
debenture or similar instrument,
(c) all Capital Lease Obligations of such Person,
(d) all obligations of such Person in respect of outstanding letters
of credit, acceptances and similar obligations created for the account of such
Person,
(e) all liabilities secured by any Lien on any property owned by
such Person even though such Person has not assumed or otherwise become liable
for the payment thereof,
(f) net liabilities of such Person under interest rate cap
agreements, interest rate swap agreements, foreign currency exchange agreements,
netting agreements and other hedging agreements or arrangements (calculated on a
basis satisfactory to the Agent and in accordance with accepted practice), and
(g) withdrawal liabilities of such Person or any Commonly Controlled
Entity under a Plan.
10
<PAGE> 16
The Indebtedness of any Person shall include any Indebtedness of any partnership
in which such Person is the general partner.
"Insolvency": with respect to any Multiemployer Plan, the condition
that such Plan is insolvent within the meaning of Section 4245 of ERISA.
"Insolvent": pertaining to a condition of Insolvency.
"Intellectual Property": has the meaning ascribed thereto in subsection
3.16.
"Interest and Rents Coverage Ratio": for any period, the ratio of (a)
the sum of OCF plus Rent Expense, in each case for such period to (b) the sum of
Consolidated Interest Expense plus Rent Expense, in each case for such period.
"Interest Payment Date": (a) as to any Base Rate Loan, the last day of
each March, June, September and December while such Loan is outstanding, (b) as
to any Eurodollar Loan having an Interest Period of three months or less, the
last day of such Interest Period, and (c) as to any Eurodollar Loan having an
Interest Period longer than three months, the day which is (i) three months
after the first day of such Interest Period and (ii) the last day of such
Interest Period.
"Interest Period": with respect to any Eurodollar Loan:
(a) initially the period commencing on the borrowing or conversion
date, as the case may be, with respect to such Eurodollar Loan and
ending one, two, three or six months thereafter, as selected by the
Borrowers in their notice of borrowing or notice of conversion, given
with respect thereto; and
(b) thereafter, each period commencing on the last day of the next
preceding Interest Period applicable to such Eurodollar Loan and ending
one, two, three or six months thereafter, as selected by the Borrowers
by irrevocable notice to the Agent not less than three Business Days
prior to the last day of the then current Interest Period with respect
thereto;
provided that, the foregoing provisions relating to Interest Periods are subject
to the following:
(i) if any Interest Period would end on a day other than a
Business Day, such Interest Period shall be extended to the next
succeeding Business Day unless such next succeeding Business Day
would fall in the next
11
<PAGE> 17
calendar month, in which case such Interest Period shall end on the
next preceding Business Day;
(ii) with respect to Eurodollar Loans, any Interest Period that
begins on the last Business Day of a calendar month (or on a day for
which there is no numerically corresponding day in the calendar
month at the end of such Interest Period) shall end on the last
Business Day of a calendar month;
(iii) with respect to Revolving Credit Loans that are Eurodollar
Loans, an Interest Period that would extend beyond the Revolving
Credit Termination Date shall end on the Revolving Credit
Termination Date;
(iv) with respect to Term Loans that are Eurodollar Loans, an
Interest Period that otherwise would extend beyond the Termination
Date shall end on the Termination Date; and
(v) the Borrowers shall select Interest Periods so as not to
require a payment or prepayment of any Eurodollar Loan during an
Interest Period for such Loan.
"IPO": the meaning ascribed to such term in Section 4.1(j).
"Lien": any mortgage, pledge, hypothecation, assignment, deposit
arrangement, encumbrance, lien (statutory or other), charge or other security
interest or any preference, priority or other security agreement or preferential
arrangement of any kind or nature whatsoever (including, without limitation, any
conditional sale or other title retention agreement and any Capital Lease having
substantially the same economic effect as any of the foregoing).
"Loan Documents": this Agreement, the Notes, the Security Agreement and
the Pledge Agreement.
"Loans": the collective reference to the Revolving Credit Loans and the
Term Loans.
"Material Adverse Effect": a material adverse effect on (a) the
business, operations, property or condition (financial or otherwise) of the
Company and the other Borrowers taken as a whole, (b) the ability of the Company
and the other Borrowers to perform their obligations under this Agreement, the
Notes or any other Loan Document or (c) the validity or enforceability of this
Agreement, the Notes or any of the other Loan Documents or the rights or
remedies of the Agent or the Banks hereunder or thereunder.
12
<PAGE> 18
"Materials of Environmental Concern": any gasoline or petroleum
(including crude oil or any fraction thereof) or petroleum products or any
hazardous or toxic substances, materials or wastes, defined or regulated as such
in or under any Environmental Law, including, without limitation, asbestos,
polychlorinated biphynels, and ureaformaldehyde insulation.
"Moody's": Moody's Investors Services, Inc.
"Multiemployer Plan": a Plan which is a multiemployer plan as defined
in Section 4001(a)(3) of ERISA.
"Net Proceeds": (a) with respect to any Asset Sale, the amount equal to
(i) the aggregate amount received in cash (including any cash received by way of
deferred payment pursuant to a note receivable, other non-cash consideration or
otherwise, but only as and when such cash is so received) in connection with
such sale or other disposition minus (ii) the sum of (A) the principal amount of
any Indebtedness which is secured by the asset that is the subject of such Asset
Sale (other than Indebtedness assumed by the purchaser of such asset) and which
is required to be, and is, repaid in connection with such Asset Sale or other
disposition thereof (other than Indebtedness hereunder) and (B) the reasonable
fees, commissions, income taxes and other out-of-pocket expenses incurred by the
Company or such Subsidiary (other than to the Company or any Affiliate thereof)
in connection with such Asset Sale; and
(b) with respect to the sale or issuance of any Capital Stock by the
Company or any of its Subsidiaries, the net amount equal to (i) the aggregate
amount received in cash in connection with such sale or issuance minus (ii) the
reasonable fees, commissions and other out-of-pocket expenses incurred by the
Company or such Subsidiary in connection with such sale or issuance other than
to the Company or any Affiliate thereof; provided that, for purposes of
subsection 4.1(j), in calculating the Net Proceeds of the initial public
offering of the Company, the only reduction pursuant to clause (ii) above shall
be for underwriting commissions and fees.
"Notes": the collective reference to the Revolving Credit Notes and the
Term Notes.
"Notice of Borrowing": with respect to a Revolving Credit Loan of any
Type, a notice from the Borrowers in respect of such Loan, containing the
information in respect of such Loan and delivered to the Agent, in the manner
and by the time specified pursuant to the terms hereof. A form of the
13
<PAGE> 19
Notice of Borrowing for Revolving Credit Loans is attached hereto as Exhibit E.
"OCF": for any period, Consolidated Net Income for such period, plus
the amount of income taxes, interest expense, depreciation and amortization
deducted from earnings in determining such Consolidated Net Income minus the
greater of (a) the aggregate purchase price for all video cassettes and game
inventory purchases (or like inventory purchases) for such period and (b) an
amount equal to 22.5% of Rental Revenue for such period; provided that, there
also shall be excluded from Consolidated Net Income (a) any addition for
non-operating gains during such period (including, without limitation,
extraordinary or unusual gains, gains from discontinuance of operations or gains
arising from the sale of capital assets) and (b) any subtraction for
non-operating losses during such period (including, without limitation,
extraordinary or unusual losses, losses from the discontinuance of operations or
losses arising from the sale of capital assets); provided that, notwithstanding
anything to the contrary herein, for each period of the Company set forth below
OCF shall for all purposes hereunder equal (i) for the four fiscal quarter
periods ending January 31, 1996 and April 30, 1996, $10,280,000, (ii) for the
four fiscal quarter period ending July 31, 1996, the sum of $7,710,000 (which is
$10,280,000 multiplied by 3/4) plus OCF for the period May 1, 1996 to July 31,
1996, (iii) for the four fiscal quarter period ending October 31, 1996, the sum
of $5,140,000 (which is $10,280,000 multiplied by 1/2) plus OCF for the period
May 1, 1996 to October 31, 1996 and (iv) for the four fiscal quarter period
ending January 31, 1997, $2,570,000 (which is $10,280,000 multiplied by 1/4)
plus OCF for the period May 1, 1996 to January 31, 1997.
"Participant" as defined in subsection 9.6(f).
"PBGC": the Pension Benefit Guaranty Corporation established pursuant
to Subtitle A of Title IV of ERISA.
"Permitted Acquisition": an acquisition by a Borrower of the stock or
assets of a Person that operates a video rental business; provided that (a) at
the time that any definitive agreement is entered into in respect of such
acquisition, no Default or Event of Default shall exist or would exist if such
acquisition were consummated on such date (assuming for purposes of the
covenants contained in subsection 6.1 that pro forma adjustments are made to the
financial statements of the Borrowers reflecting such acquisition); (b) the
gross purchase price for such acquisition shall not exceed 5.25 times the Cash
Flow for the prior fiscal year of the business or segment which is being so
acquired, with such adjustments to Cash Flow to take into account any
quantifiable cost
14
<PAGE> 20
to Cash Flow to take into account any quantifiable cost savings as a result of
such business or segment being acquired by such Borrower as demonstrated by the
Borrowers and agreed to by the Agent in its reasonable discretion, which
quantifiable expense reductions shall be of the type reflected in the pro forma
financial statements contained in the Form S-1; and (c) with respect to any
acquisition in which the gross purchase price shall exceed $5,000,000, audited
financial statements covering the assets or operations proposed to be acquired
are sent to the Agent and each Bank within five days after the entering into of
any definitive sale agreement, but in any event prior to the consummation of any
such sale.
"Permitted Investments":
(i) direct obligations of the United States of America or any
agency or instrumentality thereof or obligations backed by the full
faith and credit of the United States of America maturing in twelve
months or less from the date of acquisition;
(ii) commercial paper maturing in 180 days or less rated not
lower than A-1 by S&P or P-1 by Moody's on the date of acquisition; and
(iii) demand deposits, time deposits or certificates of deposit
maturing within one year in commercial banks whose obligations are
rated A-1, A or the equivalent or better by S&P or Moody's on the date
of acquisition.
provided, that, in each case, such obligations are payable in Dollars.
"Permitted Liens" shall mean:
(a) Liens for taxes, assessments, or similar charges, incurred in
the ordinary course of business and which are not yet due and payable;
(b) Pledges or deposits made in the ordinary course of business to
secure payment of workmen's compensation, or to participate in any fund in
connection with workmen's compensation, unemployment insurance, old-age pensions
or other social security programs;
(c) Liens of mechanics, materialmen, warehousemen, carriers, or
other like Liens, securing obligations incurred in the ordinary course of
business that are not yet due and
15
<PAGE> 21
payable and Liens of landlords securing obligations to pay lease payments that
are not yet due and payable or in default;
(d) Good faith pledges or deposits made in the ordinary course of
business to secure performance of bids, tenders, contracts (other than for the
repayment of borrowed money) or leases, not in excess of the aggregate amount
due thereunder, or to secure statutory obligations, or surety, appeal,
indemnity, performance or other similar bonds required in the ordinary course of
business;
(e) Encumbrances consisting of zoning restrictions, easements or
other restrictions on the use of real property, none of which materially impairs
the use of such property or the value thereof, and none of which is violated in
any material respect by existing or proposed structures or land use;
(f) Liens created pursuant to the Security Documents;
(g) Any Lien existing on the date of this Agreement and described on
Schedule II hereto provided that the principal amount secured thereby is not
hereafter increased and no additional assets become subject to such Lien;
(h) Purchase Money Security Interests or Liens created pursuant to
Capital Leases; provided that the aggregate amount of (i) loans and deferred
payments secured by all Purchase Money Security Interests and (ii) the aggregate
principal component of all Capital Leases shall not exceed in the aggregate
$500,000 (excluding for the purpose of this computation any loans or deferred
payments secured by Liens described on Schedule II hereto); provided further
that, (i) such Liens shall be created simultaneously with the acquisition of the
property which is subject to such Lien, (ii) such Liens do not at any time
encumber any property other than such property and (iii) the Liens are not
modified to secure any Indebtedness other than that used to acquire such
Property;
(i) The following, (i) if the validity or amount thereof is being
contested in good faith by appropriate and lawful proceedings diligently
conducted so long as levy and execution thereon have been stayed and continue to
be stayed or (ii) if a final judgment is entered and such judgment is discharged
within thirty (30) days of entry, and in either case they do not affect the
Collateral or, in the aggregate, materially impair the ability of the Borrowers
to perform their obligations hereunder or under the other Loan Documents:
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(A) Claims or Liens for taxes, assessments or charges due and
payable and subject to interest or penalty, provided that the Borrowers
maintain such reserves or other appropriate provisions as shall be
required by GAAP and pay all such taxes, assessments or charges
forthwith upon the commencement of proceedings to foreclose any such
Lien;
(B) Claims, Liens or encumbrances upon, and defects of title to,
real or personal property, including any attachment of personal or real
property or other legal process prior to adjudication of a dispute on
the merits; or
(C) Claims or Liens of mechanics, materialmen, warehousemen,
carriers, or other statutory nonconsensual Liens which are due and
payable; and
(j) Uniform Commercial Code financing statements filed by the lessor
under an operating lease against property leased by a Borrower under such
operating lease.
"Person": an individual, partnership, corporation, limited liability
company, business trust, joint stock company, trust, unincorporated association,
joint venture, Governmental Authority or other entity of whatever nature.
"Plan": at a particular time, any employee benefit plan which is
covered by ERISA and in respect of which a Borrower or a Commonly Controlled
Entity is (or, if such plan were terminated at such time, would under Section
4069 of ERISA be deemed to be) an "employer" as defined in Section 3(5) of
ERISA.
"Pledge Agreement": the Pledge Agreement in the form of Exhibit C
attached hereto, as the same may be amended, supplemented or otherwise modified
from time to time.
"Prime Rate": the rate of interest per annum publicly announced from
time to time by PNC Bank, National Association as its prime rate in effect at
its principal office in Philadelphia, Pennsylvania; each change in the Prime
Rate shall be effective on the date such change is publicly announced as
effective.
"Properties": the collective reference to the facilities and properties
owned, leased or operated by the Company or any of its Subsidiaries.
"Purchase Money Security Interest": shall mean Liens upon tangible
personal property securing loans to the
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Borrowers or deferred payments by the Borrowers for the purchase of such
tangible personal property.
"Purchase Price Aggregate Multiple": at any date, an amount equal to
(a) the sum of the aggregate gross purchase price for each business or segment
acquired (other than as part of the Acquisitions) between the Closing Date and
such date by a Borrower from a Person who is not an Affiliate of the Borrowers
pursuant to a Permitted Acquisition divided by (b) the sum of (i) the aggregate
Cash Flow for each such business or segment for the four fiscal quarter period
ending on the fiscal quarter immediately preceding the date of its acquisition
and (ii) the aggregate amount of any quantifiable expense reductions for each
such business or segment as a result of its being acquired by a Borrower as
demonstrated by the Borrowers and agreed to by the Agent in its reasonable
discretion, which quantifiable expense reductions shall be of the type reflected
in the pro forma financial statements contained in the Form S-1.
"Purchasing Bank": as defined in subsection 9.6(b).
"Register": as defined in subsection 9.6(d).
"Regulation U": Regulation U of the Board of Governors of the Federal
Reserve System as from time to time in effect, and all official rulings and
interpretations thereunder or thereof.
"Regulation X": Regulation X of the Board of Governors of the Federal
Reserve System as from time to time in effect, and all official rulings and
interpretations thereunder or thereof.
"Rent Expense": for any period, the gross expense of the Company and
its Subsidiaries incurred in such period under operating leases (whether for
real or personal property or otherwise), as determined in accordance with GAAP.
"Rental Revenue": for any period, the gross revenue of the Company and
its Subsidiaries derived in such period from the rental of videos, game
cassettes or any other similar merchandise rented by the Company or its
Subsidiaries, as determined in accordance with GAAP.
"Reorganization": with respect to any Multiemployer Plan, the condition
that such plan is in reorganization within the meaning of Section 4241 of ERISA.
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"Reportable Event": any of the events set forth in Section 4043(c)(1),
(2), (4), (5), (6), (10) and (13) of ERISA.
"Required Banks": at any time, Banks the Commitment Percentages of
which at such time aggregate at least 66-2/3%.
"Requirement of Law": as to any Person, the Certificate of
Incorporation and By-Laws or other organizational or governing documents of such
Person, and any law, treaty, rule or regulation or determination of an
arbitrator or a court or other Governmental Authority, in each case binding upon
such Person or any of its property or to which such Person or any of its
property is subject.
"Responsible Officer": with respect to any Borrower, the chief
executive officer, president or chief financial officer of such Borrower. Unless
otherwise qualified, all references to a "Responsible Officer" in this Agreement
shall refer to a Responsible Officer of the Company.
"Revolving Credit Termination Date": the earlier of (a) May 16, 1998,
or any anniversary of such date to which the Revolving Credit Termination Date
shall have been extended pursuant to subsection 2.12(e) hereof and (b) the date
the Commitments are terminated as provided herein.
"Revolving Credit Loans": the meaning ascribed thereto in subsection
2.1.
"Revolving Credit Note": as defined in subsection 2.2, as the same may
be amended, supplemented or otherwise modified from time to time.
"S&P": Standard & Poor's Rating Group, a division of McGraw-Hill
Corporation.
"Security": "security" as defined in Section 2(1) of the Securities Act
of 1933, as amended.
"Security Agreement": the Security Agreement in the form of Exhibit D
attached hereto, as the same may be amended, supplemented or otherwise modified
from time to time.
"Security Documents": the Security Agreement and the Pledge Agreement.
"Single Employer Plan": any Plan which is covered by Title IV of ERISA,
but which is not a Multiemployer Plan.
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"Subordinated Debt": shall mean Indebtedness of any Borrower which is
subordinated in right of payment to all of the obligations of all of the
Borrowers to the Banks on terms satisfactory to the Required Banks.
"Subsidiary": as to any Person, a corporation, partnership or other
entity of which shares of stock or other ownership interests having ordinary
voting power (other than stock or such other ownership interests having such
power only be reason of the happening of a contingency) to elect a majority of
the board of directors or other managers of such corporation, partnership or
other entity are at the time owned, or the management of which is otherwise
controlled, directly or indirectly through one or more intermediaries, or both,
by such Person. Unless otherwise qualified, all references to a "Subsidiary" or
to "Subsidiaries" in this Agreement shall refer to a Subsidiary or Subsidiaries
of the Company.
"Taxes": as defined in subsection 2.17.
"Term Loans": as defined in subsection 2.4.
"Term Note": as defined in subsection 2.5.
"Termination Date": May 16, 2001, or any anniversary of such date to
which the Termination Date shall have been extended pursuant to subsection 2.12
(e) hereof.
"Total Debt": at any date, without duplication, the sum of (a) the
aggregate of all Indebtedness (including the current portion thereof and the
undrawn face amount of any letters of credit then outstanding) of the Company
and its Subsidiaries, determined on a consolidated basis in accordance with
GAAP and (b) the aggregate amount of all Contingent Obligations of the Company
and its Subsidiaries, determined on a consolidated basis, in each case as of
such date.
"Total Debt/OCF Ratio": on any date, the ratio of Total Debt on such
date to OCF for the four consecutive fiscal quarters of the Company most
recently ended prior to such date.
"Total Debt/OCF Ratio Certificate": as defined in subsection 5.2(c).
"Tranche": the collective reference to Eurodollar Loans whose Interest
Periods begin on the same date and end on the same later date (whether or not
such Loans originally were made on the same day).
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"Type": when used in respect of any Loan, shall refer to the
Rate by references to which interest on such Loan is determined. For
purposes hereof, "Rate" shall include the Eurodollar Rate and the Base
Rate.
"Voting Stock": capital stock of any class or classes of a
corporation the holders of which are ordinarily, in the absence of
contingencies, entitled to elect a majority of the directors (or Persons
performing similar functions).
"Wholly-Owned Subsidiary": at any time, any Subsidiary one
hundred percent (100%) of all of the equity Securities (except
directors' qualifying shares) and voting Securities of which are owned
by any one or more of the Company and its other Wholly-Owned
Subsidiaries at such time.
1.2 Other Definitional Provisions. (a) Unless otherwise specified
therein, all terms defined in this Agreement shall have the defined meanings
when used in the Notes, the other Loan Documents or any certificate or other
document made or delivered pursuant hereto or thereto.
(b) As used herein and in the Notes and the other Loan
Documents, and any certificate or other document made or delivered pursuant
hereto or thereto, accounting terms relating to the Company and its
Subsidiaries not defined in subsection 1.1 and accounting terms partly defined
in subsection 1.1, to the extent not defined, shall have the respective
meanings given to them under GAAP.
(c) The words "hereof", "herein" and "hereunder" and words of
similar import when used in this Agreement shall refer to this Agreement as a
whole and not to any particular provision of this Agreement, and Section,
subsection, Schedule and Exhibit references are to this Agreement unless
otherwise specified.
(d) The meanings given to terms defined in this Agreement
shall be equally applicable to both the singular and plural forms of such terms.
SECTION 2. LOANS AND TERMS OF COMMITMENTS
2.1 Revolving Credit Commitments. (a) Subject to the terms and
conditions hereof, each Bank severally agrees to make revolving credit loans
(the "Revolving Credit Loans") to the Borrowers on a joint and several basis
from time to time during the Commitment Period in an aggregate principal amount
at any one time outstanding not exceed the amount of such Bank's Commitment;
provided that, no Revolving Credit Loan shall be made if, after giving effect
to the making of such Loan and the simultaneous
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application of the proceeds thereof, the ratio of (i) Total Debt on such date
to (ii) OCF for the four consecutive fiscal quarters of the Company as set
forth in the most recent Total Debt/OCF Ratio Certificate furnished to the
Agent pursuant to subsection 5.2(c) shall exceed 2.75 to 1.00. The Commitments
may be terminated or reduced from time to time pursuant to subsection 2.12.
Within the foregoing limits, the Borrowers may during the Commitment Period
borrow, repay and reborrow under the Commitments, subject to and in accordance
with the terms and limitations hereof.
(b) The Revolving Credit Loans may from time to time be (i)
Eurodollar Loans, (ii) Base Rate Loans or (iii) a combination thereof, as
determined by the Borrowers and notified to the Agent in accordance with
subsections 2.3 and 2.21; provided that, no Revolving Credit Loan shall be made
as a Eurodollar Loan after the date that is one month prior to the Revolving
Credit Termination Date.
(c) The failure of any Bank to make any Revolving Credit Loan
shall not relieve any other Bank of its obligation to lend hereunder (it being
understood, however, that no Bank shall be responsible for the failure of any
other Bank to make any Loan required to be made by such other Bank). Each
Revolving Credit Loan shall be made in accordance with the procedures set forth
in subsection 2.3.
2.2 Revolving Credit Notes. The Revolving Credit Loans made by each
Bank shall be evidenced by a promissory note of the Borrowers, substantially in
the form of Exhibit A-1, with appropriate insertions as to payee, date and
principal amount (a "Revolving Credit Note"), payable to the order of such Bank
and in a principal amount equal to the amount of the initial Commitment of such
Bank. Each Bank is hereby authorized to record the date, Type and amount of
each Revolving Credit Loan made by such Bank, each continuation thereof, each
conversion of all or a portion thereof to another Type, the date and amount of
each payment or prepayment of principal thereof and, in the case of Eurodollar
Loans, the length of each Interest Period with respect thereto, on the schedule
annexed to and constituting a part of its Revolving Credit Note, and any such
recordation shall constitute prima facie evidence of the accuracy of the
information so recorded, provided that the failure of any Bank to make such
recordation (or any error in such recordation) shall not affect the obligations
of the Borrowers hereunder or under such Note. Each Revolving Credit Note shall
(a) be dated the Closing Date, (b) be stated to mature on the Revolving Credit
Termination Date and (c) provide for the payment of interest in accordance with
subsections 2.9 and 2.10.
2.3 Procedure for Revolving Credit Loans. (a) The Borrowers may
borrow under the Commitments during the Commitment Period on any Business Day.
The Borrowers shall give the Agent
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irrevocable notice (which notice must be received by the Agent prior to 10:00
A.M., Philadelphia time, three Business Days prior to the requested Borrowing
Date, if all or any part of the requested Revolving Credit Loans are to be
initially Eurodollar Loans, or prior to 11:00 a.m., Philadelphia time, on the
requested Borrowing Date if all of the requested Revolving Credit Loans are to
be initially Base Rate Loans), specifying in the Notice of Borrowing (a) the
amount to be borrowed, (b) the requested Borrowing Date, (c) whether the
borrowing is to be of Eurodollar Loans, Base Rate Loans or a combination thereof
and (d) if the borrowing is to be entirely or partly of Eurodollar Loans, the
amount of such Loan(s) and the length of the initial Interest Period(s)
therefor. Each borrowing under the Commitments of Eurodollar Loans shall be in
an amount equal to $2,500,000 or increments of $500,000 thereafter (or, if the
aggregate Available Commitments at such time are less than $2,500,000, such
lesser amount). Each borrowing under the Commitments of Base Rate Loans shall be
in an amount equal to $500,000 or increments of $100,000 thereafter (or, if the
aggregate Available Commitments at such time are less than $500,000, such lesser
amount).
Upon receipt of a Notice of Borrowing from the Borrowers, the Agent shall
promptly notify each Bank thereof. Each Bank will make the amount of its pro
rata share of each borrowing (based on its Commitment Percentage at that time)
available to the Agent for the account of the Borrowers at the office of the
Agent specified in subsection 9.2 prior to 10:00 A.M., Philadelphia time, on the
Borrowing Date requested by the Borrowers in funds immediately available to the
Agent. Such borrowing will then be made available to the Borrowers by the Agent
crediting the account of the Company on the books of such office with the
aggregate of the amounts made available to the Agent by the Banks and in like
funds as received by the Agent.
Unless the Agent shall have received notice from a Bank prior to the date
of any borrowing of Revolving Credit Loans that such Bank will not make
available to the Agent such Bank's pro rata portion of such borrowing, the Agent
may assume that such Bank has made such portion available to the Agent on the
date of such borrowing in accordance with this subsection and the Agent may, in
reliance upon such assumption, make available to the Borrowers on such date a
corresponding amount. If and to the extent that such Bank shall not have made
such portion available to the Agent, such Bank and the Borrowers (without
prejudice to the Borrowers' rights against such Bank) severally agree to repay
to the Agent forthwith on demand such corresponding amount together with
interest thereon, for each day from the date such amount is made available to
the Borrowers until the date such amount is repaid to the Agent at (i) in the
case of the Borrowers, the interest rate applicable at the time to the Revolving
Credit Loans comprising such borrowing and (ii) in the case of such Bank, the
Federal Funds Effective
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Rate, provided, that, if such Bank shall not pay such amount within three
Business Days of such Borrowing Date, the interest rate on such overdue amount
shall, at the expiration of such three-Business Day period, be the rate per
annum applicable to Base Rate Loans. If such Bank shall repay to the Agent such
corresponding amount, such amount shall constitute such Bank's Revolving Credit
Loan as part of such borrowing for purposes of this Agreement.
(b) If in a Notice of Borrowing no election as to the Type of
Revolving Credit Loan is specified in any such notice, then the requested
Revolving Credit Loan shall be a Base Rate Loan. If a Eurodollar Loan is
requested but no Interest Period with respect to such Loan is specified in any
such notice, then the Borrowers shall be deemed to have selected an Interest
Period of one month's duration.
2.4 Term Loans. Subject to the terms and conditions hereof, each Bank
severally agrees to make on the Revolving Credit Termination Date a term loan
(a "Term Loan") to the Borrowers on a joint and several basis, in a principal
amount not to exceed the outstanding principal amount of such Bank's Revolving
Credit Loans outstanding on such date. The proceeds of the Term Loans shall be
used solely to repay in full the principal amount of the Revolving Credit Loans
then outstanding. Simultaneously with such payment, the Borrowers shall pay all
accrued and unpaid interest on the Revolving Credit Loans and any other amounts
owed under Section 2.18.
2.5 Term Notes. The Term Loan made by each Bank shall be evidenced by
a promissory note of the Borrowers, substantially in the form of Exhibit A-2 (a
"Term Note"), with appropriate insertions, payable to the order of such Bank
and in a principal amount equal to the amount of the Commitment of such Bank.
Each Bank is hereby authorized to record the date, Type and amount of the Term
Loan made by such Bank, each continuation thereof, each conversion of all or a
portion thereof to another Type, the date and amount of each payment or
prepayment of principal thereof and, in the case of Eurodollar Loans, the
length of each Interest Period with respect thereto, on the schedule annexed to
and constituting a part of its Term Note and any such recordation shall
constitute prima facie evidence of the accuracy of the information so recorded,
provided that the failure of any Bank to make such recordation (or any error in
such recordation) shall not affect the obligations of the Borrowers hereunder
or under such Note. Each Term Note shall (a) be dated the Closing Date, (b) be
stated to mature on the Termination Date and (c) provide for the payment of
interest in accordance with subsections 2.9 and 2.10.
2.6 Procedure for Term Loans. The Borrowers shall give the Agent
irrevocable notice (which notice must be received by the Agent prior to 10:00
a.m., Philadelphia time, three Business Days
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prior to the Revolving Credit Termination Date, if all or part of the Term
Loans are to be initially Eurodollar Loans, or prior to 11:00 a.m.,
Philadelphia time, on the Revolving Credit Termination Date, if all of the Term
Loans are to be initially Base Rate Loans), specifying in the Notice of
Borrowing (a) the amount to be borrowed, which amount shall not exceed the
outstanding principal amount of the Revolving Credit Loans on the Revolving
Credit Termination Date, (b) the requested Borrowing Date, which date shall be
the Revolving Credit Termination Date, (c) whether the borrowing is to be of
Eurodollar Loans, Base Rate Loan or a combination thereof and (d) if the
borrowing is to be entirely or partly of Eurodollar Loans, the amount of such
Loans and the length of the initial Interest Periods therefor.
Upon receipt of a Notice of Borrowing of Term Loans from the Borrowers,
the Agent shall promptly notify each Bank thereof. On the Revolving Credit
Termination Date, each Bank shall apply the proceeds of its Term Loan against
the outstanding principal amount of the Revolving Credit Loans of such Bank
then outstanding.
2.7 Repayment of Term Loans. (a) The Borrowers shall repay the
Term Loans in twelve (12) equal quarterly payments, the first such payment to
occur on the date which is three months after the Revolving Credit Termination
Date and each successive payment to occur three months after the date that the
preceding payment was due.
(b) The Term Notes shall be subject to mandatory and optional
prepayment as provided in subsections 2.13 and 2.14. Any payments on the Term
Loans (whether optional or mandatory) may not be reborrowed.
2.8 Fees. (a) The Borrowers jointly and severally agree to pay
to the Agent for the account of each Bank, on each March 31, June 30, September
30 and December 31 during the Commitment Period and on the date on which the
Commitments shall be permanently reduced or terminated as provided herein, a
commitment fee at a rate per annum equal to the Commitment Fee Rate in effect
from time to time on the average daily amount of the Available Commitments
during the preceding quarter (or shorter period commencing with the date hereof
or ending with the Revolving Credit Termination Date or the date on which the
Commitments shall be terminated). All Commitment Fees shall be computed on the
basis of the actual number of days elapsed in a year of 360 days and shall be
paid in Dollars. The Commitment Fee due to each Bank shall commence to accrue on
the date hereof, and shall cease to accrue on the Revolving Credit Termination
Date. The Agent shall distribute the Commitment Fees on the Revolving Credit
Loans among the Banks pro rata in accordance with their respective Commitment
Percentages.
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(b) The Borrowers jointly and severally agree to pay the Agent, for
its own account, administrative and other fees at the times and in the amounts
set forth in the Fee Letter Agreement.
(c) The foregoing fees shall be paid on the dates due, in
immediately available funds, to the Agent for distribution, if and as
appropriate, among the Banks. Once paid, none of the foregoing fees shall be
refundable under any circumstances.
2.9 Interest Rates and Payment Dates. (a) Subject to the provisions of
subsection 2.10, each Base Rate Loan shall bear interest (computed on the basis
of the actual number of days elapsed over a year of 365 or 366 days, as the case
may be) at a rate per annum equal to the Base Rate plus the Applicable Margin
applicable to Base Rate Loans.
(b) Subject to the provisions of subsection 2.10, each Eurodollar
Loan shall bear interest (computed on the basis of the actual number of days
elapsed over a year of 360 days) at a rate per annum equal to the Eurodollar
Rate for the Interest Period in effect for such Eurodollar Loan plus the
Applicable Margin applicable to Eurodollar Loans.
(c) Interest on each Loan shall be payable in arrears on each
Interest Payment Date applicable to such Loan; provided that, (i) interest
accruing on overdue amounts pursuant to subsection 2.10 shall be payable on
demand as provided in such subsection and (ii) as set forth in subsection 2.4,
accrued and unpaid interest on the Revolving Credit Loans shall be payable on
the Revolving Credit Termination Date.
(d) As soon as practicable the Agent shall notify the Company and
the Banks of (i) each determination of a Eurodollar Rate and (ii) the effective
date and the amount of each change in the interest rate on a Eurodollar Loan or
Base Rate Loan. Each determination of an interest rate by the Agent, pursuant to
any provision of this Agreement (including subsections 2.9 and 2.10) shall be
conclusive and binding on the Borrowers and the Banks in the absence of clearly
demonstrable error. At the request of the Borrowers, the Agent shall deliver to
the Company a statement showing the quotations used by it in determining any
interest rate pursuant to subsections 2.9(a) and (b).
2.10 Default Interest. If the Borrowers shall default in the payment of
the principal of or interest on any Loan or any other amount becoming due
hereunder, the Borrowers, shall on demand from time to time pay interest on any
overdue payment of principal (in lieu of the interest otherwise payable on such
principal under Section 2.9) and, to the extent permitted by law, on overdue
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payments of interest and other amounts due hereunder up to the date of actual
payment (after as well as before judgment):
(a) in the case of overdue principal of a Base Rate Loan or a
Eurodollar Loan, at a rate determined by the Agent to be 2% per annum above the
rate which would otherwise be payable on such Loans in accordance with the
provisions hereof; and
(b) in the case of any other amount payable hereunder (whether for
interest, fees or otherwise), at a rate equal to 4% per annum above the Base
Rate.
2.11 Inability to Determine Interest Rate. In the event, and on
each occasion, that prior to the first day of the commencement of any Interest
Period for a Eurodollar Loan, the Agent shall have determined (which
determination shall be conclusive and binding upon the Borrowers) that dollar
deposits in the principal amount of such Eurodollar Loan are not generally
available in the London Interbank Market, or that the rate at which such dollar
deposits are being offered will not adequately and fairly reflect the cost to
the Banks of making or maintaining the principal amount of such Eurodollar Loan
during such Interest Period, or that reasonable means do not exist for
ascertaining the Eurodollar Rate, the Agent shall, as soon as practicable
thereafter, give written, telegraphic or telephonic notice of such
determination to the Company and the Banks. After such notice shall have been
given and until the circumstances giving rise to such notice no longer exist,
each request for a Eurodollar Loan or for conversion to or maintenance of a
Eurodollar Loan pursuant to the terms of this Agreement shall be deemed to be a
request for a Base Rate Loan. Each determination by the Agent hereunder shall
be conclusive absent error in calculation.
2.12 Termination, Reduction and Extension of Commitments. (a) The
Commitments shall be automatically terminated on the Revolving Credit
Termination Date.
(b) Upon at least five Business Days' prior irrevocable written
(including telecopy) notice to the Agent, the Borrowers may at any time in
whole permanently terminate, or from time to time in part permanently reduce,
the Commitments; provided, however, that (i) each partial reduction of the
Commitments shall be in a minimum principal amount of $1,000,000 or in a whole
multiple thereof, and (ii) the Commitments may not be reduced or terminated if,
after giving effect thereto and to any prepayments of the Revolving Credit
Loans made on the effective date thereof, the aggregate principal amount of the
Revolving Credit Loans outstanding at such time would exceed the aggregate
amount of the Commitments at such time.
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(c) Any prepayment of the Revolving Credit Loans pursuant to
subsection 2.14 shall permanently reduce the Commitments on a dollar-for-dollar
basis.
(d) Each reduction in the Commitments hereunder shall be made
ratably among the Banks in accordance with their respective Commitment
Percentages. The Borrowers shall pay to the Agent for the account of the Banks
on the date of each termination or reduction of the Commitments, the Commitment
Fees on the amount of the Commitments so terminated or reduced accrued to the
date of such termination or reduction.
(e) During the period beginning one hundred and eighty days prior
to the second and any subsequent anniversary of the Closing Date and ending on
such anniversary, the Company may deliver to the Agent (which shall promptly
transmit to each Bank) a notice requesting that the Commitments be extended to
the first anniversary of the Revolving Credit Termination Date then in effect.
Within forty-five days after its receipt of any such notice, each Bank shall
notify the Agent of its willingness or unwillingness so to extend its
Commitment. Any Bank that shall fail so to notify the Agent within such period
shall be deemed to have declined to extend its Commitment. If each (but only if
each) Bank agrees to extend its Commitment, the Agent shall so notify the
Company and each Bank, whereupon (i) the respective Commitments of the Banks
shall, without further act by any party hereto, be extended to the first
anniversary of the Revolving Credit Termination Date then in effect, (ii) the
term "Revolving Credit Termination Date" shall thereafter mean such first
anniversary and (iii) the term "Termination Date" shall thereafter mean the
first anniversary of the Termination Date then in effect. Any such extension
shall be evidenced by a written agreement among the Agent, the Banks and the
Company, such agreement to be in form and substance acceptable to the Agent and
the Banks. In the event that one or more Banks (each a "Non-Electing Bank")
shall have declined or been deemed to have declined to extend its or their
Commitment and Banks holding a majority in amount of the Commitments shall have
notified the Agent of their desire to extend their Commitments, the Borrowers
shall have the right, but not the obligation, at their own expense, upon notice
to each such Non-Electing Bank and the Agent, to replace all (but not less than
all) such Non-Electing Banks (in accordance with and subject to the
restrictions contained in Section 9.6) at any time before the thirtieth (30th)
day prior to the Revolving Credit Termination Date with one or more assignees
(each a "Replacement Bank") willing to purchase the Non-Electing Banks'
interests hereunder and to agree to extend its or their Commitment in
accordance with the notice referred to in the first sentence of this clause (e).
In such event, each Non-Electing Bank shall promptly upon request transfer and
assign without recourse (in accordance with and subject to the restrictions
contained in Section 9.6) all its interests, rights
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and obligations under this Agreement to the applicable Replacement Bank;
provided, however, that (i) no such assignment shall conflict with any law or
any rule, regulation or order of any Governmental Authority, (ii) the
applicable Replacement Bank shall pay to the applicable Non-Electing Bank in
immediately available funds on the date of such assignment the principal of and
interest accrued to the date of payment on the Loans made by such Non-Electing
Bank hereunder and all other amounts accrued for such Non-Electing Bank's
account or owed to it hereunder (including Commitment Fees and any unpaid costs
or expenses), and (iii) a Non-Electing Bank shall not be required to sell its
interests hereunder unless the Borrowers have arranged for one or more
Replacement Banks to acquire the interests of all other Non-Electing Banks. If,
as a result of the foregoing, each Bank (including Replacement Banks, but
excluding Non-Electing Banks whose interests have been purchased as provided
above) has agreed to extend its Commitment, the Commitments shall be extended as
provided in clause (i) of the fourth sentence of this paragraph and the terms
Revolving Credit Termination Date and Termination Date shall have the meanings
set forth in clauses (ii) and (iii), respectively, in such fourth sentence of
this clause (e).
2.13 Optional Prepayment of Loans. (a) The Borrowers shall have
the right at any time and from time to time to prepay the Loans, in whole or in
part, without premium or penalty (but in any event subject to subsection 2.18),
upon prior written, telecopy or telephonic notice to the Agent given, and in
the case of Base Rate Loans, no later than 10:30 a.m., Philadelphia time, one
Business Day before any proposed prepayment, and in the case of Eurodollar
Loans, no later than 10:30 a.m., Philadelphia time, three Business Days before
any such proposed prepayment. In each case the notice shall specify the date
and amount of each such prepayment, whether the prepayment is of Eurodollar
Loans, or a combination thereof, and, if a combination thereof, the amount
allocable to each; provided, however, that each such partial prepayment shall be
in the principal amount of at least (x) with respect to prepayments of
Revolving Credit Loans that bear interest at the Base Rate, $500,000 or in
whole multiples of $100,000 in excess thereof, (y) with respect to prepayments
of Revolving Credit Loans that bear interest at the Eurodollar Rate, $2,500,000
or in whole multiples of $500,000 in excess thereof and (y) with respect to
prepayments of Term Loans, $250,000 or in whole multiples thereof.
(b) On the date of any termination or reduction of the Commitments
pursuant to subsection 2.12, the Borrowers shall pay or prepay so much of the
Revolving Credit Loans as shall be necessary in order that the aggregate
principal amount of Revolving Credit Loans outstanding at such time would not
exceed the Commitments at such time.
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(c) Each notice of prepayment shall be irrevocable and shall
commit the Borrowers to prepay the amount specified in such notice. All
prepayments of Term Loans under this subsection shall be accompanied by accrued
interest on the principal amount being prepaid to the date of prepayment.
(d) Upon receipt of any notice of prepayment, the Agent shall
promptly notify each Bank thereof.
(e) Partial prepayment of the Term Loans pursuant to this
subsection 2.13 shall be applied in the inverse order of maturity.
(f) Amounts prepaid on account of the Term Loans may not be
reborrowed. Amounts prepaid pursuant to subsection 2.13(a) on account of the
Revolving Credit Loans may be reborrowed, subject to the terms and conditions
hereof.
2.14 Mandatory Prepayments. (a) Promptly upon receipt by the Company
or any of its Subsidiaries of any Net Proceeds from an Asset Sale, the
Borrowers shall pay to the Agent 100% of such Net Proceeds; provided that, (i)
prior to the Revolving Credit Termination Date, the Borrowers shall not be
required to make prepayments pursuant to this clause (a) unless at the time of
such Asset Sale, a Default shall exist hereunder and (ii) in each fiscal year
of the Borrowers, the Borrowers shall not be required to make any prepayments
pursuant to this clause (a) until the Net Proceeds in the aggregate from Asset
Sales in such fiscal year (including with respect to the fiscal year ending
January 31, 1997, any such Net Proceeds received between the beginning of such
fiscal year and the Closing Date) shall equal or exceed $500,000, whereupon the
amount of Net Proceeds that must be applied to the Loans pursuant to this
paragraph shall equal 100% of all Net Proceeds in such fiscal year in excess of
$500,000 in the aggregate; provided, further, that on and after the Revolving
Credit Termination Date, the amount of any Net Proceeds in respect of an Asset
Sale that are required to be paid to the Agent pursuant to this subsection
2.14(a) shall be reduced (and so the Borrowers may retain such portion of such
Net Proceeds) by an amount equal to the amount of any voluntary prepayment of
the Term Loans pursuant to subsection 2.13(a) made by the Borrowers in the
fiscal year in which such Asset Sale occurred, but only to the extent that such
voluntary prepayment has not previously reduced any payments due to the Agent
under this subsection 2.14(a). Any payments made to the Agent pursuant to this
subsection 2.14(a) shall be applied by the Agent to the principal amount of the
Revolving Credit Loans or the Term Loans, whichever are then outstanding. The
Borrowers shall give the Agent at least one Business Day's prior written notice
of each prepayment pursuant to this subsection 2.14(a) setting forth the date
and expected amount thereof.
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(b) As provided in subsection 2.12(c), any prepayments of the
Revolving Credit Loans pursuant to subsection 2.14(a) shall permanently reduce
the Commitments on a dollar-for-dollar basis. Any prepayments of the Term Loans
pursuant to subsection 2.14(a) shall be applied in the inverse order of maturity
and may not be reborrowed.
(c) All prepayments under this subsection 2.14 shall, to the
extent possible, be applied first to any Base Rate Loans then outstanding and
the balance, if any, to Eurodollar Loans then outstanding, with payments
applied to Eurodollar Loans being applied in order of next maturing Interest
Periods. Any prepayment of Eurodollar Loans shall be subject to subsection 2.18.
2.15 Illegality. Notwithstanding any other provision herein, if any
change in any Requirement of Law or in the interpretation or application
thereof shall make it unlawful for any Bank to make or maintain Eurodollar
Loans as contemplated by this Agreement, (a) the commitment of such Bank
hereunder to make Eurodollar Loans, continue Eurodollar Loans as such and
convert Base Rate Loans to Eurodollar Loans shall forthwith be cancelled and (b)
such Bank's Loans then outstanding as Eurodollar Loans, if any, shall be
converted automatically to Base Rate Loans on the respective last days of the
then current Interest Periods with respect to such Loans or within such earlier
period as required by law. If any such conversion of a Eurodollar Loan occurs
on a day which is not the last day of the then current Interest Period with
respect thereto, the Borrowers shall pay to such Bank such amounts, if any, as
may be required pursuant to subsection 2.18.
2.16 Requirements of Law. (a) In the event that any change in any
Requirement of Law or in the interpretation, or application thereof or
compliance by any Bank with any request or directive (whether or not having the
force of law) from any central bank or other Governmental Authority made
subsequent to the date hereof:
(i) shall subject any Bank to any tax of any kind whatsoever
with respect to this Agreement, any Note or any Eurodollar Loan made
by it, or change the basis of taxation of payments to such Bank in
respect thereof (except for taxes covered by subsection 2.17 and
changes in the rate of tax on the net income of such Bank);
(ii) shall impose, modify or hold applicable any reserve,
special deposit, compulsory loan or similar requirement against assets held by,
deposits or other liabilities in or for the account of, advances, loans or
other extensions of credit by, or any other acquisition of funds by, any office
of such Bank which is not otherwise included in the
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determination of the interest rate on such Eurodollar Loan, as the case may be,
hereunder; or
(iii) shall impose on such Bank any other condition;
and the result of any of the foregoing is to increase the cost to such Bank, by
an amount which such Bank deems to be material, of making, converting into,
continuing or maintaining Eurodollar Loans or maintaining any Commitment
hereunder or to reduce any amount receivable hereunder in respect thereof then,
in any such case, the Borrowers shall as promptly as practicable pay such Bank,
upon its demand, any additional amounts necessary to compensate such Bank for
such increased cost or reduced amount receivable. If any Bank becomes entitled
to claim any additional amounts pursuant to this subsection, it shall as
promptly as practicable notify the Company, through the Agent, of the event by
reason of which it has become so entitled. A certificate as to any additional
amounts payable pursuant to this subsection submitted by such Bank, through the
Agent, to the Company shall be conclusive in the absence of clearly demonstrable
error. This covenant shall survive the termination of this Agreement and the
payment of the Notes and all other amounts payable hereunder.
(b) In the event that any Bank shall have determined that any change
in any Requirement of Law regarding capital adequacy or in the interpretation or
application thereof or compliance by such Bank or any corporation controlling
such Bank with any request or directive regarding capital adequacy (whether or
not having the force of law) from any Governmental Authority made subsequent to
the date hereof does or shall have the effect of reducing the rate of return on
such Bank's or such corporation's capital as a consequence of its obligations
hereunder to a level below that which such Bank or such corporation could have
achieved but for such change or compliance (taking into consideration such
Bank's or such corporation's policies with respect to capital adequacy) by an
amount deemed by such Bank to be material, then from time to time, the Borrowers
shall as promptly as practicable pay such Bank, upon its demand, such additional
amount or amounts as will compensate such Bank for such reduction. If any Bank
becomes entitled to claim any additional amounts pursuant to this subsection, it
shall as promptly as practicable notify the Company, through the Agent, of the
event by reason of which it has become so entitled. A certificate as to any
additional amounts payable pursuant to this subsection setting forth the
calculation of such amounts in reasonable detail submitted by such Bank, through
the Agent, to the Company shall be conclusive in the absence of clearly
demonstrable error. This covenant shall survive the termination of this
Agreement and the payment of the Notes and all other amounts payable hereunder.
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(c) Each Bank agrees that it will use reasonable efforts in order
to avoid or to minimize, as the case may be, the payment by the Borrowers of any
additional amount under subsections 2.16(a) or (b); provided, however, that no
Bank shall be obligated to incur any expense, cost or other amount in connection
with utilizing such reasonable efforts. Any claim by any Bank for payment from a
Borrower of any additional amounts under subsection 2.16(a) or (b) shall be made
within one hundred and eighty (180) days after such Bank becomes aware of the
exact amount of any such claim.
2.17 Taxes. (a) All payments made by the Borrowers under this Agreement
and the Notes shall be made free and clear of, and without deduction or
withholding for or on account of, any present or future income, stamp or other
taxes, levies, imposts, duties, charges, fees, deductions or withholdings, now
or hereafter imposed, levied, collected, withheld or assessed by any
Governmental Authority (excluding, in the case of the Agent and each Bank, net
income taxes and franchise or gross receipts taxes imposed on the Agent or such
Bank, as the case may be, as a result of a present or former connection between
the jurisdiction of the government or taxing authority imposing such tax and the
Agent or such Bank (excluding a connection arising solely from the Agent or such
Bank having executed, delivered or performed its obligations or received a
payment under, or enforced, this Agreement or the Notes)) (all such non-excluded
taxes, levies, imposts, duties, charges, fees, deductions and withholdings being
hereinafter called "Taxes"). If any Taxes are required to be withheld from any
amounts payable to the Agent or any Bank hereunder or under the Notes, the
amounts so payable to the Agent or such Bank shall be increased to the extent
necessary to yield to the Agent or such Bank (after payment of all Taxes)
interest or any such other amounts payable hereunder at the rates or in the
amounts specified in this Agreement and the Notes. Whenever any Taxes are
payable by the Borrowers, as promptly as possible thereafter the Borrowers shall
send to the Agent for its own account or for the account of such Bank, as the
case may be, a certified copy of an original official receipt received by the
Borrowers showing payment thereof. If the Borrowers fail to pay any Taxes when
due to the appropriate taxing authority or fail to remit to the Agent the
required receipts or other required documentary evidence, the Borrowers shall
indemnify the Agent and the Banks for any incremental taxes, interest or
penalties that may become payable by the Agent or any Bank as a result of any
such failure. The agreements in this subsection shall survive the termination of
this Agreement and the payment of the Notes and all other amounts payable
hereunder.
(b) Each Bank that is not incorporated under the laws of the
United States of America or a state thereof agrees that it will deliver to the
Company and the Agent (i) two duly completed copies of United States Internal
Revenue Service Form 1001 or 4224
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or successor applicable form, as the case may be, and (ii) an Internal Revenue
Service Form W-8 or W-9 or successor applicable form. Each such Bank also agrees
to deliver to the Company and the Agent two further copies of the said Form 1001
or 4224 and Form W-8 or W-9, or successor applicable forms or other manner of
certification, as the case may be, on or before the date that any such form
expires or becomes obsolete or after the occurrence of any event requiring a
change in the most recent form previously delivered by it to the Company, and
such extensions or renewals thereof as may reasonably be requested by the
Company or the Agent, unless in any such case an event (including, without
limitation, any change in treaty, law or regulation) has occurred prior to the
date on which any such delivery would otherwise be required which renders all
such forms inapplicable or which would prevent such Bank from duly completing
and delivering any such form with respect to it and such Bank so advises the
Company and the Agent. Each such Bank shall certify (i) in the case of a Form
1001 or 4224, that it is entitled to receive payments under this Agreement
without deduction or withholding of any United States federal income taxes and
(ii) in the case of a Form W-8 or W-9, that it is entitled to an exemption from
United States backup withholding tax.
(c) Notwithstanding the foregoing subsection 2.17, the Borrowers
shall not be required to pay any additional amounts to any Bank in respect of
United States withholding tax pursuant to such subsections if (i) the obligation
to pay such additional amounts would not have arisen but for a failure by such
Bank to comply with the requirements of subsection 2.17(b) or (ii) such Bank
shall not have furnished the Company with such forms listed in subsection
2.17(b) and shall not have taken such other steps as reasonably may be available
to it under applicable tax laws and any applicable tax treaty or convention to
obtain an exemption from, or reduction (to the lowest applicable rate) of, such
United States withholding tax.
(d) Any claim by a Bank for payment from any Borrower of any Taxes
under this subsection 2.17 shall be made within one hundred and eighty (180)
days after such Bank becomes aware of the exact amount of any such claim.
2.18 Indemnity. (a) The Borrowers jointly and severally agree to
indemnify each Bank and to hold each Bank harmless from any loss or expense
which such Bank may sustain or incur as a consequence of (i) default by the
Borrowers in payment when due of the principal amount of or interest on any
Eurodollar Loan, (ii) default by the Borrowers in making a borrowing of,
conversion into or continuation of Eurodollar Loans after the Borrowers have
given a notice requesting the same in accordance with the provisions of this
Agreement, (iii) default by the Borrowers in making any prepayment after the
Borrowers have given a notice thereof in accordance with the provisions of this
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Agreement or (iv) the making of a prepayment (whether voluntary, mandatory, as a
result of acceleration or otherwise) of Eurodollar Loans on a day which is not
the last day of an Interest Period with respect thereto, including, without
limitation, in each case, any such loss or expense arising from the reemployment
of funds obtained by it or from fees payable to terminate the deposits from
which such funds were obtained. A certificate as to any amounts that a Bank is
entitled to receive under this subsection 2.18 submitted by such Bank, through
the Agent, to the Company shall be conclusive in the absence of clearly
demonstrable error and all such amounts shall be paid by the Borrowers promptly
upon demand by such Bank. This covenant shall survive the termination of this
Agreement and the payment of the Notes and all other amounts payable hereunder.
(b) For the purpose of calculation of all amounts payable to a
Bank under this subsection, each Bank shall be deemed to have actually funded
its relevant Eurodollar Loan through the purchase of a deposit bearing interest
at the Eurodollar Rate in an amount equal to the amount of such relevant
Eurodollar Loan and having a maturity comparable to the relevant Interest
Period; provided, however, that each Bank may fund each of its Eurodollar Loans
in any manner it sees fit, and the foregoing assumption shall be utilized only
for the calculation of amounts payable under this subsection. This covenant
shall survive the termination of this Agreement and the payment of the Notes and
all other amounts payable hereunder.
(c) Any claim by a Bank for payment from any Borrower under this
subsection 2.18 shall be made within one hundred and eighty (180) days after
such Bank becomes aware of the exact amount of such claim.
2.19 Pro Rata Treatment of Loans and Payments: Commitment Fees. (a)
Except as required under subsection 2.15, each borrowing by the Borrowers
hereunder, each payment or prepayment of principal of the Loans, each payment of
interest on the Loans, each payment of Commitment Fees, and each reduction of
the Commitments, shall be made pro rata among the Banks in accordance with their
respective Commitment Percentages.
(b) Each Bank agrees that in computing such Bank's portion of any
borrowing to be made hereunder, the Agent may, in its discretion, round each
Bank's percentage of such borrowing to the next higher or lower whole dollar
amount.
2.20 Payments. (a) The Borrowers shall make each payment (including
principal of or interest on any borrowing or any fees or other amounts)
hereunder not later than 12:00 (noon), Philadelphia time, on the date when due
in Dollars to the Agent at its offices set forth in subsection 9.2, in
immediately available
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funds. Such payments shall be made without set off or counterclaim of any kind.
The Agent shall distribute to the Banks any payments received by the Agent
promptly upon receipt in like funds as received.
(b) Whenever any payment (including principal of or interest on
any borrowing or any fees or other amounts) hereunder (other than payments on
Eurodollar Loans) shall become due, or otherwise would occur, on a day that is
not a Business Day, such payment may be made on the next succeeding Business
Day.
(c) The Borrowers hereby authorize and direct the Agent to charge
any deposit account of any Borrower maintained at any branch of PNC Bank,
National Association for each payment of principal of and interest on the Loans
and for all fees and other amounts due from the Borrowers hereunder and the
Agent agrees to provide prior notice of the amount and time of each such charge;
provided that, if any Event of Default shall have occurred and be continuing, no
notice from the Agent shall be required.
2.21 Conversion and Continuation Options. The Borrowers shall have the
right at any time upon prior irrevocable notice to the Agent (i) not later than
12:00 noon, Philadelphia time, one Business Day prior to conversion, to convert
any Eurodollar Loan to a Base Rate Loan, (ii) not later than 10:00 a.m.,
Philadelphia time, three Business Days prior to conversion or continuation, to
convert any Base Rate Loan into a Eurodollar Loan or to continue any Eurodollar
Loan as a Eurodollar Loan for any additional Interest Period and (iii) not later
than 10:00 a.m., Philadelphia time, three Business Days prior to conversion, to
convert the Interest Period with respect to any Eurodollar Loan to another
permissible Interest Period, subject in each case to the following:
(a) a Eurodollar Loan may not be converted at a time other than
the last day of the Interest Period applicable thereto;
(b) any portion of a Loan maturing or required to be repaid in
less than one month may not be converted into or continued as a Eurodollar Loan;
(c) no Eurodollar Loan may be continued as such and no Base Rate
Loan may be converted to a Eurodollar Loan when any Default has occurred and is
continuing and the Agent or the Required Banks have determined that such a
continuation is not appropriate;
(d) any portion of a Eurodollar Loan that cannot be converted into
or continued as a Eurodollar Loan by reason of paragraph 2.21(b) or 2.21(c)
automatically shall be converted at
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the end of the Interest Period in effect for such Loan to a Base Rate Loan;
(e) on the last day of any Interest Period for Eurodollar Loans,
if the Borrowers have failed to give notice of conversion or continuation as
described in this subsection or if such conversion or continuation is not
permitted pursuant to subsection 2.21(d), such Loans shall be converted to Base
Rate Loans on the last day of such then expiring Interest Period; and
(f) Each request by the Borrowers to convert or continue a Loan
shall constitute a representation and warranty that no Default shall have
occurred and be continuing.
Accrued interest on a Loan (or portion thereof) being converted shall be paid by
the applicable Borrower(s) at the time of conversion.
2.22 Minimum Amounts of Tranches: Maximum Number of Tranches. (a) All
borrowings, conversions and continuations of Loans hereunder and all selections
of Interest Periods hereunder shall be in such amounts and be made pursuant to
such elections that, after giving effect thereto, the aggregate principal amount
of the Loans comprising each Eurodollar Tranche shall be equal to $2,500,000 or
a whole multiple of $500,000 in excess thereof.
(b) The Borrowers shall not have outstanding at any one time more
than in the aggregate five Eurodollar Tranches.
2.23 Use of Proceeds. (a) Revolving Credit Loans. The proceeds of the
Revolving Credit Loans shall be used by the Borrowers (i) for working capital
and general corporate purposes in the ordinary course of business, (ii) to repay
Indebtedness under the Existing Credit Agreement and to pay a portion of the
purchase price for the Acquisitions and (iii) to the extent permitted hereunder,
to pay all or a portion of the purchase price for other acquisitions.
(b) Term Loans. The proceeds of the Term Loans shall be used
solely for the purpose of repaying the Revolving Credit Loans then outstanding.
SECTION 3. REPRESENTATIONS AND WARRANTIES
To induce the Agent and the Banks to enter into this Agreement and to
make the Loans, each of the Borrowers hereby represents and warrants to the
Agent and each Bank that:
3.1 Financial Condition. (a) The consolidated balance sheet of the
Company and its consolidated Subsidiaries as at
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January 31, 1996 and the related consolidated statements of income and of cash
flows for the fiscal year ended on such date, copies of which have heretofore
been furnished to each Bank, present fairly the consolidated financial condition
of the Company and its consolidated Subsidiaries as at such date, and the
consolidated results of their operations and their consolidated cash flows for
the fiscal year then ended. All such financial statements, including the related
schedules and notes thereto, have been prepared in accordance with GAAP applied
consistently throughout the periods involved. Neither the Company nor any of its
consolidated Subsidiaries had, at the date of the most recent balance sheet
referred to above, any material Contingent Obligation, liability for taxes, or
any long-term lease or unusual forward or long-term commitment, including,
without limitation, any interest rate or foreign currency swap or exchange
transaction, which is required by GAAP to be but is not reflected in the
foregoing statements or in the notes thereto.
(b) Historical Statements. The Company has delivered to the Agent
copies of the financial statements listed on Schedule 3.1(b) hereof
(collectively, the "Historical Statements"). The Historical Statements were
compiled from the books and records maintained by the management of the
Borrowers' and the other parties listed on such Schedule, and fairly represent
the financial condition and results of operations for each of the corporations
referred to in such Schedule (and the consolidated financial condition of the
Company assuming the Acquisitions had been completed as of such date) as of the
respective dates and periods specified, and have been prepared in accordance
with GAAP consistently applied, subject in the case of interim statements to
normal year-end audit adjustments.
(c) Financial Projections. The Company has delivered to the Agent
(i) financial projections of the Company and its consolidated Subsidiaries as of
the date of consummation of the Acquisitions and (ii) those other financial
projections listed on Schedule 3.1(c) hereof (collectively, the "Financial
Projections"). The Financial Projections represent a reasonable range of
possible results in light of the history of the business, present and
foreseeable conditions and the intentions of the Company's management. The
Financial Projections accurately reflect the liabilities of the Company and its
Subsidiaries upon consummation of the transactions contemplated hereby as of the
Closing Date.
3.2 No Change. Since January 31, 1996, there has been no development or
event nor any prospective development or event which has had or could reasonably
be expected to have a Material Adverse Effect.
3.3 Corporate Existence; Compliance with Law. Each of the Borrowers and
its Subsidiaries (a) is duly organized, validly
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existing and in good standing under the laws of the jurisdiction of its
organization, (b) has the corporate power and authority, and the legal right, to
own and operate its property, to lease the property it operates as lessee and to
conduct the business in which it is currently engaged, (c) is duly qualified as
a foreign corporation and in good standing under the laws of each jurisdiction
where its ownership, lease or operation of property or the conduct of its
business requires such qualification, except to the extent that the failure to
be so qualified could not, in the aggregate, reasonably be expected to have a
Material Adverse Effect and (d) is in compliance with all Requirements of Law
except to the extent that the failure to comply therewith could not, in the
aggregate, reasonably be expected to have a Material Adverse Effect.
3.4 Corporate Power: Authorization: Enforceable Obligations. Each of
the Borrowers has the corporate power, authority, and legal right, to make,
deliver and perform this Agreement and each other Loan Document to which it is a
party and to borrow hereunder and has taken all necessary corporate action to
authorize the borrowings on the terms and conditions of this Agreement and each
other Loan Document to which it is a party and to authorize the execution,
delivery and performance of this Agreement and each other Loan Document to which
it is a party. No consent or authorization of, filing with or other act by or in
respect of, any Governmental Authority or any other Person (including
stockholders and creditors of the Borrowers) is required in connection with the
borrowings hereunder or with the execution, delivery, performance, validity or
enforceability of this Agreement, the Notes or any other Loan Document. This
Agreement has been and each other Loan Document to which it is a party will be,
duly executed and delivered on behalf of such Borrower. This Agreement
constitutes and each other Loan Document when executed and delivered will
constitute, a legal, valid and binding obligation of the Borrowers parties
thereto enforceable against such Borrowers in accordance with its terms, except
as enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the enforcement of
creditors' rights generally and by general equitable principles (whether
enforcement is sought by proceedings in equity or at law).
3.5 No Legal Bar. The execution, delivery and performance of this
Agreement, the Notes and the other Loan Documents by the Borrowers, the
borrowings hereunder and the use of the proceeds thereof will not violate any
Requirement of Law or Contractual Obligation of any Borrower or any of its
Subsidiaries and will not result in, or require, the creation or imposition of
any Lien on any properties or revenues of any Borrower pursuant to any such
Requirement of Law or Contractual Obligation.
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3.6 No Material Litigation. No litigation, investigation or proceeding
of or before any arbitrator or Governmental Authority is pending or, to the
knowledge of the Borrowers, threatened against any Borrower or any of their
respective Subsidiaries or against any of its or their respective properties or
revenues (a) with respect to this Agreement, the Notes, the other Loan Documents
or any of the transactions contemplated hereby, or (b) as to which there is a
reasonable likelihood of an adverse determination and which, if adversely
determined, could have a Material Adverse Effect.
3.7 No Default. Neither the Company, any other Borrower nor any of its
or their Subsidiaries is in default under or with respect to any of its
Contractual Obligations in any respect which could have a Material Adverse
Effect. No Default or Event of Default has occurred and is continuing.
3.8 Taxes. Each of the Borrowers has filed or caused to be filed all
tax returns which, to its knowledge, are required to be filed and has paid all
taxes shown to be due and payable on said returns or on any assessments made
against it or any of its property and all other taxes, fees or other charges
imposed on it or any of its property by any Governmental Authority (other than
any the amount or validity of which are currently being contested in good faith
by appropriate proceedings and with respect to which reserves, if any, in
conformity with GAAP have been provided on the books of the Company or its
Subsidiaries, as the case may be); no tax Lien has been filed against any of the
Borrowers or any of their Subsidiaries, and, to the knowledge of each of the
Borrowers, no claim is being asserted, with respect to any such tax, fee or
other charges.
3.9 Federal Regulations. No part of the proceeds of any Loans will be
used for "purchasing" or "carrying" any "margin stock' within the respective
meanings of each of the quoted terms under Regulation U or for any purpose which
violates the provisions of Regulation U or any other Regulations of the Board of
Governors of the Federal Reserve System. If requested by any Bank or the Agent,
the Borrowers will furnish to the Agent and each Bank a statement to the
foregoing effect in conformity with the requirements of FR Form U-1 referred to
in said Regulation U. No part of the proceeds of the Loans hereunder will be
used for any purpose which violates, or which is inconsistent with, the
provisions of Regulation X.
3.10 ERISA. Each Plan (such representations in respect of any
Multiemployer Plan being made to the best knowledge of each Borrower) has
complied in all material respects with the applicable provisions of ERISA and
the Code. No prohibited transaction or accumulated funding deficiency (each as
defined in subsection 7.1(j)) or, Reportable Event has occurred with respect to
any
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Single Employer Plan. The present value of all accrued benefits under each
Single Employer Plan of which any Borrower or a Commonly Controlled Entity is a
sponsor (based on those assumptions used to fund the Plans), as calculated by
such Borrower's actuaries, did not, as of the last annual valuation date prior
to the date on which this representation is made or deemed made, exceed the
value of the assets of the Plans allocable to such benefits. Neither any
Borrower nor any Commonly Controlled Entity has had a complete or partial
withdrawal from any Multiemployer Plan and neither any Borrower nor any Commonly
Controlled Entity would become subject under ERISA to any liability if any
Borrower or any such Commonly Controlled Entity were to withdraw completely from
any Multiemployer Plan as of the valuation date most closely preceding the date
this representation is made or deemed made. Such Multiemployer Plans are neither
in Reorganization as defined in Section 4241 of ERISA nor Insolvent as defined
in Section 4245 of ERISA. The present value (determined using actuarial and
other assumptions which are reasonable in respect of the benefits provided and
the employees participating) of the liability of the Borrowers and each Commonly
Controlled Entity for post-retirement benefits to be provided to their current
and former employees under Plans which are welfare benefit plans (as defined in
Section 3(1) of ERISA) does not, in the aggregate, exceed the assets under all
such Plans allocable to such benefits. Neither any Borrower nor any Commonly
Controlled Entity has any or has received notice of any liability under the Coal
Industry Retiree Health Benefit Act of 1992. Neither a Reportable Event nor an
"accumulated funding deficiency" within the meaning of Section 412 of the Code
or Section 302 of ERISA has occurred during the five-year period to the date on
which this representation is made or deemed made with respect to any Single
Employer Plan or Multiemployer Plan. No termination of a Single Employer Plan
has occurred, and no Lien on assets of any of the Borrowers or any Commonly
Controlled Entity in favor of the PBGC or a Plan has arisen during such
five-year period.
3.11 Investment Company Act. None of Borrowers is an "investment
company", or a company "controlled" by an "investment company", within the
meaning of the Investment Company Act of 1940, as amended.
3.12 PurPose of Loans. The proceeds of the Loans shall be used by the
Borrowers only for the purposes permitted under subsection 2.23.
3.13 Environmental Matters. Except to the extent that all of the
following could not reasonably be expected to have a Material Adverse Effect:
(a) To the best knowledge of each of the Borrowers, the Properties
do not contain, and have not previously contained,
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in, on, or under, including, without limitation, the soil and groundwater
thereunder, any Materials of Environmental Concern in amounts or concentrations
that constitute or constituted a violation of, or reasonably could give rise to
liability under Environmental Laws.
(b) To the best knowledge of each of the Borrowers, the Properties
and all operations and facilities at the Properties are in compliance, and have
in the last five years been in compliance with all Environmental Laws, and there
is no contamination at, under or about the Properties or violation of any
Environmental Law with respect to the Properties or the business operated by any
Borrower or any Subsidiary thereof which could interfere with the continued
operation of any of the Properties or impair the fair saleable value of any
thereof. None of the Borrowers or any of their respective Subsidiaries have
assumed any liability of any Person under Environmental Laws.
(c) Neither the Company, any other Borrower, nor any of their
Subsidiaries has received or is aware of any claim, notice of violation, alleged
violation, non-compliance, investigation or advisory action or potential
liability regarding environmental matters or compliance of Environmental Law
with regard to the Properties which has not been satisfactorily resolved by the
Company, such other Borrower, or such Subsidiary, nor is the Company nor any
other Borrower aware or have reason to believe that any such action is being
contemplated, considered or threatened.
(d) To the best knowledge of each Borrower, Materials of
Environmental Concern have not been generated, treated, stored, transported,
disposed of, at, on, from or under any of the Properties, nor have any Materials
of Environmental Concern been transferred from the Properties to any other
location except in either case in the ordinary course of business of the
Borrowers or any of their respective Subsidiaries, in compliance with all
Environmental Laws and such that it could not reasonably be expected to give
rise to liability under any applicable Environmental Law.
(e) There are no governmental, administrative actions or judicial
proceedings pending or, to the best knowledge of each Borrower, contemplated or
threatened under any Environmental Laws to which the Company, any other Borrower
or any of their respective Subsidiaries is or will be named as a party with
respect to the Properties, nor are there any consent decrees or other decrees,
consent orders, administrative orders or other orders, or other administrative
or judicial requirements outstanding under any Environmental Law with respect to
any of the Properties.
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(f) To the best knowledge of the Borrowers, there has been no
release or threat of release of Matters of Environmental Concern at or from the
Properties, or arising from or related to the operation of the Company or any
Subsidiary in connection with the Properties or otherwise in connection with the
business operated by the Company or any Subsidiary in violation of or in amounts
or in a manner that could reasonably be expected to give rise to liability under
any Environmental Law.
(g) To the best knowledge of the Borrowers, each of the
representations and warranties set forth in paragraphs 3.13(a) through 3.13(f)
is true and correct with respect to each Property.
3.14 No Material Misstatements. No financial statement, exhibit or
schedule furnished by or on behalf of any Borrower to the Agent or any Bank in
connection with the negotiation of this Agreement, any Note or any other Loan
Document contains any misstatement of fact, or omitted or omits to state any
fact necessary to make the statements therein not misleading under the
circumstances under which they were made or given, where such misstatement or
omission would be material to the interests of the Banks with respect to the
performance of each Borrower of its obligations hereunder or thereunder. Prior
to the date hereof, the Borrowers have disclosed to the Banks in writing any and
all facts which materially and adversely affect (to the extent the Borrowers can
as of the date hereof reasonably foresee), the business, operations or financial
condition of the Company and its Subsidiaries taken as a whole, and the ability
of the Borrowers to perform their obligations under this Agreement, the Notes
and the other Loan Documents.
3.15 Title to Properties. The real property owned or leased by the
Borrowers or any Subsidiary as of the Closing Date is described on Schedule 3.15
hereto. The Borrowers and any Subsidiaries have good and marketable title to or
valid leasehold interest in all properties, assets and other rights which they
purports to own or lease or which are reflected as owned or leased on their
respective books and records, free and clear of all Liens and encumbrances
except Permitted Liens, and subject to the terms and conditions of the
applicable leases. All leases of property are in full force and effect without
the necessity for any consent which has not previously been obtained upon
consummation of the transactions contemplated hereby unless the failure to
obtain such consent would not result in a Material Adverse Effect.
3.16 Intellectual Property. Each of the Borrowers and each of their
respective Subsidiaries owns, or is licensed to use, all trademarks, tradenames,
copyrights, technology, know-how and processes necessary for the conduct of its
business as currently conducted (the "Intellectual Property") except for those
as to which the failure to own or license could not reasonably be
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expected to have a Material Adverse Effect. No claim has been asserted and is
pending by any Person challenging or questioning the use of any such
Intellectual Property, nor does such Borrower know of any valid basis for any
such claim. The use of such Intellectual Property by the Borrowers and their
Subsidiaries does not infringe the rights of any Person, except for such claims
and infringements that, in the aggregate, do not have such a Material Adverse
Effect.
3.17 No Burdensome Restrictions: List of Subsidiaries. No Requirement
of Law or Contractual Obligation of any of the Borrowers or any of their
Subsidiaries could reasonably be expected to have a Material Adverse Effect. All
of the Subsidiaries of each Borrower as of the date hereof are listed on
Schedule 3.17 of this Agreement under its name, and the respective number of
shares of authorized Capital Stock and issued and outstanding Capital Stock are
as set forth on such schedule. There are no Subsidiaries of the Company or any
Borrower which are not Borrowers hereunder.
3.18 Security Interests. (a) At all times after execution and delivery
of the Pledge Agreement by the Borrowers party thereto and satisfaction of the
conditions specified in subsection 4.1(b), the security interests created for
the benefit of the Agent and the Banks under the Pledge Agreement will
constitute valid, perfected security interests in the stock pledged thereunder,
subject to no other Liens.
(b) At all times after execution and delivery of the Security
Documents (other than the Pledge Agreement) by the Borrowers party thereto and
completion of the filing and recordings listed on Schedule 3.18, the security
interests created for the benefit of the Agent and the Banks pursuant to the
Security Documents (other than the Pledge Agreement) will constitute valid,
perfected security interests in the collateral subject thereto, subject to no
other Liens whatsoever, except Permitted Liens.
3.19 Acquisitions.
(a) Complete and correct copies of the Acquisition Agreements have
been provided to the Agent.
(b) The Company and, to the extent relevant, its Subsidiaries has
the power and authority under the laws of its jurisdiction of incorporation and
under its articles of incorporation and by-laws to enter into and perform the
Acquisition Agreements; all actions (corporate or otherwise) necessary or
appropriate for the execution and performance of the Acquisition Agreements by
the Company has been taken; and the Acquisition Agreements constitute the valid
and binding obligation of each party thereto, enforceable in accordance with
their respective terms.
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(c) The making and performance of the Acquisition Agreements will
not violate any provision of any law or regulation, federal, state or local,
including precedents of the jurisdiction of incorporation of the Company and its
Subsidiaries, and will not violate any provisions of the articles of
incorporation and by-laws of the Company and its Subsidiaries, or constitute a
default under any agreement by which the Company and its Subsidiaries or its
other property may be bound, to the extent that any of the foregoing could
individually or in the aggregate reasonably be expected to have a Material
Adverse Effect.
(d) Immediately after the consummation of the Acquisitions, the
representations and warranties set forth in this Section 3 shall be true and
correct in all material respects.
3.20 Senior Debt Status. The obligations of the Borrowers under this
Agreement and the Notes rank senior in priority of payment to the Subordinated
Debt.
3.21 Solvency. Each of the Borrowers is, and after receipt and
application of the initial Loans hereunder will be, solvent such that: (a) the
fair value of its assets (including without limitation the fair salable value of
the goodwill and other intangible property of such Borrower) is greater than the
total amount of its liabilities, including without limitation, Contingent
Obligations, (b) the present fair salable value of its assets (including without
limitation the fair salable value of the goodwill and other intangible property
of such Borrower) is not less than the amount that will be required to pay the
probable liability on its debts as they become absolute and matured, and (c) it
is able to realize upon its assets and pay its debts and other liabilities and
commitments (including Contingent Obligations) as they mature in the normal
course of business. Each Borrower (a) does not intend to, and does not believe
that it will, incur debts or liabilities beyond its ability to pay as such debts
and liabilities mature, and (b) is not engaged in a business or transaction, or
about to engage in a business or transaction, for which its property would
constitute unreasonably small capital after giving due consideration to the
prevailing practice and industry in which it is engaged.
3.22 Public Utility Holding Company Act. No Borrower is subject to
regulation as a "holding company", subject to regulation as an "affiliate" of a
"holding company", or subject to regulation as a "subsidiary company" of a
"holding company", in each case under the Public Utility Holding Company Act of
1935, as amended.
3.23 Insurance. Schedule 3.23 hereto lists, as of the Closing Date, all
insurance policies and other bonds to which the Borrowers or any Subsidiary is a
party, all of which are valid and in full force and effect. No notice has been
given or claim made
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and no grounds exist to cancel or avoid any of such policies or bonds or to
reduce the coverage provided thereby or any replacements thereof. Such policies
and bonds or any replacements thereof provide adequate coverage from reputable
and financially sound insurers in amounts sufficient to insure the assets and
risks of the Borrowers and its subsidiaries in accordance with prudent business
practice in the industry of the Borrowers and its Subsidiaries.
3.24 Material Contracts; Franchise Agreements. As of the Closing Date,
all material contracts relating to the business operations of the Borrowers,
including, without limitation, all employee benefit plans, employment
agreements, collective bargaining agreements and labor contracts, termination of
which would result in a Material Adverse Change (collectively, the "Material
Contracts") are listed on Schedule 3.24. As of the Closing Date, all such
Material Contracts are valid, binding and enforceable upon the Borrowers and
each of the parties thereto in accordance with their respective terms, and there
is no default thereunder with respect to any of the Borrowers or, to the
Borrowers' knowledge, with respect to parties other than the Borrowers. All
franchise agreements to which any of the Borrowers is a party are valid, binding
and enforceable upon such Borrower and each of the parties thereto in accordance
with their respective terms, and to the best of the Borrowers' knowledge, all
required disclosures required by law to be given in connection with those
franchise agreements have been given as required and the Borrowers and to the
best of the Borrowers' knowledge each of the other parties thereto are in
compliance in all material respects with such franchise agreements.
SECTION 4. CONDITIONS PRECEDENT
4.1 Conditions to Initial Extension of Credit. The agreement of each
Bank to make the initial Loans requested to be made by it is subject to the
satisfaction on the Closing Date of the following conditions precedent:
(a) Credit Agreement and Notes. The Agent shall have received (i)
this Agreement, (A) executed and delivered by a duly authorized officer of each
Borrower, with a counterpart for each Bank, and (B) executed and delivered by a
duly authorized officer of each Bank and (ii) for the account of each Bank, a
Revolving Credit Note and a Term Note conforming to the requirements hereof and
executed by a duly authorized officer of the Borrowers.
(b) Other Loan Documents. (i) The Agent shall have the following
agreements executed and delivered by a duly authorized officer of the Borrowers
party thereto: (A) the Pledge
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Agreement, together with share certificates evidencing all of the stock pledged
thereunder and stock powers or other appropriate instruments of transfer,
executed in blank, (B) the Security Agreement and (C) each of the other Security
Documents.
(ii) Any document (including without limitation financing
statements) required to be filed, registered or recorded in order to create, for
the benefit of the Agent and the Banks, a perfected, first priority Lien,
subject only to those Liens described on Schedule 4.1(b)(ii), shall have been
properly prepared for filing, registration or recording in each office in each
jurisdiction in which such filings, registration and recordation are required to
perfect such first priority security interests created by the Security
Documents, and the Agent shall be satisfied that all such recordings and filings
will be completed promptly following the Closing Date and that all necessary
filing, recording and other fees and all taxes and expenses related to such
filings, registrations and recordings will be paid in full by the Borrowers.
(c) Corporate Proceedings: No Default. The Agent shall have received
a certificate of the Secretary or an Assistant Secretary of each Borrower dated
as of the Closing Date certifying (A) that attached thereto is a true and
complete copy of the resolutions, in form and substance satisfactory to the
Agent, of the Board of Directors of such Borrower authorizing (i) the execution,
delivery and performance of this Agreement, the Notes and the other Loan
Documents to which it is a party, and (ii) the borrowings contemplated hereunder
and that such resolutions attached thereto have not been amended, modified,
revoked or rescinded, (B) as to the incumbency and specimen signature of each
officer executing any Loan Document on behalf of a Borrower; and such
certificate and the regulations attached thereto shall be in form and substance
satisfactory to the Agent and (C) that the representations contained in Section
3 are true and correct and there exists no Default after giving effect to the
initial Loans hereunder.
(d) Corporate Documents. The Agent shall have received, with a
counterpart for each Bank, true and complete copies of the certificate of
incorporation and by-laws of each Borrower, certified as of the Closing Date as
complete and correct copies thereof by the Secretary or an Assistant Secretary
of such Borrower.
(e) Fees. The Agent shall have received for its own account the fees
to be received on the Closing Date referred to in the Fee Letter.
(f) Legal Opinions. The Agent shall have received the executed legal
opinion of Hale and Dorr, counsel to the Borrowers, covering the matters set
forth in Exhibit G. Such
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opinion shall be addressed to the Banks and the Agent and cover such other
matters incident to the transactions contemplated by this Agreement as the Agent
may reasonably require.
(g) UCC Filing and Other Searches. The Agent shall have received the
results of (i) Uniform Commercial Code searches made with respect to the
Borrowers in the states or provinces in which their chief executive offices are
located, together with copies of financing statements disclosed by such searches
and (ii) such tax and judgment lien searches as the Agent shall reasonably
request, and each of the foregoing searches shall disclose no Liens on any
assets encumbered by any Security Document, except for Permitted Liens or, if
unpermitted Liens are disclosed, the Agent shall have received satisfactory
evidence of the release of such Liens.
(h) Existing Credit Agreement. The Existing Credit Agreement shall
be terminated and all Indebtedness thereunder shall have been repaid in full.
(i) Acquisitions. The Acquisitions shall be consummated
substantially on the terms set forth in the Acquisition Agreements. The Agent
shall have received a copy of all Acquisition Agreements.
(j) Initial Public Offering. The Net Proceeds of the initial public
offering ("IPO") of the stock of the Company pursuant to the Form S-1 shall be
at least $55,000,000 and the minimum price per share in such offering shall be
at least $10.
(k) Insurance. The Agent shall have received Certificates of
Insurance with respect to each Borrower fire, casualty, liability and other
insurance covering its respective property and business, including loss payee
endorsements in favor of the Agent as to all material collateral under the
Security Documents.
(l) Good Standing. The Agent shall have received certificates of
good standing, subsistence and/or status dated a recent date from the Secretary
of State or appropriate taxing or other authorities in the state or province of
incorporation of each Borrower.
(m) Maximum Loans on Closing Date. The Loans made on the Closing
Date shall not exceed $15,000,000.
4.2 Conditions to Each Loan. The agreement of each Bank to make any
Loan requested to be made by it on any date (including, without limitation, its
initial Loan) is subject to the satisfaction of the following conditions
precedent:
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(a) Representations and Warranties. Each of the representations and
warranties made by each Borrower herein or which are contained in any
certificate, document or financial or other statement furnished at any time
under or in connection herewith or therewith, shall be true and correct in all
material respects on and as of such date as if made on and as of such date.
(b) No Default. No Default or Event of Default shall have occurred
and be continuing on such date or after giving effect to the Loans requested to
be made on such date.
(c) Additional Matters. All corporate and other proceedings, and all
documents, instruments and other legal matters in connection with the
transactions contemplated by this Agreement and the other Loan Documents shall
be satisfactory in form and substance to the Agent, and the Agent shall have
received such other documents and legal opinions in respect of any aspect or
consequence of the transactions contemplated hereby or thereby as it shall
reasonably request.
Each request by the Borrowers for a Loan hereunder shall constitute a
representation and warranty by the Borrowers as of the date of such Loan that
the conditions contained in this subsection 4.2 have been satisfied.
SECTION 5. AFFIRMATIVE COVENANTS
Each of the Borrowers hereby agrees that, so long as the Commitments
remain in effect, any Note remains outstanding and unpaid, or any other amount
is owing to any Bank or the Agent hereunder, such Borrower shall and (except in
the case of delivery of financial information, reports and notices) shall cause
each of its Subsidiaries to:
5.1 Financial Statements. Furnish to each Bank:
(a) as soon as available, but in any event not later than 90 days
after the close of each fiscal year of the Company, a copy of the annual audit
report for such year for the Company and its consolidated Subsidiaries,
including therein a consolidated balance sheet of the Company and its
consolidated Subsidiaries as at the end of such fiscal year, and related
consolidated statements of income and retained earnings and changes in cash
flows of the Company and its consolidated Subsidiaries for such fiscal year, all
in reasonable detail, prepared in accordance with GAAP applied on a basis
consistently maintained throughout the period involved and with the prior year
with such changes thereon as shall be approved by the Company's independent
certified public accountants, such financial statements to be certified by Price
Waterhouse, LLP. or other independent certified public accountants
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selected by the Company and reasonably acceptable to the Banks, without a "going
concern" or like qualification or exception or qualification arising out of the
scope of the audit; and
(b) as soon as available, but in any event not later than 45 days
after the end of each of the first three quarterly periods of each fiscal year
of the Company and 90 days after the end of the fourth quarterly period of each
fiscal year of the Company, unaudited cash flows of the Company and its
consolidated Subsidiaries, including therein (i) a consolidated and
consolidating balance sheet of the Company and its consolidated Subsidiaries as
at the end of such fiscal quarter, (ii) the related consolidated and
consolidating statements of income and retained earnings of the Company and its
consolidated Subsidiaries, and (iii) the related consolidated and consolidating
statement of changes in financial position of the Company and its consolidated
Subsidiaries all for the period from the beginning of such fiscal quarter to the
end of such fiscal quarter and the portion of the fiscal year through the end of
such quarter, setting forth in each case in comparative form the corresponding
figures for the like period of the preceding fiscal year; all in reasonable
detail, prepared in accordance with GAAP applied on a basis consistently
maintained throughout the period involved and with prior periods and accompanied
by a certificate of a Responsible Officer of the Company stating that the
financial statements fairly present the financial condition of the Company and
its consolidated Subsidiaries as of the date and for the periods covered thereby
subject to, except with respect to the statements as of the fourth fiscal
quarter, normal year-end audit adjustments).
(c) as soon as available, but in any event not later than 45 days
after the Closing Date a pro forma opening consolidated and consolidating
balance sheet of the Borrowers giving effect to the Acquisitions. There shall be
no material change in such opening balance sheets from the pro forma statements
delivered to the Agent prior to the Closing Date.
5.2 Certificates; Other Information. Furnish to each Bank:
(a) concurrently with the delivery of the financial statements
referred to in subsection 5.1(a), a certificate of the Company's independent
certified public accountants reporting on such financial statements stating that
in making the examination necessary for certifying such financial statements no
knowledge was obtained of any Default or Event of Default, except as
specifically indicated;
(b) concurrently with the delivery of the financial statements
referred to in subsection 5.1(a), a certificate of a
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Responsible Officer of the Company showing in detail the calculations
demonstrating compliance with the financial covenants set forth in subsection
6.1 and compliance with subsection 6.15; and concurrently with the delivery of
the financial statements referred to in subsections 5.1(a) and 5.1(b), a
certificate of the chief financial officer or Treasurer of the Company stating
that such officer has obtained no knowledge of any Default or Event of Default
except as specifically indicated; if the certificate above shall indicate that
such officer has obtained knowledge of a Default or Event of Default, such
certificate shall state what efforts the Borrowers are making to cure such
Default or Event of Default;
(c) within 45 days after the end of the first three fiscal quarters
in each fiscal year of the Company, and within 90 days after the end of each
fiscal year of the Company, a certificate of a Responsible Officer of the
Company setting forth the Total Debt/OCF Ratio as of the end of such fiscal
quarter or fiscal year, as the case may be, and detailing the computations
necessary in calculating such Ratio (a "Total Debt/OCF Ratio Certificate");
(d) within five days after the same are sent, copies of all
financial statements and reports which the Company sent to its stockholders and
within five days after the same are filed, copies of all financial statements
and reports which any Borrower may make to, or file with, the Securities and
Exchange Commission or any successor of analogous Governmental Authority;
(e) Written notice:
(i) at least ten (10) calendar days prior thereto, with respect
to any proposed sale or transfer of assets in excess of $250,000
pursuant to subsection 6.5, and
(ii) within the time limits set forth in subsection 6.16, any
amendment to the organizational documents of the Borrowers.
(f) Promptly upon their becoming available to the Borrowers:
(i) the annual budget and any forecasts or projections of the
Borrowers, to be supplied not later than the commencement of the fiscal
year to which any of the foregoing may be applicable; and
(ii) any reports including management letters submitted to the
Borrowers by independent accountants in connection with any annual,
interim or special audit.
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(g) Not later than the fifteenth (15) day of each fiscal quarter,
an updated list of all currently effective franchise agreements to which
any of the Borrowers are parties and identifying the franchisee thereunder
if there has been any change in such list during the preceding month.
(h) promptly, such additional financial and other information as
the Agent or any Bank may from time to time reasonably request.
5.3 Payment of Obligations. Pay, discharge or otherwise satisfy at or
before maturity or before they become delinquent, as the case may be, all its
obligations of whatever nature, except where the amount or validity thereof is
currently being contested in good faith by appropriate proceedings and reserves
in conformity with GAAP with respect thereto have been provided on the books of
the Company or its Subsidiaries, as the case may be.
5.4 Conduct of Business and Maintenance of Existence. Except as
otherwise permitted in subsection 6.4, continue to engage in business of the
same general type as now conducted by it and, preserve, renew and keep in full
force and effect its corporate existence and take all reasonable action to
maintain all rights, privileges and franchises necessary or desirable in the
normal conduct of its business; comply with all Contractual Obligations and
Requirements of Law except to the extent that failure to comply therewith could
not, in the aggregate, have a Material Adverse Effect.
5.5 Maintenance of Insurance; Property. (a) Insure its properties and
assets against loss or damage by fire and such other insurable hazards as such
assets are commonly insured (including fire, extended coverage, property damage,
worker's compensation, public liability and business interruption insurance) and
against other risks in such amounts as similar properties and assets are insured
by prudent companies in similar circumstances carrying on similar businesses,
and with reputable and financially sound insurers, including self insurance to
the extent customary. The Borrowers shall deliver (i) on the Closing Date and
annually thereafter an original certificate of insurance signed by the
Borrowers' independent insurance broker describing and certifying as to the
existence of the insurance on the Collateral required to be maintained by this
Agreement and the other Loan Documents and (ii) at the request of the Agent or
any Bank, from time to time a summary schedule indicating all insurance then in
force with respect to the Borrowers. Such policies of insurance shall contain
endorsements, in form and substance acceptable to the Agent, which shall (i)
specify the Agent (on behalf of the Banks) as an additional insured and lender
loss payee as its interests may appear, with the understanding that any
obligation imposed upon the insured (including, without limitation, the
liability to pay
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premiums) shall be the sole obligation of the Borrowers and not that of the
insured, (ii) provide, except in the case of public liability insurance and
workmen's compensation insurance, that all insurance proceeds for losses of less
than $250,000 shall be adjusted with and payable to the Borrowers or any
Subsidiaries and that all insurance proceeds for losses of $250,000 or more
shall be adjusted with and payable to the Bank, (iii) include effective waivers
by the insurer of all claims for insurance premiums against the Agent and the
Banks, (iv) provide that no cancellation of such policies for any reason
(including, without limitation, non-payment of premium) nor any change therein
including any reduction in coverage shall be effective until at least thirty
(30) days after receipt by the Agent of written notice of such cancellation or
change, (v) be primary without right of contribution of any other insurance
carried by or on behalf of any additional insureds with respect to their
respective interests in the Collateral, and (vi) provide that inasmuch as the
policy covers more than one insured, all terms, conditions, insuring agreements
and endorsements (except limits of liability) shall operate as if there were a
separate policy covering each insured. The Borrowers shall notify the Banks
promptly of any occurrence causing a material loss or decline in value of the
Collateral and the estimated (or actual, if available) amount of such loss or
decline. Following the occurrence and continuance of an Event of Default, any
monies constituting insurance proceeds shall, if received by the Borrowers, be
held in trust for the benefit of the Banks and promptly paid over to the Agent,
on behalf of the Banks, and all such proceeds may, at the option of the Agent,
either (i) be applied by the Banks to the payment of the Loans in such manner as
the Banks may reasonably determine, or (ii) be disbursed to the Borrowers on
such terms as are deemed appropriate by the Banks for the repair, restoration
and/or replacement of property in respect of which such proceeds were paid.
Otherwise, so long as no Event of Default has occurred, any monies constituting
insurance proceeds shall, if received by the Agent, be disbursed to the
Borrowers and, together with any such proceeds paid directly to the Borrowers,
shall be applied by the Borrowers to the repair, restoration and/or replacement
of property in respect of which such proceeds were paid, all as the Borrowers
reasonably deem appropriate.
(b) Maintain in good repair, working order and condition (ordinary
wear and tear and casualty excepted) in accordance with the general practice of
other businesses of similar character and size, all of those properties useful
or necessary to its business, and from time to time, each of the Company and its
Subsidiaries will make or cause to be made all appropriate repairs, renewals or
replacements thereof.
5.6 Inspection of Property; Books and Records; Discussions. Keep proper
books of records and account in which full, true and correct entries in
conformity with GAAP and all
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Requirements of Law shall be made of all dealings and transactions in relation
to its business and activities; and upon reasonable notice permit
representatives of any Bank to visit and inspect any of its properties and
examine and make abstracts from any of its books and records during normal
business hours and as often as may reasonably be desired and to discuss the
business, operations, properties and financial and other condition of the
Company and its Subsidiaries with officers and employees of the Company and its
Subsidiaries and with its independent certified public accountants.
5.7 Notices. Promptly give notice to the Agent and each Bank of:
(a) the occurrence of any Default or Event of Default;
(b) any (i) default or event of default under any Contractual
Obligation of the Company or any of its Subsidiaries or (ii) litigation,
investigation or proceeding which may exist at any time between the Company or
any of its Subsidiaries and any Governmental Authority, which in either case, if
not cured or if adversely determined, as the case may be, could have a Material
Adverse Effect;
(c) any litigation or proceeding affecting the Company or any of
its Subsidiaries in which the amount involved is $500,000 or more and not
covered by insurance as reasonably determined by the Company's corporate counsel
or in which injunctive or similar relief is sought;
(d) the following events, as soon as possible and in any event
within 30 days after the Company knows or has reason to know thereof: (i) the
occurrence or expected occurrence of any Reportable Event with respect to any
Plan, a failure to make any required contribution to a Plan, any Lien in favor
of PBGC or a Plan or any withdrawal from, or the termination, Reorganization or
Insolvency of any Multiemployer Plan or (ii) the institution of proceedings or
the taking of any other action by the PBGC or any Borrower or any Commonly
Controlled Entity or any Multiemployer Plan with respect to the withdrawal from,
or the terminating, Reorganization or Insolvency of, any Plan or (iii)
assessment of liability under the Coal Industry Retiree Health Benefit Act of
1992; and
(e) an event which has had or could reasonably be expected to have
a Material Adverse Effect.
Each notice pursuant to this subsection shall be accompanied by a statement of a
Responsible Officer setting forth details of the occurrence referred to therein
and stating what action the Borrowers propose to take with respect thereto.
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5.8 Environmental Laws. (a) Comply with, and require compliance by all
tenants and all subtenants, if any, with, all Environmental Laws and obtain and
comply with and maintain, and require that all tenants and subtenants obtain and
comply with and maintain, any and all licenses, approvals, registrations or
permits required by Environmental Laws, except to the extent that failure to so
comply or obtain or maintain such documents could not reasonably be expected to
have a Material Adverse Effect;
(b) Comply with all lawful and binding orders and directives of all
Governmental Authorities respecting Environmental Laws; and
(c) Defend, indemnify and hold harmless the Agents and the Banks,
and their respective employees, agents, officers, directors, successors and
assigns from and against any claims, demands, penalties, fines, liabilities,
settlements, damages, costs and expenses of whatever kind or nature known or
unknown, contingent or otherwise, arising out of, or in any way relating to any
violation of or noncompliance with or liability under any Environmental Laws, or
any orders, requirements or demands of Governmental Authorities related thereto
which in each case relate to or arise in connection with any Borrower, any
Property or any activities relating to any other property or business of a
Borrower or the enforcement of any rights provided herein or in the other Loan
Documents, including, without limitation, attorneys' and consultants' fees,
response costs, investigation and laboratory fees, court costs and litigation
expenses, except to the extent that any of the foregoing arise out of the gross
negligence or willful misconduct of any of the foregoing enumerated parties.
This indemnity shall continue in full force and effect regardless of the
termination of this Agreement and the payment of the Notes.
5.9 Management Changes. Notify the Agent in writing within thirty (30)
days after any change of its executive officers.
5.10 Further Assurances. From time to time, at their expense, faithfully
preserve and protect the Agent's and the Bank's Lien on and security interest in
the Collateral as a continuing first priority perfected Lien, subject only to
Liens permitted under subsection 6.2, and shall do such other acts and things as
the Agent or the Required Banks in its or their sole discretion may deem
necessary or advisable from time to time in order to preserve, perfect and
protect the Liens granted under the Security Documents and to exercise and
enforce its or their rights and remedies thereunder with respect to the
Collateral.
5.11 Subordination of Intercompany Loans, Other Loans and Advances to
the Borrowers. Cause any intercompany indebtedness, loans or advances owed by
the Borrowers to each other or to any other Subsidiary (other than indebtedness,
loans or
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advances incurred in the ordinary course of business) to be subordinated on
terms satisfactory to the Agent to the Loans and other obligations owed to the
Agent and the Banks hereunder or under the other Loan Documents.
5.12 Pledge of Property. At any time and from time to time at the
written request of the Agent, each Borrower shall execute, deliver and, if
requested, record and/or file such security agreements, pledge agreements and/or
related or similar documents as the Agent shall reasonably request and take such
further action as the Agent shall reasonably request, in each case, in order to
grant to the Agent (or other Person selected by the Agent) for the benefit of
the Banks, a Lien on all personal property owned by such Borrower or any
personal property acquired by such Borrower after the Closing Date or, to the
extent such Borrower becomes a Borrower hereunder after the Closing Date, any
assets of such Borrower, in each case as additional collateral for the
obligations of the Borrowers to the Agent and the Banks under this Agreement and
the other Loan Documents.
SECTION 6. NEGATIVE COVENANTS
Each of the Borrowers hereby agrees that, so long as the Commitments
remain in effect, any Note remains outstanding and unpaid, or any other amount
is owing to any Bank or Agent hereunder, such Borrower shall not, and shall not
permit any of its Subsidiaries to, directly or indirectly:
6.1 Financial Condition Covenants.
(a) Maintenance of Net Worth. Permit (i) Consolidated Net Worth
on any day to be less than (x) from the Closing Date until January 31, 1997,
$78,573,000 and (y) thereafter, the sum of (A) $78,573,000 plus (B)
seventy-five percent (75%) of Consolidated Net Income for each fiscal year
commencing with the fiscal year ending January 31, 1997, exclusive of any
fiscal year in which Consolidated Net Income is a negative and (C) one-hundred
percent (100%) of the Net Proceeds from the issuance after the Closing Date of
Capital Stock of any Borrower or Subsidiary thereof and (ii) Consolidated
Tangible Net Worth on any day to be less than $1.
(b) Total Debt/OCF Leverage Ratio. At the last day of any fiscal
quarter (including the fourth fiscal quarter) of the Company, permit the Total
Debt/OCF Ratio to be greater than 2.75 to 1.00.
(c) Interest and Rents Coverage Ratio. At the last day of any
fiscal quarter of the Company commencing with the second fiscal quarter of the
fiscal year ending January 31, 1997, permit
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the Interest and Rents Coverage Ratio for the period of the four consecutive
fiscal quarters ending on such date (except for the calculations as at the end
of the second, third and fourth fiscal quarters of the fiscal year ending
January 31, 1997, for which the ratio shall be calculated for the three-month,
six-month or nine-month period, respectively, ending on the last day of such
fiscal quarter) to be less 1.50 to 1.00.
(d) Debt Service Coverage Ratio. At the last day of any fiscal
quarter of the Company commencing with the fiscal quarter ending July 31, 1996,
permit the ratio of (i) OCF minus income taxes to the extent deducted from
earnings in determining Consolidated Net Income to (ii) the sum of Consolidated
Interest Expense, required amortization of Indebtedness (other than Revolving
Credit Loans) and one-third of the average principal amount of the Revolving
Credit Loans outstanding, in each case for the period of the four consecutive
fiscal quarters ending on such day (except for the calculations as at the end of
the second, third and fourth fiscal quarters of the fiscal year ending January
31, 1997, for which (x) the foregoing ratio shall be calculated for the
three-month, six-month or nine-month period, respectively, ending on the last
day of such fiscal quarter and (y) the average principal amount of the Loans
outstanding during each such periods shall be multiplied by .25, .5 and .75,
respectively) to be less than 1.10 to 1.00.
(e) Maximum Allowable Debt Component. At the last day of any fiscal
quarter of the Company commencing with the fiscal quarter ending October 31,
1996, permit (a) the difference between (i) the sum of the aggregate cash
portion of the gross purchase price for each business or segment acquired by a
Borrower (other than as part of Acquisitions) from a Person who is not an
Affiliate of the Borrowers during the period from the Closing Date to the last
day of such fiscal quarter (collectively, the "Subsequent Acquisitions") and
(ii) the sum of (x) cash on hand on the Closing Date after giving effect to the
Acquisitions and the IPO less the principal amount of Loans outstanding on the
Closing Date and (y) Excess Operating Cash Flow for the period from May 1, 1996
to the end of such fiscal quarter divided by (b) the aggregate gross purchase
price of the Subsequent Acquisitions to exceed (c) the Allowable Debt Component
as of the last day of such fiscal quarter; provided that, notwithstanding the
foregoing, the Borrowers shall be in compliance with this covenant if at such
time the Purchase Price Aggregate Multiple shall be less than or equal to 3.00.
6.2 Limitation on Liens. Create, incur, assume or suffer to exist any
Lien upon any of its property, assets or revenues, whether now owned or
hereafter acquired, except for Permitted Liens.
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6.3 Limitation of Indebtedness. Create, incur, assume or suffer to
exist any Indebtedness except;
(a) Indebtedness in respect of the Loans, the Notes and other
obligations of the Borrowers under this Agreement;
(b) Indebtedness which is subordinated in accordance with the
provisions of subsection 5.11;
(c) Indebtedness listed on Schedule 6.3, and renewals, extensions
and modifications thereof which do not increase the principal amount thereof or
otherwise significantly change the terms thereof unless otherwise specified in
Schedule 6.3;
(d) Indebtedness under Capital Leases or secured by Purchase Money
Security Interests in an amount not exceeding in the aggregate $500,000; and
(e) Subordinated Debt, and renewals, extensions and modifications
thereof which do not increase the principal amount thereof or otherwise
significantly change the terms thereof.
6.4 Limitations on Fundamental Changes. Enter into any merger,
consolidation or amalgamation, or liquidate, wind up or dissolve itself (or
suffer any liquidation or dissolution), or convey, sell, lease, assign, transfer
or otherwise dispose of, all or substantially all of its property, business or
assets, except that:
(a) any Subsidiary of the Company may be merged or consolidated
with or into the Company (provided that the Company shall be the continuing or
surviving corporation) or with or into any other Borrower (provided that such
Borrower shall be the continuing or surviving corporation); and
(b) any Subsidiary of the Company may sell, lease, transfer or
otherwise dispose of any or all of its assets (upon voluntary liquidation or
otherwise) to a Borrower; provided that, immediately after any such transaction
referred to in paragraphs (a) and (b) above and after giving effect thereto,
each of the Borrowers is in compliance with this Agreement and no Default or
Event of Default shall have occurred and be continuing or result from such
transaction.
6.5 Limitation on Sale of Assets. Convey, sell, lease, assign, transfer
or otherwise dispose of any of its property, business or assets (including,
without limitation, receivables and leasehold interests), whether now owned or
hereafter acquired, except:
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(a) any sale, transfer or lease of assets in the ordinary course of
business which are no longer necessary or required in the conduct of the
Borrowers' business;
(b) transactions involving the sale or lease of inventory in the
ordinary course of business;
(c) the sale or discount without recourse of accounts receivable
arising in the ordinary course of business in connection with the compromise or
collection in the ordinary course of business of such accounts receivable;
(d) as permitted by subsection 6.4; and
(e) in addition to the above subsections 6.5(a) through 6.5(d)
inclusive, any such conveyances, sales, leases, assignments, transfers or other
disposals, the aggregate amount of which for the Company and its Subsidiaries
for any fiscal year of the Company does not exceed $1,000,000; provided that (i)
such conveyance, sale, lease, assignment, transfer or other disposition is for
cash consideration which the officers or Board of Directors of the Company or
its Subsidiary, as the case may be, deems to be fair and reasonable and (ii) the
Net Proceeds are applied to the Loans to the extent provided in subsection 2.14.
6.6 Limitation on Distributions. Declare or pay any Distribution
(whether in cash or property or obligations of a Borrower or any Subsidiary
thereof) in respect of any Borrower or any Subsidiary thereof, except any
Wholly-Owned Subsidiary may declare and pay dividends to a Borrower.
6.7 Transactions with Affiliates. Except as expressly permitted in this
Agreement, directly or indirectly enter into any transaction or arrangement
whatsoever (including without limitations any purchase, sale, lease or exchange
of property or the rendering of any service) or make any payment to or otherwise
deal with any Affiliate, except, as to all of the foregoing in the ordinary
course of and pursuant to the reasonable requirements of such Borrower's and its
Subsidiary's business and upon fair and reasonable terms no less favorable to
such Borrower or such Subsidiary, as the case may be, than would be obtained in
a comparable arm's length transaction with a Person not an Affiliate.
6.8 Sale and Leaseback. Enter into any arrangement with any Person
providing for the leasing by such Borrower or any Subsidiary thereof of real or
personal property which has been or is to be sold or transferred by such
Borrower or such Subsidiary 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 thereof.
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6.9 Limitation on Contingent Obligations. Create, incur, assume or
suffer to exist any Contingent Obligation except:
(a) guarantees made in the ordinary course of its business by any
of the Borrowers or its Subsidiaries of obligations of any of their
Subsidiaries, provided those obligations are otherwise permitted under this
Agreement; and
(b) Contingent Obligations described on Schedule 6.9.
6.10 Limitation on Investments, Loans and Advances. Purchase, hold or
acquire beneficially any stock, other securities or evidences of indebtedness
of, make or permit to exist any loans or advances to, or make or permit to exist
any investment or acquire any interest whatsoever in, any other Person, except:
(a) extensions of trade credit to customers in the ordinary course
of business;
(b) Permitted Investments;
(c) advances to employees of the Borrowers or their Subsidiaries
for travel, entertainment and relocation expenses in the ordinary course of
business;
(d) Capital Stock of any Subsidiary; provided that such Capital
Stock is pledged to the Agent for the benefit of the Banks pursuant to a Pledge
Agreement;
(e) loans and advances by a Borrower to another Borrower, which
loans are subordinated in accordance with subsection 5.11; and
(f) Permitted Acquisitions.
6.11 Limitation on Optional Payments and Modifications of Subordinated
Debt. Make any optional payment or prepayment on or redemption, defeasance or
purchase of any Subordinated Indebtedness or amend, modify or change, or consent
or agree to any amendment, modification or change to any of the terms (including
the payment terms) of any Subordinated Debt.
6.12 Limitation on Negative Pledge Clauses. Enter into any agreement
with any Person other than the Banks which prohibits or limits the ability of
any Borrower or any of its Subsidiaries to create, incur, assume or suffer to
exist any Lien upon any of its properties, assets or revenues, whether now owned
or hereafter acquired; provided that a Borrower may enter into such an agreement
in connection with a Purchase Money Security Interest permitted
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hereunder, provided that such prohibition or limitation is by its terms
effective only against the assets subject to such Lien.
6.13 Fiscal Year. Permit the fiscal year of a Borrower to end on a day
other than January 31.
6.14 Limitation on Conduct of Business. Enter into any business either
directly or through any Subsidiary except for businesses in which the Borrowers
and their Subsidiaries are engaged on the date of this Agreement and any
business directly related to such existing businesses.
6.15 Landlord Waivers. Permit, on any date on and after one-hundred
twenty (120) days after the Closing Date, more than one-third (1/3) in Dollar
amount of all of the Borrowers' Inventory (as defined in the Security Agreement)
to be maintained at locations which (a) are not owned by a Borrower free and
clear of any mortgage or other Lien, except any Lien in favor of the Agent for
the benefit of the Banks or (b) are leased by a Borrower unless (i) the owner of
such location has executed a landlord waiver in the form of Exhibit G hereto or
otherwise in form and substance satisfactory to the Agent or (ii) such location
is in a state in which the Company has demonstrated to the Agent, and the Agent
in its reasonable judgment concurs, that any potential statutory Lien in favor
of the owner of such location would be junior in priority to the Lien in favor
of the Agent, for the benefit of the Banks, in the Borrowers' Inventory present
at such location.
6.16 Changes in Organizational Documents. None of the Borrowers shall
amend in any respect its certificate of incorporation (including any provisions
or resolutions relating to Capital Stock), by-laws or other organizational
documents without providing at least thirty (30) calendar days' prior written
notice to the Agent, in the event such change would be adverse to the Agent
and/or the Banks as determined by the Agent in its sole discretion.
6.17 Store Openings. Open in the aggregate for the Company and its
Subsidiaries more than twenty (20) stores in any fiscal year, exclusive of any
such stores (i) opened in connection with the Acquisitions or (ii) acquired
after the date hereof as part of a Permitted Acquisition.
SECTION 7. EVENTS OF DEFAULT
7.1 Events of Default. If any of the following events shall occur and
be continuing:
(a) A Borrower shall fail to pay any principal of or interest on
any Note or any other amount payable hereunder or
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thereunder (including without limitation any fees) when due in accordance with
the terms thereof or hereof; or
(b) Any representation or warranty made or deemed made by a
Borrower herein or in any other Loan Document or which is contained in any
certificate or financial statement furnished at any time under or in connection
with this Agreement shall prove to have been incorrect or misleading in any
material respect on or as of the date made or deemed made; or
(c) A Borrower shall default in the observance or performance of
any agreement contained in Section 6 of this Agreement; or
(d) A Borrower shall default in the observance or performance of
any other agreement contained in this Agreement (other than as provided in
subsection (a) through (c) above) or any other Loan Document, and such default
shall continue unremedied for a period of 20 days; or
(e) A Borrower or any Subsidiary thereof shall (i) default in the
payment of any principal of or interest on or any other amount payable on any
Indebtedness (other than the Notes) or in the payment of any Contingent
Obligation, beyond the period of grace (not to exceed 30 days), if any, provided
in the instrument or agreement under which such Indebtedness or Contingent
Obligation was created and the aggregate amount of such Indebtedness and/or
Contingent Obligations in respect of which such default or defaults shall have
occurred is at least $250,000; or (ii) default in the observance or performance
of any other agreement or condition relating to any such Indebtedness or
Contingent Obligation or contained in any instrument or agreement evidencing,
securing or relating thereto, or any other event shall occur or condition exist,
the effect of which default or other event or condition is to cause, or to
permit the holder or holders of such Indebtedness or beneficiary or
beneficiaries of such Contingent Obligation (or a trustee or agent on behalf of
such holder or holders or beneficiary or beneficiaries) to cause, with the
giving of notice if required, such Indebtedness to become due and payable prior
to its stated maturity or such Contingent Obligation to become payable; or
(f) (i) A Borrower or any Subsidiary thereof shall commence any
case, proceeding or other action (A) under any existing or future law of any
jurisdiction, domestic or foreign, relating to bankruptcy, insolvency,
reorganization or relief of debtors, seeking to have an order for relief entered
with respect to it, or seeking to adjudicate it a bankrupt or insolvent, or
seeking reorganization, arrangement, adjustment, winding-up, liquidation,
dissolution, composition or other relief with respect to it or its debts, or (B)
seeking appointment of a receiver,
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trustee, custodian or other similar official for it or for all or any
substantial part of its assets, or a Borrower or any of its Subsidiaries shall
make a general assignment for the benefit of its creditors; or (ii) there shall
be commenced against a Borrower or any of its Subsidiaries any case, proceeding
or other action of a nature referred to in clause (i) above which (A) results in
the entry of an order for relief or any such adjudication or appointment or (B)
remains undismissed, undischarged or unbonded for a period of 60 days; or (iii)
there shall be commenced against a Borrower or any of its Subsidiaries any case,
proceeding or other action seeking issuance of a warrant of attachment,
execution, distraint or similar process against all or any substantial part of
its assets which results in the entry of an order for any such relief which
shall not have been vacated, discharged, satisfied, or stayed or bonded pending
appeal within 60 days from the entry thereof; or (iv) a Borrower or any of its
Subsidiaries shall take any action in furtherance of, or indicating its consent
to, approval of, or acquiescence in, any of the acts set forth in clause (i),
(ii), or (iii) above; or (v) a Borrower or any of its Subsidiaries shall
generally not, or shall be unable to, or shall admit in writing its inability
to, pay its debts as they generally become due; or
(g) One or more judgments or decrees shall be entered against a
Borrower or any of its Subsidiaries involving in the aggregate a liability
(excluding any such judgments or orders which are fully covered by insurance,
subject to any customary deductible, and under which the applicable insurance
carrier has acknowledged such full coverage in writing) of $250,000 or more and
all such judgments or decrees shall not have been vacated, discharged, settled,
satisfied or paid, or stayed or bonded pending appeal within 30 days from the
entry thereof; or
(h) Any Change in Control shall occur; or
(i) A Borrower or any Subsidiary thereof shall fail to (i) comply
with or require compliance by all tenants and, to the extent possible, all
subtenants, if any, with all Environmental Laws or obtain and comply with and
maintain, or require that all tenants and, to the extent possible, all
subtenants, obtain and comply with and maintain, any and all licenses,
approvals, registrations or permits required by Environmental Laws except to the
extent that failure to so comply or obtain or maintain such documents could not
reasonably be expected to have a Material Adverse Effect; or (ii) comply with
all lawful and binding orders and directives of all Governmental Authorities
respecting Environmental Laws except to the extent that failure to so comply
could not reasonably be expected to have a Material Adverse Effect; or
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(j) (i) Any Person shall engage in any "prohibited transaction" (as
defined in Section 406 of ERISA or Section 4975 of the Code) involving any Plan,
(ii) any "accumulated funding deficiency" (as defined in Section 302 of ERISA),
whether or not waived, shall exist with respect to any Plan or any Lien in favor
of the PBGC or a Plan shall arise on the assets of the Company or any Commonly
Controlled Entity, (iii) a Reportable Event shall occur with respect to, or
proceedings shall commence to have a trustee appointed, or a trustee shall be
appointed, to administer or to terminate, any Single Employer Plan, which
Reportable Event or institution of proceedings or appointment of a trustee is,
in the reasonable opinion of the Required Banks, likely to result in the
termination of such Plan for purposes of Title IV of ERISA, (iv) any Single
Employer Plan shall terminate for purposes of Title IV of ERISA, (v) the Company
or any Commonly Controlled Entity shall, or in the reasonable opinion of the
Required Banks is likely to, incur any liability in connection with a withdrawal
from, or the Insolvency or Reorganization of, a Multiemployer Plan or (vi) any
other event or condition shall occur or exist in regard to a Plan; and in each
case in clauses (i) through (vi) above, such event or condition, together with
all other such events or conditions, if any, could reasonably be expected to
have a Material Adverse Effect; or
(k) the Company shall cease to own, directly or indirectly,
one-hundred percent (100%) of the legal and beneficial ownership of each other
Borrower except pursuant to a transaction permitted under subsection 6.4; or
(l) Any Security Document shall, at any time, cease to be in full
force and effect (unless released by the Agent) or shall be declared null and
void, or the validity or enforceability thereof shall be contested by any
Borrower or the Agent shall not have or shall cease to have valid, perfected
security interests in the collateral subject thereto, subject to no other liens
whatsoever, except Permitted Liens;
then, and in any such event, (A) if such event is an Event of Default specified
in clause (i) or (ii) of paragraph (f) above with respect to a Borrower,
automatically the Commitments shall immediately terminate and the Loans
hereunder (with accrued interest thereon) and all other amounts owing under this
Agreement, the Notes and the other Loan Documents shall automatically and
immediately become due and payable, and (B) if such event is any other Event of
Default, either or both of the following actions may be taken: (i) with the
consent of the Required Banks, the Agent may, or upon the written request of the
Required Banks, the Agent shall, by notice to the Company declare the
Commitments to be terminated forthwith, whereupon the Commitments shall
immediately terminate; and (ii) with the consent of the Required Banks, the
Agent may, or upon the written request of the Required Banks, the
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Agent shall, by notice of default to the Company, declare the Loans hereunder
(with accrued interest thereon) and all other amounts owing under this
Agreement, the Notes and the other Loan Documents to be due and payable
forthwith, whereupon the same shall immediately become due and payable. Except
as expressly provided above in this Section, presentment, demand, protest and
all other notices of any kind are hereby expressly waived.
SECTION 8. THE AGENT
8.1 Appointment. Each Bank hereby irrevocably designates and appoints
PNC Bank, National Association as the Agent of such Bank under this Agreement
and the other Loan Documents, and each such Bank irrevocably authorizes PNC
Bank, National Association, as the Agent for such Bank, to take such action on
its behalf under the provisions of this Agreement and the other Loan Documents
and to exercise such powers and perform such duties as are expressly delegated
to the Agent by the terms of this Agreement and the other Loan Documents,
together with such other powers as are reasonably incidental thereto.
Notwithstanding any provision to the contrary elsewhere in this Agreement and
the other Loan Documents, the Agent shall not have any duties or
responsibilities, except those expressly set forth herein or therein, or any
fiduciary relationship with any Bank, and no implied covenants, functions,
responsibilities, duties, obligations or liabilities shall be read into this
Agreement and the other Loan Documents or otherwise exist against the Agent. PNC
Bank, National Association agrees to act as the Agent on behalf of the Banks to
the extent provided in this Agreement and the other Loan Documents.
8.2 Delegation of Duties. The Agent may execute any of its duties under
this Agreement and the other Loan Documents by or through agents or
attorneys-in-fact and shall be entitled to engage and pay for the advice and
services of counsel concerning all matters pertaining to such duties. The Agent
shall not be responsible to the Banks for the negligence or misconduct of any
agents or attorneys in-fact selected by it with reasonable care.
8.3 Exculpatory Provisions. The Banks hereby agree that neither the
Agent nor any of its officers, directors, employees, agents, attorneys-in-fact
or Affiliates shall be (a) liable for any action lawfully taken or omitted to be
taken by it or such Person under or in connection with this Agreement or the
other Loan Documents (except for its or such Person's own gross negligence or
willful misconduct) or (b) responsible in any manner to any of the Banks for any
recitals, statements, representations or warranties made by a Borrower or any
officer thereof contained in this Agreement, the other Loan Documents or in any
certificate, report, statement or other document referred to or provided for in,
or received by the Agent under or in connection with, this Agreement
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or for the value, validity, effectiveness, genuineness, enforceability or
sufficiency of this Agreement, the Notes or the other Loan Documents or for any
failure of the Borrowers (or any of them) to perform their obligations hereunder
or thereunder. The Agent shall not be under any obligation to any Bank to
ascertain or to inquire as to the observance or performance of any of the
agreements contained in, or conditions of, this Agreement or the other Loan
Documents, or to inspect the properties, books or records of the Borrowers (or
any of them).
8.4 Reliance by Agent. The Agent shall be entitled to rely, and shall
be fully protected in relying, upon any Note, writing, resolution, notice,
consent, certificate, affidavit, letter, cablegram, telegram, telecopy, telex or
teletype message, statement, order or other document or conversation believed by
it to be genuine and correct and to have been signed, sent or made by the proper
Person or Persons and upon advice and statements of legal counsel (including,
without limitation, counsel to one or more of the Borrowers), independent
accountants and other experts selected by such Agent. The Agent may deem and
treat the payee of any Note as the owner thereof for all purposes unless a
written notice of assignment, negotiation or transfer thereof shall have been
filed with the Agent. The Agent shall be fully justified in failing or refusing
to take any action under this Agreement or the other Loan Documents unless it
shall first receive such advice or concurrence of the Required Banks as it deems
appropriate or it shall first be indemnified to its satisfaction by the Banks
against any and all liability and expense which may be incurred by it by reason
of taking or continuing to take any such action. The Banks hereby agree that the
Agent shall in all cases be fully protected in acting, or in refraining from
acting, under this Agreement, the Notes or the other Loan Documents in
accordance with a request of the Required Banks, and such request and any action
taken or failure to act pursuant thereto shall be binding upon all the Banks and
all future holders of the Notes.
8.5 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
it has received notice from a Bank or a Borrower referring to this Agreement,
describing such Default or Event of Default and stating that such notice is a
"notice of default". In the event that the Agent receives such a notice, the
Agent shall give notice thereof to the Banks. The Agent shall take such action
with respect to such Default or Event of Default as shall be reasonably directed
by the Required Banks; provided that unless and until the Agent shall have
received such directions, it may (but shall not be obligated to) take such
action, or refrain from taking such action, with respect to such Default or
Event of Default as it shall deem advisable in the best interests of the Banks.
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8.6 Non-Reliance on Agent and Other Banks. Each Bank expressly
acknowledges that neither the Agent nor any of its respective officers,
directors, employees, agents, attorneys-in-fact or Affiliates has made any
representations or warranties to it and that no act by the Agent hereinafter
taken, including any review of the affairs of the Borrowers, shall be deemed to
constitute any representation or warranty by the Agent to any Bank. Each Bank
represents to the Agent that it has, independently and without reliance upon the
Agent or any other Bank, and based on such documents and information as it has
deemed appropriate, made its own appraisal of and investigation into the
business, operations, property, financial and other condition and
creditworthiness of the Borrowers and made its own decision to make its Loans
hereunder and enter into this Agreement and each other Loan Document to which it
is a party. Each Bank also represents that it will, independently and without
reliance upon the Agent or any other Bank, and based on such documents and
information as it shall deem appropriate at the time, continue to make its own
credit analysis, appraisals and decisions in taking or not taking action under
this Agreement and the other Loan Documents, and to make such investigation as
it deems necessary to inform itself as to the business, operations, property,
financial and other condition and creditworthiness of the Borrowers. Except for
notices, reports and other documents expressly required to be furnished to the
Banks by the Agent hereunder, the Agent shall not have any duty or
responsibility to provide any Bank with any credit or other information
concerning the business, operations, property, condition (financial or
otherwise), prospects or creditworthiness of the Borrowers which may come into
the possession of the Agent or any of its officers, directors, employees,
agents, attorneys-in-fact or Affiliates.
8.7 Indemnification. The Banks agree to indemnify the Agent in its
capacity as such (to the extent not reimbursed by the Borrowers and without
limiting the obligation, if any, of the Borrowers to do so) in Dollars, ratably
according to their respective Commitment Percentages, from and against any and
all liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses or disbursements of any kind whatsoever which may at any
time (including, without limitation, at any time following the payment of the
Notes) be imposed on, incurred by or asserted against the Agent in any way
relating to or arising out of this Agreement, the other Loan Documents, or any
documents contemplated by or referred to herein or therein or the transactions
contemplated hereby or thereby or any action taken or omitted by the Agent under
or in connection with any of the foregoing; provided that no Bank shall be
liable for the payment of any portion of such liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or disbursements
resulting solely from the Agent's gross negligence or willful misconduct. The
agreements in this Section 8.7 shall
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survive the payment of the Notes and all other amounts payable hereunder.
8.8 Agent in Its Individual Capacity. The Agent and its Affiliates may
make loans to, accept deposits from and generally engage in any kind of business
with the Borrowers (or any of them) as though the Agent were not the Agent
hereunder. With respect to its Loans made or renewed by it and any Note issued
to it, the Agent shall have the same rights and powers under this Agreement and
the other Loan Documents as any Bank and may exercise the same as though it were
not the Agent, and the terms "Bank" and "Banks" shall include the Agent in its
individual capacity.
8.9 Release of Liens. Upon the sale of any assets of the Borrowers in
compliance with subsection 6.5, the Agent will take such action as may be
necessary to evidence the release of the Banks' Lien on such assets, including
delivering to the Borrowers, at the cost of the Borrowers, appropriate releases,
Uniform Commercial Code termination statements and mortgage satisfaction
documents, as appropriate.
8.10 Successor Agent. The Agent may resign as Agent hereunder and under
the other Loan Documents upon 30 days' notice to the Banks and the Company. If
the Agent shall resign, then the Required Banks shall appoint from among the
Banks a successor Agent for the Banks, which appointment shall be subject to the
approval of the Company (which approval shall not be unreasonably withheld),
whereupon such successor agent shall succeed to the rights, powers and duties of
the Agent and the term "Agent" shall mean such successor agent effective upon
its appointment and the former Agent's rights, powers and duties as Agent shall
be terminated, without any other or further act or deed on the part of such
former Agent or any of the parties to this Agreement or the other Loan Documents
or any holders of the Notes. After any retiring Agent's resignation, the
provisions of this subsection 8.9 shall inure to its benefit as to any actions
taken or omitted to be taken by it while it was Agent under this Agreement.
8.11 Beneficiaries. Except as expressly provided herein, the provisions
of this Section 8 are solely for the benefit of the Agent and the Banks, and the
Borrowers shall not have any rights to rely on or enforce any of the provisions
hereof. In performing its functions and duties under this Agreement and the
other Loan Documents, the Agent shall act solely as agent of the Banks and does
not assume and shall not be deemed to have assumed any obligation toward or
relationship of agency or trust with or for the Borrowers.
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SECTION 9. MISCELLANEOUS
9.1 Amendments and Waivers. Neither this Agreement, any Note any other
Loan Document, nor any terms hereof or thereof may be amended, supplemented or
modified except in accordance with the provisions of this subsection. With the
written consent of the Required Banks, the Agent and the Borrowers may, from
time to time, enter into written amendments (including letter amendments),
supplements or modifications hereto and to the Notes and the other Loan
Documents for the purpose of adding any provisions to this Agreement, the Notes
or any other Loan Document or changing in any manner the rights of the Banks or
of the Borrowers hereunder or thereunder or waiving, on such terms and
conditions as the Agent may specify in such instrument, any of the requirements
of this Agreement, the Notes or any other Loan Document or any Default or Event
of Default and its consequences; provided, however, that no such waiver and no
such amendment, supplement or modification shall directly or indirectly (a)
reduce the amount or extend the maturity of any Note or any installment thereof,
or reduce the rate of interest or extend the time of payment of interest
thereon, or reduce any fee payable to any Bank hereunder or extend the period
for payment thereof, or change the duration or the amount of any Bank's
Commitment in each case without the consent of the Bank affected thereby or (b)
or amend, modify or waive any provision of this subsection or reduce the
percentage specified in the definition of Required Banks, or consent to the
assignment or transfer by the Borrowers of any of their rights and obligations
under this Agreement, the Notes and the other Loan Documents, or release all or
substantially all of the Collateral in each case without the written consent of
all the Banks, or (c) amend, modify or waive any provision of Section 8 without
the written consent of the then Agent. Any such waiver and any such amendment,
supplement or modification shall apply equally to each of the Banks and shall be
binding upon the Borrowers, the Banks, the Agent and all future holders of the
Notes. In the case of any waiver, the Borrowers, the Banks and the Agent shall
be restored to their former position and rights hereunder and under the
outstanding Notes, and any Default or Event of Default waived shall be deemed to
be cured and not continuing; but no such waiver shall extend to any subsequent
or other Default or Event of Default, or impair any right consequent thereon.
9.2 Notices. All notices, requests and demands to or upon the
respective parties hereto to be effective shall be in writing (including by
telecopy, telegraph or telex confirmed in writing), and, unless otherwise
expressly provided herein, shall be deemed to have been duly given or made when
delivered by hand, or three days after being deposited in the mail, postage
prepaid, or the next Business Day if sent by reputable overnight courier,
postage prepaid, for delivery on the next Business Day, or, in the case of
telecopy notice, when received during normal business
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hours, or, in the case of telegraphic notice, when delivered to the telegraph
company, or, in the case of telex notice, when sent, answerback received,
addressed as follows in the case of the Borrowers or the Agent, and as set forth
in Schedule I in the case of the other parties hereto, or to such other address
as may be hereafter notified by the respective parties hereto and any future
holders of the Notes:
The Borrowers
or any of them: c/o West Coast Entertainment Corporation
9990 Global Road
Philadelphia, PA 19115
Attention: T. Kyle Standley, President
Telecopy: (215) 677-5804
The Agent: PNC Bank, National Association
Suite 200
1000 Westlakes Drive
Berwyn, PA 19312
Attention: Charlene Massih
Telecopy: (610) 640-4914
With a Copy to: PNC Bank, National Association
Multi-Bank Loan Administration
One PNC Plaza
249 Fifth Avenue
Fourth Floor Annex
Pittsburgh, PA 15222
Attention: Arlene Ohler
Telecopy: (412) 762-8672
provided that (a) any notice, request or demand to or upon the Agent or the
Banks pursuant to subsections 2.3, 2.6, 2.13, 2.14 and 2.21 shall not be
effective until received and (b) any notice of a Default or Event of Default
hereunder shall be sent by telecopy or reputable overnight courier.
9.3 No Waiver; Cumulative Remedies. No failure to exercise and
no delay in exercising, on the part of the Agent or any Bank, any right, remedy,
power or privilege hereunder shall operate as a waiver thereof; nor shall any
single or partial exercise of any right, remedy, power or privilege hereunder
preclude any other or further exercise thereof or the exercise of any other
right, remedy, power or privilege. The rights, remedies, powers and privileges
herein provided are cumulative and not exclusive of any rights, remedies, powers
and privileges provided by law.
9.4 Survival of Representations and Warranties. All
representations and warranties made hereunder and in any document, certificate
or statement delivered pursuant hereto or in connection
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herewith shall survive the execution and delivery of this Agreement, the Notes
and the other Loan Documents.
9.5 Payment of Expenses and Taxes. Each of the Borrowers
jointly and severally agrees (a) to pay or reimburse the Agent for all its
out-of-pocket costs and expenses incurred in connection with the development,
preparation and execution of, and the syndication of, this Agreement, the Notes,
the other Loan Documents and any other documents executed and delivered in
connection herewith, and the consummation of the transactions contemplated
hereby and thereby, including, without limitation, the reasonable fees and
disbursements of counsel to the Agent, (b) to pay or reimburse the Agent for all
its out-of-pocket costs and expenses incurred in connection with any amendment,
supplement or modification to this Agreement, the Notes and the other Loan
Documents and any other documents executed and delivered in connection
therewith, including without limitation, the reasonable fees and disbursements
of counsel, (c) pay or reimburse the Bank and each Agent for all its costs and
expenses incurred in connection with the enforcement or preservation of any
rights under this Agreement, the Notes, the other Loan Documents and any such
other documents, including, without limitation, reasonable fees and
disbursements of counsel to the Agent and to the several Banks, (d) to pay,
indemnify, and hold each Bank and the Agent harmless from, any and all recording
and filing fees and any and all liabilities with respect to, or resulting from
any delay in paying, stamp, excise and other taxes, if any, which may be payable
or determined to be payable in connection with the execution and delivery of, or
consummation of any of the transactions contemplated by, or any amendment,
supplement or modification of, or any waiver or consent under or in respect of,
this Agreement, the Notes, the other Loan Documents and any such other
documents, and (e) to pay, indemnify, and hold each Bank and the Agent harmless
from and against any and all other liabilities, obligations, losses, damages,
penalties, actions (whether sounding in contract, in tort or on any other
ground), judgments, suits, costs, expenses or disbursements of any kind or
nature whatsoever with respect to the execution, delivery, enforcement,
performance and administration of or in any other way arising out of or relating
to, this Agreement, the Notes, the other Loan Documents, the Acquisitions, or
any such other documents contemplated by or referred to herein or therein or any
action taken by any Bank or the Agent with respect to the foregoing (all the
foregoing, collectively, the "indemnified liabilities"), provided, that the
Borrowers shall have no obligation hereunder to the Agent or any Bank with
respect to indemnified liabilities arising from (i) the gross negligence or
willful misconduct of such person or (ii) legal proceedings commenced against
such person by any other Bank. The agreements in this subsection shall survive
repayment of the Notes and all other amounts payable hereunder.
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9.6 Successors and Assigns. (a) Whenever in this
Agreement any of the parties hereto is referred to, such reference shall be
deemed to include the successors and permitted assigns of such party; and all
covenants, promises and agreements by or on behalf of a Borrower, the Agent or
the Banks that are contained in this Agreement shall bind and inure to the
benefit of their respective successors and assigns. The Borrowers may not assign
or transfer any of their rights or obligations under this Agreement or the other
Loan Documents without the prior written consent of each Bank.
(b) Each Bank may, in accordance with applicable law, sell
to any Bank or Affiliate thereof and, with the consent of the Company (which
consent shall not be unreasonably withheld) and the Agent, to one or more banks
or other financial institutions (each, a "Purchasing Bank") all or any part of
its interests, rights and obligations under this Agreement, the Notes and the
other Loan Documents (including all or a portion of its Commitment and the Loans
at the time owing to it and the Notes held by it); provided, however, that (i)
so long as no Event of Default shall exist and be continuing, such assignment
shall be in an amount not less than $5,000,000 (or such lesser amount as the
Company and the Agent shall agree in their sole discretion) and (ii) the parties
to each such assignment shall execute and deliver to the Agent and the Company
for its acceptance and recording in the Register an Assignment and Acceptance,
together with the Note or Notes subject to such assignment and a processing and
recordation fee of $2,000. Upon acceptance and recording pursuant to paragraph
(e) of this subsection 9.6, from and after the effective date specified in each
Assignment and Acceptance, which effective date shall be at least five Business
Days after the execution thereof, (A) such Purchasing Bank shall be a party
hereto and, to the extent of the interest assigned by such Assignment and
Acceptance, have the rights and obligations of a Bank under this Agreement and
(B) the assigning Bank thereunder shall, to the extent of the interest assigned
by such Assignment and Acceptance, be released from its obligations under this
Agreement (and, in the case of an Assignment and Acceptance covering all or the
remaining portion of an assigning Bank's rights and obligations under this
Agreement and the other Loan Documents, such Bank shall cease to be a party
hereto but shall continue to be entitled to the benefits of subsections 2.16,
2.17 and 2.18 (to the extent that such Bank's entitlement to such benefits arose
out of such Bank's position as a Bank prior to the applicable assignment), as
well as to any Commitment Fees accrued for its account and not yet paid). Such
Assignment and Acceptance shall be deemed to amend this Agreement to the extent,
and only to the extent, necessary to reflect the addition of such Purchasing
Bank and the resulting amounts and percentages held by the Banks arising from
the purchase by such Purchasing Bank of all or a portion of the rights and
obligations of such assigning Bank under this Agreement, the Notes and the other
Loan Documents.
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Notwithstanding any provision of this subsection 9.6, the consent of the Company
shall not be required for any assignment which occurs at any time when any of
the events described in subsection 7.1(f) shall have occurred and be continuing.
(c) By executing and delivering an Assignment and
Acceptance, the assigning Bank thereunder and the Purchasing Bank thereunder
shall be deemed to confirm to and agree with each other and the other parties
hereto as follows: (i) such assigning Bank warrants that it is the legal and
beneficial owner of the interest being assigned thereby, free and clear of any
adverse claim and that its Commitment, and the outstanding balances of its
Loans, without giving effect to assignments thereof which have not become
effective, are as set forth in such Assignment and Acceptance, (ii) except as
set forth in (i) above, such assigning Bank makes no representation or warranty
and assumes no responsibility with respect to any statements, warranties or
representations made in or in connection with this Agreement or the other Loan
Documents, or the execution, legality, validity, enforceability, genuineness,
sufficiency or value of this Agreement, the other Loan Documents or any other
instrument or document furnished pursuant hereto or thereto, or the financial
condition of the Borrowers or any Subsidiary thereof or the performance or
observance by the Borrowers or any Subsidiary thereof of any of its obligations
under this Agreement or the other Loan Documents or any other instrument or
document furnished pursuant hereto or thereto; (iii) such Purchasing Bank
represents and warrants that it is legally authorized to enter into such
Assignment and Acceptance; (iv) such Purchasing Bank confirms that it has
received a copy of this Agreement, together with copies of the most recent
financial statements delivered pursuant to subsection 5.1 and such other
documents and information as it has deemed appropriate to make its own credit
analysis and decision to enter into such Assignment and Acceptance; (v) such
Purchasing Bank will independently and without reliance upon the Agent, such
assigning Bank or any other Bank and based on such documents and information as
it shall deem appropriate at the time, continue to make its own credit decisions
in taking or not taking action under this Agreement and the other Loan
Documents; (vi) such Purchasing Bank appoints and authorizes the Agent to take
such action as agent on its behalf and to exercise such powers under this
Agreement and the other Loan Documents as are delegated to the Agent by the
terms hereof or thereof, together with such powers as are reasonably incidental
thereto; and (vii) such Purchasing Bank agrees that it will perform in
accordance with their terms all the obligations which by the terms of this
Agreement and the other Loan Documents are required to be performed by it as a
Bank including, if it is organized under the laws of a jurisdiction outside the
United States, its obligation pursuant to subsection 2.17 to deliver the forms
prescribed by the Internal Revenue Service of the United States certifying as to
the Purchasing Bank's exemption from United States
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withholding taxes with respect to all payments to be made to the Purchasing Bank
under this Agreement.
(d) The Agent shall maintain at its offices in Philadelphia,
Pennsylvania a copy of each Assignment and Acceptance and the names and
addresses of the Banks, and the Commitment of, and principal amount of the Loans
owing to, each Bank pursuant to the terms hereof from time to time (the
"Register"). The entries in the Register shall be conclusive in the absence of
manifest error and the Borrowers, the Agent and the Banks may treat each Person
whose name is recorded in the Register pursuant to the terms hereof as a Bank
hereunder for all purposes of this Agreement. The Register shall be available
for inspection by the Borrowers and any Bank at any reasonable time and from
time to time upon reasonable prior notice.
(e) Upon its receipt of a duly completed Assignment and
Acceptance executed by an assigning Bank and a Purchasing Bank (and in the case
of a Purchasing Bank that is not then a Bank or an Affiliate thereof, by the
Company and the Agent) together with the Note or Notes subject to such
assignment and the processing and recordation fee referred to in paragraph (b)
above, the Agent shall promptly (i) accept such Assignment and Acceptance, (ii)
record the information contained therein in the Register and (iii) give notice
thereof to the Banks. Within five Business Days after receipt of notice, the
Borrowers, at their own expense, shall execute and deliver to the Agent, in
exchange for the surrender of the original Note(s) (A) (x) with respect to an
assignment of the Term Loan of any Bank, a new Term Note to the order of the
Purchasing Bank in an amount equal to the Term Loan purchased and (y) with
respect to the assignment of Revolving Credit Loans of any Bank, a new Revolving
Credit Note and Term Note to the order of such Purchasing Bank in an amount
equal to the Commitment assumed and (B) if the assigning Bank has retained a
Commitment or, with respect to assignments occurring after the termination of
the Commitments, a portion of the Term Loans, a new Term Note and/or Revolving
Credit Note, as appropriate, to the order of such assignor in the respective
amount equal to the Term Loan retained by it and/or the Commitment retained by
it, as the case may be. Such new Notes shall be in an aggregate principal amount
equal to the aggregate principal amount of such surrendered Note(s); such new
Notes shall be dated the date of the surrendered Notes which they replace and
shall otherwise be in substantially the form of Exhibit A-1 or A-2 hereto, as
appropriate. Canceled Notes shall be returned to the Company.
(f) Each Bank may without the consent of the Company or the
Agent (except to the extent provided below) sell participations to one or more
banks or other entities (each a "Participant") in any Loan owing to such Bank,
any Note held by such Bank, any Commitment of such Bank or any other interest of
such Bank hereunder and under the other Loan Documents, provided,
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however, that (i) such Bank's obligations under this Agreement to the other
parties to this Agreement shall remain unchanged, (ii) such Bank shall remain
solely responsible to the other parties hereto for the performance of such
obligations, (iii) such Bank shall remain the holder of any such Note for all
purposes under this Agreement and the other Loan Documents, (iv) the Borrowers,
the Banks and the Agent shall continue to deal solely and directly with such
Bank in connection with such Bank's rights and obligations under this Agreement
and the other Loan Documents, (v) in any proceeding under the Bankruptcy Code
the Bank shall be, to the extent permitted by law, the sole representative with
respect to the obligations held in the name of such Bank, whether for its own
account or for the account of any Participant, (vi) such Bank shall retain the
sole right to approve, without the consent of any Participant, any amendment,
modification or waiver of any provision of this Agreement or the Note or Notes
held by such Bank or any other Loan Document, other than any such amendment,
modification or waiver with respect to any Loan or Commitment in which such
Participant has an interest that forgives principal, interest or fees or reduces
the interest rate or fees payable with respect to any such Loan or Commitment,
postpones any date fixed for any regularly scheduled payment of principal of, or
interest or fees on, any such Loan, releases any guarantor of such Loan or
releases all or substantially all of the Collateral, if any, securing any such
Loan.
(g) If amounts outstanding under this Agreement and the
Notes are due or unpaid, or shall have been declared or shall have become due
and payable upon the occurrence of an Event of Default, each Participant shall
be deemed to have the right of set-off in respect of its participating interest
in amounts owing under this Agreement and any Note to the same extent as if the
amount of its participating interest were owing directly to it as a Bank under
this Agreement or any Note, provided that in purchasing such participation such
Participant shall be deemed to have agreed to share with the Banks the proceeds
thereof as provided in subsection 9.8. The Borrowers also agree that each
Participant shall be entitled to the benefits of subsections 2.16, 2.17, 2.18
and 9.5 with respect to its participation in the Commitments and the Loans
outstanding from time to time; provided, that no Participant shall be entitled
to receive any greater amount pursuant to such subsections than the assigning
Bank would have been entitled to receive in respect of the amount of the
participation transferred by such assigning Bank to such Participant had no such
transfer occurred.
(h) If any Participant of a Bank is organized under the laws
of any jurisdiction other than the United States or any state thereof, the
assigning Bank, concurrently with the sale of a participating interest to such
Participant, shall cause such Participant (i) to represent to the assigning Bank
(for the benefit
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of the assigning Bank, the other Banks, the Agent and the Borrowers) that under
applicable law and treaties no taxes will be required to be withheld by the
Agent, the Borrowers or the assigning Bank with respect to any payments to be
made to such Participant in respect of its participation in the Loans and (ii)
to agree (for the benefit of the assigning Bank, the other Banks, the Agent and
the Borrowers) that it will deliver the tax forms and other documents required
to be delivered pursuant to paragraph 2.17(b) and comply from time to time with
all applicable U.S. laws and regulations with respect to withholding tax
exemptions.
(i) Any Bank may at any time assign all or any portion of
its rights under this Agreement and the Notes issued to it to a Federal Reserve
Bank; provided that no such assignment shall release a Bank from any of its
obligations hereunder.
9.7 Disclosure of Information. Unless otherwise consented to by
the Company in writing, each of the Banks and the Agent agrees (on behalf of
itself and each of its affiliates, directors, officers, employees and
representatives) to use reasonable precautions to keep confidential, in
accordance with its customary procedures for handling confidential information
of the same nature and in accordance with safe and sound banking practices, any
non-public information supplied to it by the Company pursuant to this Agreement;
provided that nothing herein shall limit the disclosure of any such information
(a) to the extent required by statute, rule, regulation or judicial process, (b)
to counsel for any Bank or the Agent, (c) to bank examiners, auditors or
accountants, (d) to the Agent or any other Bank, (e) in connection with any
litigation to which any one or more of the Banks or the Agent is a party
involving one or more Borrowers or its or their properties or in any way
relating to this Agreement or any other Loan Documents or any Loans or other
obligations of one or more Borrowers to the Agent or any Bank and (f) to any
Participant or Purchasing Bank (or prospective Participant or Purchasing Bank)
so long as such Participant or Purchasing Bank (or prospective Participant or
Purchasing Bank) agrees to comply with the requirements of this Section.
9.8 Adjustments: Set-off. (a) If any Bank (a "benefitted Bank")
shall at any time receive any payment of all or part of its Loans owing to it,
or interest thereon, or receive any collateral in respect thereof (whether
voluntarily or involuntarily, by set-off, pursuant to events or proceedings of
the nature referred to in subsection 7(f), or otherwise), in a greater
proportion than any such payment to or collateral received by any other Bank, if
any, in respect of such other Bank's Loans, or interest thereon, such benefitted
Bank shall purchase for cash from the other Banks such portion of each such
other Bank's Loans owing to it, or shall provide such other Banks with the
benefits of any such collateral, or the proceeds thereof, as shall be necessary
to
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cause such benefitted Bank to share the excess payment or benefits of such
collateral or proceeds ratably with each of the Banks; provided, however, that
if all or any portion of such excess payment or benefits is thereafter recovered
from such benefitted Bank, such purchase shall be rescinded, and the purchase
price and benefits returned, to the extent of such recovery, but without
interest. Each of the Borrowers, jointly and severally agrees that each Bank so
purchasing a portion of another Bank's Loans may exercise all rights of payment
(including, without limitation, rights of set-off) with respect to such portion
as fully as if such Bank were the direct holder of such portion.
(b) In addition to any rights and remedies of the Banks
provided by law, upon the occurrence and during the continuance of an Event of
Default, each Bank shall have the right, without prior notice to the Borrowers
(or any of them), any such notice being expressly waived by the Borrowers to the
extent permitted by applicable law, upon any amount becoming due and payable by
the Borrowers hereunder or under the Notes (whether at the stated maturity, by
acceleration or otherwise) to set-off and appropriate and apply against such
amount any and all deposits (general or special, time or demand, provisional or
final), in any currency, and any other credits, indebtedness or claims, in any
currency, in each case whether direct or indirect, absolute or contingent,
matured or unmatured, at any time held or owing by such Bank to or for the
credit or the account of one or more Borrowers. Each Bank agrees promptly to
notify the Company and the Agent after any such set-off and application made by
such Bank, provided that the failure to give such notice shall not affect the
validity of such set-off and application.
9.9 Counterparts. This Agreement may be executed by one or more
of the parties to this Agreement on any number of separate counterparts, and all
of said counterparts taken together shall be deemed to constitute one and the
same instrument. A set of the copies of this Agreement signed by all the parties
shall be lodged with the Company, on behalf of the Borrowers, and each of the
Banks.
9.10 Severability. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
9.11 Power of Attorney. Each Borrower other than the Company
hereby grants to the Company an irrevocable power of attorney to act as its
attorney-in-fact with regard to all matters relating to this Agreement and each
other Loan Document, including,
77
<PAGE> 83
without limitation, execution and delivery of any Notice of Borrowing, and
amendments, supplements, waivers or other modifications hereto or thereto,
receipt of any notices hereunder or thereunder and receipt of service of process
in connection herewith or therewith and making all elections as to interest
rates and interest payment dates. Each such Borrower hereby explicitly
acknowledges that the Agent and each Bank has executed and delivered this
Agreement and each other Loan Document to which it is a party, and has performed
its obligations under this Agreement and each other Loan Document to which it is
a party, in reliance upon the irrevocable grant of such power of attorney
pursuant to this subsection 9.11.
9.12 Integration. This Agreement and the other Loan Documents
represent the agreement of the parties hereto with respect to the subject matter
hereof, and there are no promises, undertakings, representations or warranties
by the Agent or any Bank relative to the subject matter hereof not expressly set
forth or referred to herein or in the other Loan Documents.
9.13 GOVERNING LAW. THIS AGREEMENT AND THE NOTES AND THE RIGHTS
AND OBLIGATIONS OF THE PARTIES UNDER THIS AGREEMENT AND THE NOTES SHALL BE
GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE
COMMONWEALTH OF PENNSYLVANIA.
9.14 Submission To Jurisdiction; Waivers. Each of the Borrowers
hereby irrevocably and unconditionally:
(a) submits for itself and its property in any legal action
or proceeding relating to this Agreement or the Notes, or for recognition and
enforcement of any judgement in respect thereof, to the non-exclusive general
jurisdiction of the Courts of the Commonwealth of Pennsylvania, the courts of
the United States of America for the Eastern District of Pennsylvania, and
appellate courts from any thereof;
(b) consents that any such action or proceeding may be
brought in such courts and waives any objection that it may now or hereafter
have to the venue of any such action or proceeding in any such court or that
such action or proceeding was brought in an inconvenient court and agrees not to
plead or claim the same;
(c) agrees that service of process in any such action or
proceeding may be effected by mailing a copy thereof by registered or certified
mail (or any substantially similar form of mail), postage prepaid, to the
Company at its address set forth in Section 9.2 or at such other address of
which the Agent shall have been notified pursuant thereto;
78
<PAGE> 84
(d) agrees that nothing herein shall affect the right to
effect service of process in any other manner permitted by law or shall limit
the right to sue in any other jurisdiction; and
(e) waives, to the maximum extent not prohibited by law,
any right it may have to claim or recover in any legal action or proceeding
referred to in this subsection any special, exemplary or punitive or
consequential damages.
9.15 Acknowledgements. Each of Borrowers hereby acknowledges
that:
(a) it has been advised by counsel in the negotiation,
execution and delivery of this Agreement, the Notes and the other Loan
Documents;
(b) neither the Agent nor any Bank has any fiduciary
relationship to the Borrowers (or any of them) and the relationship hereunder
between the Agent and Banks, on the one hand, and the Borrowers, on the other
hand, is solely that of debtor and creditor; and
(c) no joint venture exists among the Banks or among the
Borrowers (or any of them) and the Banks.
9.16 No Right of Contribution. No Borrower shall seek or be
entitled to any reimbursement from any other Borrower, or be subrogated to any
rights of the Banks against the Borrowers, in respect of any payments made
pursuant to the Loan Documents, until all amounts owing to the Banks hereunder
and under the Notes are paid in full.
9.17 WAIVERS OF JURY TRIAL. EACH OF THE BORROWERS, THE AGENT
AND THE BANKS HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVE TRIAL BY JURY IN ANY
LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT, THE NOTES OR ANY OTHER
LOAN DOCUMENT AND FOR ANY MANDATORY COUNTERCLAIM THEREIN.
79
<PAGE> 85
IN WITNESS WHEREOF, the parties hereto, by their officers
thereunto duly authorized, have executed this Agreement as of the day and year
first above written.
ATTEST: WEST COAST ENTERTAINMENT
CORPORATION
/s/ Ralph W. Standley III By: /s/ T. Kyle Standley
- ------------------------------ --------------------------------
Chairman Name: T. Kyle Standley
Title: President
[seal]
ATTEST: VIDEOSMITH, INCORPORATBD
/s/ Ralph W. Standley III By: /s/ T. Kyle Standley
- ------------------------------ --------------------------------
President Name: T. Kyle Standley
Title: President
[seal]
ATTEST: WEST COAST FRANCHI8ING COMPANY
/s/ Ralph W. Standley III By: /s/ T. Kyle Standley
- ------------------------------ --------------------------------
Chairman Name: T. Kyle Standley
Title: President
[seal]
ATTEST: PALMER WEST COA8T CORPORATION
/s/ Ralph W. Standley III By: /s/ T. Kyle Standley
- ------------------------------ --------------------------------
Secretary Name: T. Kyle Standley
Title: President
[seal]
ATTEST: RKT MERGER CO.
/s/ Ralph W. Standley III By: /s/ T. Kyle Standley
- ------------------------------ --------------------------------
Secretary Name: T. Kyle Standley
Title: President
[seal]
80
<PAGE> 86
ATTEST: SHOWTIME, INC.
/s/ Ralph W. Standley III By: /s/ T. Kyle Standley
- ------------------------------ --------------------------------
Secretary Name: T. Kyle Standley
Title: President
[seal]
ATTEST: VIDEO GIANT INC.
/s/ Ralph W. Standley III By: /s/ T. Kyle Standley
- ------------------------------ --------------------------------
Secretary Name: T. Kyle Standley
Title: President
[seal]
PNC BANK, NATIONAL
ASSOCIATION, as a Bank and as
Agent
By: /s/ Charlene Massih
------------------------------
Name: Charlene Massih
Title: Vice President
81
<PAGE> 1
EXHIBIT 10.18
REVOLVING CREDIT NOTE
$60,000,000 Philadelphia, Pennsylvania
May 17, 1996
FOR VALUE RECEIVED, WEST COAST ENTERTAINMENT CORPORATION, a Delaware
corporation (the "Company"), VIDEOSMITH INCORPORATED, a Massachusetts
corporation, WEST COAST FRANCHISING COMPANY, a Delaware corporation, PALMER WEST
COAST CORPORATION, a Delaware corporation, RKT MERGER CO., a Delaware
corporation, SHOWTIME, INC., a Virginia corporation, and VIDEO GIANT INC., a
Texas corporation (collectively, the "Borrowers"), hereby jointly and severally
unconditionally promise to pay to the order of PNC Bank, National Association
(the "Bank") at the office of PNC BANK, NATIONAL ASSOCIATION (the "Agent")
located at Broad and Chestnut Streets, Philadelphia, Pennsylvania 19110, on the
Revolving Credit Termination Date (as such term is defined in the Credit
Agreement hereinafter referred to) in lawful money of the United States of
America and in immediately available funds, the principal sum of (a) SIXTY
MILLION DOLLARS ($60,000,000 DOLLARS ), or, if less, (b) the aggregate unpaid
principal amount of all Revolving Credit Loans made by the Bank to the Borrowers
pursuant to the Credit Agreement. The Borrowers further agree to pay interest
accrued on the unpaid principal amount outstanding hereunder from time to time
from the date hereof in like money at such office at the rates and on the dates
specified in the Credit Agreement together with all other costs, fees and
expenses as provided in the Credit Agreement.
The holder of this Note is authorized to endorse on Schedule 1
annexed hereto and made a part hereof or on a continuation thereof which shall
be attached hereto and made a part hereof the respective date(s), Type and
amount of each Revolving Credit Loan made by the Bank to the Borrowers, each
continuation thereof, each conversion of all or a portion thereof to another
Type, the date and amount of each payment or prepayment of principal thereof
and, in the case of Eurodollar Loans, the length of each Interest Period with
respect thereto, which endorsement shall constitute prima facie evidence of the
accuracy of the information endorsed; provided, however, that the failure to
make any such endorsement (or any error in such recordation) shall not affect
the obligations of the Borrowers to make payments of principal, interest and
other amounts outstanding in accordance with the terms of this Note and the
Credit Agreement.
This Note is one of the Revolving Credit Notes referred to in,
evidences indebtedness incurred under, and is entitled to the benefits of, the
Credit Agreement dated as of May 17, 1996
<PAGE> 2
(said Agreement, as it may hereafter be amended, supplemented or
otherwise modified from time to time, being referred to as the "Credit
Agreement") among the Borrowers, the other banks and financial institutions
parties thereto, and PNC Bank, National Association, as agent. The Credit
Agreement, among other things, contains provisions for the acceleration of the
maturity hereof upon the happening of certain events, for optional or mandatory
prepayments of the principal hereof prior to the maturity thereof, for a higher
rate of interest hereunder on amounts past due, for the amendment or waiver of
certain provisions of the Credit Agreement and for certain security interests
granted by the Borrowers. Reference is made to the Credit Agreement and the
other Loan Documents for a statement of the terms and conditions under which the
Loans evidenced hereby have been secured.
Upon the occurrence of any one or more of the Events of Default
specified in the Credit Agreement, all amounts then remaining unpaid on this
Note shall become, or may be declared to be, immediately due and payable, all as
provided therein.
All parties now and hereafter liable with respect to this Note, whether
maker, principal, surety, guarantor, endorser or otherwise, hereby waive
presentment, demand, protest and notice of any kind. No failure to exercise, and
no delay in exercising, any rights hereunder on the part of the holder hereof
shall operate as a waiver of such rights.
Capitalized terms not otherwise defined herein shall have the meanings
set forth in the Credit Agreement. This Note shall be governed by, and construed
in accordance with, the laws of the Commonwealth of Pennsylvania.
ATTEST: WEST COAST ENTERTAINMENT CORPORATION
/s/ Ralph W. Standley III By: /s/ T. Kyle Standley
- ------------------------------ --------------------------------
Chairman Name: T. Kyle Standley
--------------------------
Title: President
--------------------------
[seal]
[signatures continued on next page]
2
<PAGE> 3
ATTEST: VIDEOSMITH, INCORPORATED
/s/ Ralph W. Standley III By: /s/ T. Kyle Standley
- ------------------------------ --------------------------------
President Name: T. Kyle Standley
--------------------------
Title: President
--------------------------
[seal]
ATTEST: WEST COAST FRANCHISING COMPANY
/s/ Ralph W. Standley III By: /s/ T. Kyle Standley
- ------------------------------ --------------------------------
Chairman Name: T. Kyle Standley
--------------------------
Title: President
--------------------------
[seal]
ATTEST: PALMER WEST COAST CORPORATION
/s/ Ralph W. Standley III By: /s/ T. Kyle Standley
- ------------------------------ --------------------------------
Secretary Name: T. Kyle Standley
--------------------------
Title: President
--------------------------
[seal]
ATTEST: RKT MERGER CO.
/s/ Ralph W. Standley III By: /s/ T. Kyle Standley
- ------------------------------ --------------------------------
Secretary Name: T. Kyle Standley
--------------------------
Title: President
--------------------------
[seal]
ATTEST: SHOWTIME, INC.
/s/ Ralph W. Standley III By: /s/ T. Kyle Standley
- ------------------------------ --------------------------------
Secretary Name: T. Kyle Standley
--------------------------
Title: President
--------------------------
[seal]
3
<PAGE> 4
ATTEST: VIDEO GIANT INC.
/s/ Ralph W. Standley III By: /s/ T. Kyle Standley
- ------------------------------ --------------------------------
Secretary Name: T. Kyle Standley
--------------------------
Title: President
--------------------------
[seal]
4
<PAGE> 5
SCHEDULE 1
LOANS, CONVERSIONS AND PAYMENTS
<TABLE>
<CAPTION>
AMOUNT OF AMOUNT OF
BASE RATE EURODOLLAR
LOANS LOANS UNPAID
TYPE OF LOAN CONVERTED CONVERTED TO PRINCIPAL
(EURODOLLAR OR AMOUNT OF TO EURODOLLAR BASE RATE BALANCE OF NOTATION
DATE BASE RATE) LOANS LOANS LOANS LOANS MADE BY
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 1
EXHIBIT 10.19
TERM NOTE
$60,000,000 Philadelphia, Pennsylvania
May 17, 1996
FOR VALUE RECEIVED, WEST COAST ENTERTAINMENT CORPORATION, a Delaware
corporation (the "Company"), VIDEOSMITH INCORPORATED, a Massachusetts
corporation, WEST COAST FRANCHISING COMPANY, a Delaware corporation, PALMER WEST
COAST CORPORATION, a Delaware corporation, RKT MERGER CO., a Delaware
corporation, SHOWTIME, INC., a Virginia corporation, and VIDEO GIANT INC., a
Texas corporation (collectively, the "Borrowers"), hereby jointly and severally
unconditionally promise to pay to the order of PNC Bank, National Association
(the "Bank") at the office of PNC Bank, National Association (the "Agent")
located at Broad and Chestnut Streets, Philadelphia, Pennsylvania 19110, on the
Termination Date (as such term is defined in the Credit Agreement hereinafter
referred to) in lawful money of the United States of America and in immediately
available funds, the principal sum of (a) SIXTY MILLION DOLLARS ($60,000,000)
or, if less (b) the aggregate principal amount of the Revolving Credit Loans on
the Revolving Credit Termination Date, in such quarterly installments of
principal in such amounts, and payable at such times, as are specified in the
Credit Agreement referred to below. The Borrowers further agree to pay interest
accrued on the unpaid principal amount outstanding hereunder from time to time
from the date hereof in like money at such office at the rates and on the dates
specified in the Credit Agreement.
The holder of this Note is authorized to endorse on Schedule 1 annexed
hereto and made a part hereof or on a continuation thereof which shall be
attached hereto and made a part hereof the respective date(s), Type and amount
of each Term Loan made by the Bank to the Borrowers, each continuation thereof,
each conversion of all or a portion thereof to another Type, the date and amount
of each payment or prepayment of principal thereof and, in the case of
Eurodollar Loans, the length of each Interest Period with respect thereto, which
endorsement shall constitute prima facie evidence of the accuracy of the
information endorsed; provided, however, that the failure to make any such
endorsement (or any error in such recordation) shall not affect the obligations
of the Borrowers to make payments of principal and interest in accordance with
the terms of this Note and the Credit Agreement.
This Note is one of the Term Notes referred to in, evidences
indebtedness incurred under, and is entitled to the benefits of, the Credit
Agreement dated as of May 17, 1996 (said Agreement, as it may hereafter be
amended, supplemented or
<PAGE> 2
otherwise modified from time to time, being referred to as the "Credit
Agreement") among the Borrowers, the other banks and financial institutions
parties thereto, and PNC Bank, National Association, as agent. The Credit
Agreement, among other things, contains provisions for the acceleration of the
maturity hereof upon the happening of certain events, for optional and mandatory
prepayments of the principal hereof prior to the maturity thereof, for a higher
rate of interest hereunder on amounts past due, for the amendment or waiver of
certain provisions of the Credit Agreement and for certain security interests
granted by the Borrowers. Reference is made to the Credit Agreement and the
other Loan Documents for a statement of the terms and conditions under which the
Loans evidenced hereby have been secured.
Upon the occurrence of any one or more of the Events of Default
specified in the Credit Agreement, all amounts then remaining unpaid on this
Note shall become, or may be declared to be, immediately due and payable, all as
provided therein.
All parties now and hereafter liable with respect to this Note,
whether maker, principal, surety, guarantor, endorser or otherwise, hereby waive
presentment, demand, protest and notice of any kind. No failure to exercise, and
no delay in exercising, any rights hereunder on the part of the holder hereof
shall operate as a waiver of such rights.
Capitalized terms not otherwise defined herein shall have the
meanings set forth in the Credit Agreement. This Note shall be governed by, and
construed in accordance with, the laws of the Commonwealth of Pennsylvania.
ATTEST: WEST COAST ENTERTAINMENT
CORPORATION
/s/ Ralph W. Standley III By: /s/ T. Kyle Standley
- ------------------------------ --------------------------------
Chairman Name: T. Kyle Standley
--------------------------
Title: President
--------------------------
[seal]
[signatures continued on next page]
2
<PAGE> 3
ATTEST: VIDEOSMITH, INCORPORATED
/s/ Ralph W. Standley III By: /s/ T. Kyle Standley
- ------------------------------ --------------------------------
President Name: T. Kyle Standley
--------------------------
Title: Vice President
--------------------------
[seal]
ATTEST: WEST COAST FRANCHISING COMPANY
/s/ Ralph W. Standley III By: /s/ T. Kyle Standley
- ------------------------------ --------------------------------
Chairman Name: T. Kyle Standley
--------------------------
Title: President
--------------------------
[seal]
ATTEST: PALMER WEST COAST CORPORATION
/s/ Ralph W. Standley III By: /s/ T. Kyle Standley
- ------------------------------ --------------------------------
Secretary Name: T. Kyle Standley
--------------------------
Title: President
--------------------------
[seal]
ATTEST: RKT MERGER CO.
/s/ Ralph W. Standley III By: /s/ T. Kyle Standley
- ------------------------------ --------------------------------
Secretary Name: T. Kyle Standley
--------------------------
Title: President
--------------------------
[seal]
ATTEST: SHOWTIME, INC.
/s/ Ralph W. Standley III By: /s/ T. Kyle Standley
- ------------------------------ --------------------------------
Secretary Name: T. Kyle Standley
--------------------------
Title: President
--------------------------
[seal]
3
<PAGE> 4
ATTEST: VIDEO GIANT INC.
By: /s/ T. Kyle Standley
- ------------------------------ --------------------------------
Secretary Name: T. Kyle Standley
--------------------------
Title: President
--------------------------
[seal]
4
<PAGE> 5
SCHEDULE 1
LOANS, CONVERSIONS AND PAYMENTS
<TABLE>
<CAPTION>
AMOUNT OF AMOUNT OF
BASE RATE EURODOLLAR
LOANS LOANS UNPAID
TYPE OF LOAN CONVERTED CONVERTED TO PRINCIPAL
(EURODOLLAR OR AMOUNT OF TO EURODOLLAR BASE RATE BALANCE OF NOTATION
DATE BASE RATE) LOANS LOANS LOANS LOANS MADE BY
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 1
EXHIBIT 10.20
PLEDGE AGREEMENT
Pledge Agreement, dated as of May 17, 1996, made by WEST COAST
ENTERTAINMENT CORPORATION, a Delaware corporation (the "Pledgor"), in favor of
PNC BANK, NATIONAL ASSOCIATION, as agent (in such capacity, the "Agent") for the
banks and other financial institutions (the "Banks") parties to the Credit
Agreement (as defined below).
W I T N E S S E T H :
WHEREAS, the Pledgor and certain of its subsidiaries
(collectively, the "Borrowers"), the Banks and the Agent have entered into a
Credit Agreement, dated as of the date hereof (as amended, supplemented or
otherwise modified from time to time, the "Credit Agreement");
WHEREAS, pursuant to the provisions of the Credit Agreement and
upon the terms and subject to the conditions set forth therein, the Banks have
severally agreed to make certain loans to the Borrowers to be evidenced by the
notes issued by the Borrowers thereunder;
WHEREAS, the Pledgor is the legal and beneficial owner of the
shares of Pledged Stock (as hereinafter defined) of the entities listed on
Schedule I hereto (individually, an "Issuer," and collectively, the "Issuers");
and
WHEREAS, it is a condition precedent to the obligation of the
Banks to make their respective loans to the Borrowers under the Credit Agreement
that the Pledgor shall have executed and delivered this Pledge Agreement to the
Agent for the ratable benefit of the Banks.
NOW, THEREFORE, in consideration of the premises and to induce
the Agent and the Banks to enter into the Credit Agreement and make their
respective loans to the Borrowers thereunder, the Pledgor hereby agrees with the
Agent, for the ratable benefit of the Banks, as follows:
1. Defined Terms. Unless otherwise defined herein, terms which
are defined in the Credit Agreement and used herein are so used as so
defined, and the following terms shall have the following meanings:
"Code" means the Uniform Commercial Code from time to time in
effect in the Commonwealth of Pennsylvania.
"Collateral" means the Pledged Stock and all Proceeds.
<PAGE> 2
"Obligations" shall mean the unpaid principal amount of, and
interest on (including, without limitation, interest accruing after the
filing of any petition in bankruptcy, or the commencement of any
insolvency, reorganization or like proceeding, relating to a Borrower,
whether or not a claim for post-filing or post-petition interest is
allowed in such proceeding) the Notes and all other obligations and
liabilities of the Borrowers to the Agent or any Bank, whether direct or
indirect, absolute or contingent, due or to become due, or now existing
or hereafter incurred, which may arise under, out of, or in connection
with, the Credit Agreement, the Notes, this Pledge Agreement, the other
Loan Documents and any other document made, delivered or given in
connection therewith or herewith, whether on account of principal,
interest, reimbursement obligations, fees, indemnities, costs, expenses
(including, without limitation, all fees and disbursements of counsel to
the Agent or any Bank that are required to be paid by the Borrowers
pursuant to the terms of the Credit Agreement) or otherwise.
"Pledge Agreement" means this Pledge Agreement, as amended,
supplemented or otherwise modified from time to time.
"Pledged Stock" means the shares of capital stock of the Issuers
listed on Schedule I hereto, together with all stock certificates,
options or rights of any nature whatsoever that may be issued or granted
by any Issuer to the Pledgor while this Pledge Agreement is in effect.
"Proceeds" means all "proceeds" as such term is defined in
Section 9306(a) of the Code on the date hereof and, in any event, shall
include, without limitation, all dividends or other income from the
Pledged Stock, collections thereon or distributions with respect
thereto.
2. Pledge; Grant of Security Interest. The Pledgor
hereby agrees on the date hereof to deliver to the Agent, for the
ratable benefit of the Banks, the Pledged Stock and hereby grants to the
Agent, for the ratable benefit of the Banks, a first priority security
interest in the Collateral, as collateral security for the prompt and
complete payment and performance when due (whether at the stated
maturity, by acceleration or otherwise) of the Obligations.
3. Stock Powers. Concurrently with the delivery to the Agent of
each certificate representing one or more shares of Pledged Stock, the Pledgor
shall deliver an undated stock power covering such certificate, duly executed in
blank by the Pledgor with, if the Agent so requests, signature guaranteed.
2
<PAGE> 3
4. Representations and Warranties. The Pledgor represents and
warrants that:
(a) the Pledgor is the owner of the issued and outstanding shares
of all capital stock of each Issuer and the shares of Pledged Stock
listed on Schedule I constitute all of such issued and outstanding
shares;
(b) all the shares of the Pledged Stock have been duly and
validly issued and are fully paid and nonassessable;
(c) the Pledgor is the record and beneficial owner of, and has
good and marketable title to, the Pledged Stock listed on Schedule I,
free of any and all Liens or options in favor of, or claims of, any
other Person, except the Lien created by this Pledge Agreement; and
(d) upon delivery to the Agent of the stock certificates
evidencing the Pledged Stock, the Lien granted pursuant to this Pledge
Agreement will constitute a valid, perfected first priority Lien on the
Collateral, enforceable as such against all creditors of the Pledgor
and any Persons purporting to purchase any Collateral from the Pledgor.
5. Covenants. The Pledgor covenants and agrees with the Agent
and the Banks that from and after the date of this Pledge Agreement until the
Obligations are paid in full and the Commitments are terminated:
(a) If the Pledgor shall, as a result of its ownership of the
Pledged Stock, become entitled to receive or shall receive any stock
certificate (including, without limitation, any certificate
representing a stock dividend or a distribution in connection with any
reclassification, increase or reduction of capital or any certificate
issued in connection with any reorganization), option or rights,
whether in addition to, in substitution of, as a conversion of, or in
exchange for any shares of the Pledged Stock, or otherwise in respect
thereof, the Pledgor shall accept the same as the agent of the Agent
and the Banks, hold the same in trust for the Agent and the Banks and
deliver the same to the Agent in the exact form received, duly indorsed
by the Pledgor to the Agent, if required, together with an undated
stock power covering such certificate duly executed in blank by the
Pledgor and with, if the Agent so requests, signature guaranteed, to be
held by the Agent, subject to the terms hereof, as additional
collateral security for the Obligations. Any sums paid upon or in
respect of the Pledged Stock upon the liquidation or dissolution of any
Issuer shall be paid over to the Agent to be held by it hereunder as
additional collateral security for the
3
<PAGE> 4
Obligations, and in case any distribution of capital shall be
made on or in respect of the Pledged Stock or any property shall be
distributed upon or with respect to the Pledged Stock pursuant to the
recapitalization or reclassification of the capital of such Issuer or
pursuant to the reorganization thereof, the property so distributed
shall be delivered to the Agent to be held by it hereunder as
additional collateral security for the Obligations. If any sums of
money or property so paid or distributed in respect of the Pledged
Stock shall be received by the Pledgor, the Pledgor shall, until such
money or property is paid or delivered to the Agent, hold such money or
property in trust for the Banks, segregated from other funds of the
Pledgor, as additional collateral security for the Obligations.
(b) Without the prior written consent of the Agent, the Pledgor
will not (i) vote to enable, or take any other action to permit, any
Issuer to issue any stock or other equity securities of any nature or
to issue any other securities convertible into or granting the right to
purchase or exchange for any stock or other equity securities of any
nature of such Issuer, (ii) sell, assign, transfer, exchange, or
otherwise dispose of, or grant any option with respect to, the
Collateral, and (iii) create, incur or permit to exist any Lien or
option in favor of, or any claim of any Person with respect to, any of
the Collateral, or any interest therein, except for the Lien provided
for by this Pledge Agreement. The Pledgor will defend the right, title
and interest of the Agent and the Banks in and to the Collateral
against the claims and demands of all Persons whomsoever.
(c) At any time and from time to time, upon the written request
of the Agent, and at the sole expense of the Pledgor, the Pledgor will
promptly and duly execute and deliver such further instruments and
documents and take such further actions as the Agent may reasonably
request for the purposes of obtaining or preserving the full benefits
of this Pledge Agreement and of the rights and powers herein granted.
If any amount payable under or in connection with any of the Collateral
shall be or become evidenced by any promissory note, other instrument
or chattel paper, such note, instrument or chattel paper shall be
immediately delivered to the Agent, duly endorsed in a manner
satisfactory to the Agent, to be held as Collateral pursuant to this
Pledge Agreement.
(d) The Pledgor agrees to pay, and to save the Agent and the
Banks harmless from, any and all liabilities with respect to, or
resulting from any delay in paying, any and
4
<PAGE> 5
all stamp, excise, sales or other taxes which may be payable or
determined to be payable with respect to any of the Collateral or in
connection with this Pledge Agreement or the granting of security
hereunder or the exercising of any rights or remedies hereunder.
6. Cash Dividends; Voting Rights. Unless an Event of
Default shall have occurred and be continuing and the Agent shall have
given notice to the Company of the Agent's intent to exercise its rights
pursuant to paragraph 7 below, the Pledgor shall be permitted to receive
all dividends (other than dividends paid in additional capital stock of
any Issuer) paid in the normal course of business of each Issuer and
consistent with past practice, to the extent permitted in the Credit
Agreement, in respect of the Pledged Stock and to exercise all voting
and corporate rights with respect to the Pledged Stock, provided,
however, that no vote shall be cast or corporate right exercised or
other action taken which, in the Agent's reasonable judgment, would
impair the Collateral or which would be inconsistent with or result in
any violation of any provision of the Credit Agreement, the Notes or any
of the other Loan Documents.
7. Rights of the Banks and the Agent.
(a) If an Event of Default shall occur and be continuing and
the Agent shall give notice of its intent to exercise its rights hereunder to
the Company, (i) the Agent shall have the right to receive any and all cash
dividends paid in respect of the Pledged Stock and make application thereof to
the Obligations in such order as the Agent may determine, and (ii) all shares of
the Pledged Stock shall be registered in the name of the Agent or its nominee,
and the Agent, or its nominee may thereafter exercise (A) all voting, corporate
and other rights pertaining to such shares of Pledged Stock at any meeting of
shareholders of any Issuer or otherwise and (B) any and all rights of
conversion, exchange, subscription and any other rights, privileges or options
pertaining to such shares of the Pledged Stock as if it were the absolute owner
thereof (including, without limitation, the right to exchange at its discretion
any and all of the Pledged Stock upon the merger, consolidation, reorganization,
recapitalization or other fundamental change in the corporate structure of any
Issuer, or upon the exercise by the Pledgor or the Agent of any right, privilege
or option pertaining to such shares of the Pledged Stock, and in connection
therewith, the right to deposit and deliver any and all of the Pledged Stock
with any committee, depositary, transfer agent, registrar or other designated
agency upon such terms and conditions as it may determine), all without
liability except to account for property actually received by it and except for
its gross negligence or willful misconduct, but the Agent shall have no duty to
the Pledgor to exercise any such
5
<PAGE> 6
right, privilege or option and shall not be responsible for any failure to do so
or delay in so doing.
(b) The rights of the Agent and the Banks hereunder shall not be
conditioned or contingent upon the pursuit by the Agent or any Bank of any right
or remedy against any other Person which may be or become liable in respect of
all or any part of the Obligations or against any collateral security therefor,
guarantee therefor or right of offset with respect thereto. Neither the Agent
nor any Bank shall be liable for any failure to demand, collect or realize upon
all or any part of the Collateral or for any delay in doing so, nor shall the
Agent be under any obligation to sell or otherwise dispose of any Collateral
upon the request of the Pledgor or any other Person or to take any other action
whatsoever with regard to the Collateral or any part thereof.
8. Remedies. If an Event of Default shall have occurred and be
continuing, the Agent, on behalf of the Banks, may exercise, in addition to all
other rights and remedies granted to it in this Pledge Agreement and in any
other instrument or agreement securing, evidencing or relating to the
Obligations, all rights and remedies of a secured party under the Code. Without
limiting the generality of the foregoing, the Agent, without demand of
performance or other demand, presentment, protest, advertisement or notice of
any kind (except any notice required by law referred to below or otherwise
specifically required hereunder) to or upon the Pledgor, any Issuer or any other
Person (all and each of which demands, defenses, advertisements and notices are
hereby waived), may in such circumstances forthwith collect, receive,
appropriate and realize upon the Collateral, or any part thereof, and/or may
forthwith sell, assign or give option or options to purchase or otherwise
dispose of and deliver the Collateral or any part thereof (or contract to do any
of the foregoing), in one or more parcels at public or private sale or sales, in
the over-the-counter market, at any exchange, broker's board or office of the
Agent or any Bank or elsewhere upon such terms and conditions as it may deem
advisable and at such prices as it may deem best, for cash or on credit or for
future delivery without assumption of any credit risk. The Agent or any Bank
shall have the right upon any such public sale or sales, and, to the extent
permitted by law, upon any such private sale or sales, to purchase the whole or
any part of the Collateral so sold, free of any right or equity of redemption in
the Pledgor, which right or equity is hereby waived or released. The Agent shall
apply any Proceeds from time to time held by it and the net proceeds of any such
collection, recovery, receipt, appropriation, realization or sale, after
deducting all reasonable costs and expenses of every kind incurred in respect
thereof or incidental to the care or safekeeping of any of the Collateral or in
any way relating to
6
<PAGE> 7
the Collateral or the rights of the Agent and the Banks hereunder, including,
without limitation, reasonable attorneys' fees and disbursements of counsel to
the Agent, to the payment in whole or in part of the Obligations, in such order
as the Agent may elect, and only after such application and after the payment by
the Agent of any other amount required by any provision of law, including,
without limitation, Section 9504(a)(3) of the Code, need the Agent account for
the surplus, if any, to the Pledgor. To the extent permitted by applicable law,
the Pledgor waives all claims, damages and demands it may acquire against the
Agent or any Bank arising out of the lawful exercise by them of any rights
hereunder. If any notice of a proposed sale or other disposition of Collateral
shall be required by law, such notice shall be deemed reasonable and proper if
given at least 10 Business Days before such sale or other disposition. The
Pledgor shall remain liable for any deficiency if the proceeds of any sale or
other disposition of Collateral are insufficient to pay the Obligations and the
fees and disbursements of any attorneys employed by the Agent or any Bank to
collect such deficiency.
9. Registration Rights; Private Sales.
(a) The Pledgor recognizes that the Agent may be unable to
effect a public sale of any or all the Pledged Stock, by reason of certain
prohibitions contained in the Securities Act of 1933, as amended (the
"Securities Act") and applicable state securities laws or otherwise, and may
resort to one or more private sales thereof to a restricted group of purchasers
which will be obliged to agree, among other things, to acquire such securities
for their own account for investment and not with a view to the distribution or
resale thereof. The Pledgor acknowledges and agrees that any such private sale
may result in prices and other terms less favorable than if such sale were a
public sale and, notwithstanding such circumstances, agrees that any such
private sale shall be deemed to have been made in a commercially reasonable
manner. The Agent shall be under no obligation to delay a sale of any of the
Pledged Stock for the period of time necessary to permit any Issuer to register
such securities for public sale under the Securities Act, or under applicable
state securities laws, even if such Issuer would agree to do so.
(b) The Pledgor further agrees to use its best efforts to do
or cause to be done all such other acts as may be necessary to make such sale or
sales of all or any portion of the Pledged Stock pursuant to this paragraph 9
valid and binding and in compliance with any and all other applicable
Requirements of Law. The Pledgor further agrees that a breach of any of the
covenants contained in this paragraph 9 will cause irreparable injury to the
Agent and the Banks, that the Agent and the Banks have no adequate remedy at law
in respect of such breach and, as
7
<PAGE> 8
a consequence, that each and every covenant contained in this paragraph 9 shall
be specifically enforceable against the Pledgor, and the Pledgor hereby waives
and agrees not to assert any defenses against an action for specific performance
of such covenants.
10. Limitation on Duties Regarding Collateral. The Agent's sole duty
with respect to the custody, safekeeping and physical preservation of the
Collateral in its possession, under Section 9-207 of the Code or otherwise,
shall be to deal with it in the same manner as the Agent deals with similar
securities and property for its own account. Neither the Agent, any Bank nor any
of their respective directors, officers, employees or agents shall be liable for
failure to demand, collect or realize upon any of the Collateral or for any
delay in doing so or shall be under any obligation to sell or otherwise dispose
of any Collateral upon the request of the Pledgor or otherwise.
11. Powers Coupled with an Interest. All authorizations and agencies
herein contained with respect to the Collateral are irrevocable and powers
coupled with an interest.
12. Severability. Any provision of this Pledge Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provisions in any other jurisdiction.
13. Paragraph Headings. The paragraph headings used in this Pledge
Agreement are for convenience of reference only and are not to affect the
construction hereof or be taken into consideration in the interpretation hereof.
14. No Waiver; Cumulative Remedies. Neither the Agent nor any Bank
shall by any act (except by a written instrument pursuant to paragraph 15
hereof) be deemed to have waived any right or remedy hereunder or to have
acquiesced in any default of any obligation under any Loan Document or in any
breach of any of the terms and conditions hereof or thereof. No failure to
exercise, nor any delay in exercising, on the part of the Agent or any Bank of
any right, power or privilege hereunder shall operate as a waiver thereof. No
single or partial exercise of any right, power or privilege hereunder shall
preclude any other or further exercise thereof or the exercise of any other
right, power or privilege. A waiver by the Agent or any Bank of any right or
remedy hereunder on any one occasion shall not be construed as a bar to any
right on any future occasion. The rights and remedies herein provided are
cumulative, may be
8
<PAGE> 9
exercised singly or concurrently and are not exclusive of any other rights or
remedies provided by law.
15. Waivers and Amendments; Successors and Assigns; Governing Law. None
of the terms or provisions of this Pledge Agreement may be amended, supplemented
or otherwise modified except by a written instrument executed by the Pledgor and
the Agent, provided that any provision of this Pledge Agreement may be waived by
the Agent in a letter or agreement executed by the Agent or by telex or
facsimile transmission from the Agent. This Pledge Agreement shall be binding
upon the successors and assigns of the Pledgor and shall inure to the benefit of
the Agent and the Banks and their respective successors and assigns. THIS PLEDGE
AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE
WITH, THE SUBSTANTIVE LAWS OF THE COMMONWEALTH OF PENNSYLVANIA.
16. Notices. All notices hereunder to the Agent, the Pledgor or any
Issuer to be effective shall be in writing (including by telecopy), and, unless
otherwise expressly provided herein, shall be deemed to have been duly given
when delivered or sent in the manner and to the respective addresses as provided
in Subsection 9.2 of the Credit Agreement or in the case of each Issuer at its
address set forth on Schedule II hereto.
17. Irrevocable Authorization and Instruction to Issuers. The Pledgor
hereby authorizes and instructs each Issuer to comply with any instruction
received by it from the Agent in writing that (a) states that an Event of
Default has occurred and is continuing and (b) is otherwise in accordance with
the terms of this Pledge Agreement, without any other or further instructions
from the Pledgor, and the Pledgor agrees that each Issuer shall be fully
protected in so complying.
18. Authority of Agent. The Pledgor acknowledges that the rights and
responsibilities of the Agent under this Pledge Agreement with respect to any
action taken by the Agent or the exercise or non-exercise by the Agent of any
option, voting right, request, judgment or other right or remedy provided for
herein or resulting or arising out of this Pledge Agreement shall, as between
the Agent and the Banks, be governed by the Credit Agreement and by such other
agreements with respect thereto as may exist from time to time among them, but,
as between the Agent and the Pledgor, the Agent shall be conclusively presumed
to be acting as agent for the Banks with full and valid authority so to act or
refrain from acting, and neither the Pledgor nor any Issuer shall be under any
obligation, or entitlement, to make any inquiry respecting such authority.
9
<PAGE> 10
19. Submission to Jurisdiction; Waivers.
(a) The Pledgor hereby irrevocably and
unconditionally
(i) submits for itself and its property in any legal action or
proceeding relating to this Pledge Agreement, or for recognition and
enforcement of any judgment in respect thereof to the non-exclusive
general jurisdiction of the courts of the Commonwealth of Pennsylvania,
the courts of the United States of America for the Eastern District of
Pennsylvania, and appellate courts from any thereof;
(ii) consents that any such action or proceeding may be brought
in such courts, and waives any objection that it may now or hereafter
have to the venue of any such action or proceeding in any such court or
that such action or proceeding was brought in an inconvenient court and
agrees not to plead or claim the same;
(iii) agrees that service of process in any such action or
proceeding may be effected by mailing a copy thereof by registered or
certified mail (or any substantially similar form of mail), postage
prepaid, to such Pledgor at its address set forth in the Credit
Agreement or at such other address of which the Agent shall have been
notified; and
(iv) agrees that nothing herein shall affect the right to
effect service of process in any other manner permitted by law or shall
limit the right to sue in any other jurisdiction.
(b) THE PLEDGOR HEREBY UNCONDITIONALLY WAIVES TRIAL BY JURY IN ANY
LEGAL ACTION OR PROCEEDING REFERRED TO IN PARAGRAPH (a) ABOVE.
20. Counterparts. This Pledge Agreement may be executed by one or more
of the parties to this Pledge Agreement on any number of separate counterparts,
and all of said counterparts taken together shall be deemed to constitute one
and the same instrument.
10
<PAGE> 11
IN WITNESS WHEREOF, the undersigned has caused this Pledge
Agreement to be duly executed and delivered as of the date first above written.
ATTEST: WEST COAST ENTERTAINMENT
CORPORATION
/s/ Ralph W. Standley III By: /s/ T. Kyle Standley
- ------------------------------ --------------------------------
Chairman Name: T. Kyle Standley
--------------------------
Title: President
--------------------------
[seal]
11
<PAGE> 12
ACKNOWLEDGMENT AND CONSENT
Each Issuer referred to in the foregoing Pledge Agreement hereby
acknowledges receipt of a copy thereof and agrees to be bound thereby and
comply with the terms thereof insofar as such terms are applicable
to it. Each Issuer agrees to notify the Agent promptly in writing of the
occurrence of any of the events described in paragraph 5(a) of the Pledge
Agreement. Each Issuer further agrees that the terms of paragraph 9(b) of the
Pledge Agreement shall apply to it, mutatis mutandis, with respect to all
actions that may be required of it under or pursuant to or arising out of
paragraph 9 of the Pledge Agreement.
VIDEOSMITH, INCORPORATED
By: /s/ T. Kyle Standley
--------------------------------
Name: T. Kyle Standley
--------------------------
Title: President
--------------------------
PALMER WEST COAST CORPORATION
By: /s/ T. Kyle Standley
--------------------------------
Name: T. Kyle Standley
--------------------------
Title: President
--------------------------
RKT MERGER COMPANY
By: /s/ T. Kyle Standley
--------------------------------
Name: T. Kyle Standley
--------------------------
Title: President
--------------------------
SHOWTIME, INCORPORATED
By: /s/ T. Kyle Standley
--------------------------------
Name: T. Kyle Standley
--------------------------
Title: President
--------------------------
WEST COAST FRANCHISING COMPANY
By: /s/ T. Kyle Standley
--------------------------------
Name: T. Kyle Standley
--------------------------
Title: President
--------------------------
<PAGE> 13
SCHEDULE I
(To Pledge Agreement)
PLEDGED STOCK
<TABLE>
<CAPTION>
Number of Number of Stock % of PAR or
Record Owner Class of Authorized Outstanding Cert Issued Liquidation
Issuer or Owners Shares Shares Shares No. Shares Value
- ------ --------- ------ ------ ------ ----- ------ -----
<S> <C> <C> <C> <C> <C> <C> <C>
RKT Merger Co. West Coast Common 3,000 1,000 1 33.3% $.01
Entertainment Corp.
Palmer West Coast West Coast Common 3,000 1,000 1 33.3% $.01
Corporation Entertainment Corp.
Showtime, Inc. West Coast Common A 10,000 4,000 8 40.0% $.10
Entertainment Corp. Common B 2,000 1,000 - 50.0% $.10
(treasury)
Video Giant Inc. West Coast
Entertainment Corp. Common 500,000 1,000 6 33.3% $.01
Videosmith, West Coast Common 300,000 9,075 25 3.02% $.10
Incorporated Entertainment Corp.
West Coast West Coast Common 50,000 1,000 1 2.0% $.01
Franchising Entertainment Corp. Preferred 20,000 0 - $.01
Company
</TABLE>
<PAGE> 14
SCHEDULE II
(to Pledge Agreement)
ADDRESS OF ISSUERS
West Coast Entertainment Corporation
9990 Global Road
Philadelphia, PA 19115
Palmer West Coast Corporation
9990 Global Road
Philadelphia, PA 19115
RKT Merger Co.
9990 Global Road
Philadelphia, PA 19115
Showtime, Inc.
9990 Global Road
Philadelphia, PA 19115
Video Giant Inc.
9990 Global Road
Philadelphia, PA 19115
Videosmith, Incorporated
9990 Global Road
Philadelphia, PA 19115
West Coast Franchising Company
9990 Global Road
Philadelphia, PA 19115
<PAGE> 1
EXHIBIT 10.21
SECURITY AGREEMENT
This Security Agreement is made and entered into as of the 17th
day of May, 1996, between WEST COAST ENTERTAINMENT CORPORATION, a Delaware
corporation (the "Company"), VIDEOSMITH INCORPORATED, a Massachusetts
corporation, WEST COAST FRANCHISING COMPANY, a Delaware corporation, PALMER WEST
COAST CORPORATION, a Delaware corporation, RKT MERGER CO., a Delaware
corporation, SHOWTIME, INC., a Virginia corporation, and VIDEO GIANT INC., a
Texas corporation (collectively, the "Debtors"), and PNC BANK, NATIONAL
ASSOCIATION, as agent (in such capacity, the "Agent") for the banks and other
financial institutions (the "Banks") from time to time parties to the Credit
Agreement, dated as of the date hereof (as amended, supplemented or otherwise
modified from time to time, the "Credit Agreement") among the Debtors, the Banks
and the Agent.
W I T N E S S E T H :
WHEREAS, pursuant to the provisions of the Credit Agreement and
upon the terms and subject to the conditions set forth therein, the Banks have
severally agreed to make certain loans to the Debtors to be evidenced by the
notes issued by the Debtors thereunder;
WHEREAS, it is a condition precedent to the obligation of the
Banks to make their respective loans to the Borrowers under the Credit Agreement
that the Debtors shall have executed and delivered this Security Agreement to
the Agent for the ratable benefit of the Banks; and
NOW, THEREFORE, in consideration of the premises and to induce
the Agent and the Banks to enter into the Credit Agreement and to make their
respective loans to one or more of the Borrowers under the Credit Agreement, the
Debtors hereby agree with the Agent, for the ratable benefit of the Banks, as
follows:
1. Defined Terms. Unless otherwise defined herein, terms which
are defined in the Credit Agreement and used herein are so used as so defined;
the following terms which are defined in the Uniform Commercial Code in effect
in the Commonwealth of Pennsylvania on the date hereof are used herein as so
defined: Accounts, Chattel Paper, Documents, Equipment, Farm Products, General
Intangibles, Instruments, Inventory and Proceeds; and the following terms shall
have the following meanings:
<PAGE> 2
"Code" shall mean the Uniform Commercial Code as from time to
time in effect in the Commonwealth of Pennsylvania.
"Collateral" shall have the meaning assigned to it in Section 2
of this Security Agreement.
"Contracts" shall mean all contracts and other agreements between
one or more Debtors and any other Person (including agreements between one
Debtor and another Debtor), as the same may from time to time be amended,
supplemented or otherwise modified, including, without limitation, (a) all
rights of the Debtors to receive moneys due and to become due to them thereunder
or in connection therewith, (b) all rights of the Debtors to damages arising out
of, or for, breach or default in respect thereof and (c) all rights of the
Debtors to perform and to exercise all remedies thereunder.
"Financial Assets" shall have the meaning ascribed to such term
under the Code.
"Obligations" shall mean the unpaid principal amount of, and
interest on (including, without limitation, interest accruing after the filing
of any petition in bankruptcy, or the commencement of any insolvency,
reorganization or like proceeding, relating to a Debtor, whether or not a claim
for post-filing or post-petition interest is allowed in such proceeding) the
Notes and all other obligations and liabilities of the Debtors to the Agent or
any Bank, whether direct or indirect, absolute or contingent, due or to become
due, or now existing or hereafter incurred, which may arise under, out of, or in
connection with, the Credit Agreement, the Notes, this Security Agreement, the
other Loan Documents and any other document made, delivered or given in
connection therewith or herewith, whether on account of principal, interest,
reimbursement obligations, fees, indemnities, costs, expenses (including,
without limitation, all fees and disbursements of counsel to the Agent or any
Bank that are required to be paid by the Debtors pursuant to the terms of the
Credit Agreement) or otherwise.
"Patents" shall mean (a) all letters patent of the United States
or any other country or any political subdivision thereof, and all reissues and
extensions thereof, including, without limitation, any thereof referrred to in
Schedule I hereto, and (b) all applications for letters patent of the United
States and all divisions, continuations and continuations-in-part thereof or any
other
2
<PAGE> 3
country or any political subdivision, including, without
limitation, any thereof referred to in Schedule I hereto.
"Patent License" shall mean all agreements, whether written or
oral, providing for the grant by a Debtor of any right to manufacture,
use or sell any invention covered by a Patent, including, without
limitation, any thereof referred to in Schedule I hereto.
"Security Agreement" shall mean this Security Agreement, as
amended, supplemented or otherwise modified from time to time.
"Trademarks" shall mean (a) all trademarks, trade names,
corporate names, company names, business names, fictitious business
names, trade styles, service marks, logos and other source or business
identifiers, and the goodwill associated therewith, now existing or
hereafter adopted or acquired, all registrations and recordings
thereof, and all applications in connection therewith, whether in the
United States Patent and Trademark Office or in any similar office or
agency of the United States, any State thereof or any other country or
any political subdivision thereof, or otherwise, including, without
limitation, any thereof referred to in Schedule II hereto, and (b) all
reissues, extensions or renewals thereof.
"Trademark License" shall mean any agreement, written or oral,
providing for the grant by a Debtor of any right to use any Trademark,
including, without limitation, any thereof referred to in Schedule II
hereto.
2. Grant of Security Interest. As collateral security for the prompt
and complete payment and performance when due (whether at the stated maturity,
by acceleration or otherwise) of the Obligations, each of the Debtors hereby
grants to the Agent for the ratable benefit of the Banks a security interest in
all of the following property now owned or at any time hereafter acquired by
such Debtor or in which such Debtor now has or at any time in the future may
acquire any right, title or interest (collectively, the "Collateral"):
(i) all Accounts;
(ii) all Chattel Paper;
(iii) all Contracts;
(iv) all Documents;
(v) all Equipment;
3
<PAGE> 4
(vi) all General Intangibles;
(vii) all Instruments;
(viii) all Inventory;
(ix) all Patents;
(x) all Patent Licenses;
(xi) all Trademarks;
(xii) all Trademark Licenses;
(xiii) all Financial Assets; and
(xiv) to the extent not otherwise included, all Proceeds
and products of any and all of the foregoing.
3. Rights of Agent and Banks: Limitations on Agent's
and Banks' Obligations.
(a) Debtors Remain Liable under Accounts and Contracts.
Anything herein to the contrary notwithstanding, the Debtors shall remain liable
under each of the Accounts and Contracts to observe and perform all the
conditions and obligations to be observed and performed by them thereunder, all
in accordance with the terms of any agreement giving rise to each such Account
and in accordance with and pursuant to the terms and provisions of each such
Contract. Neither the Agent nor any Bank shall have any obligation or liability
under any Account (or any agreement giving rise thereto) or under any Contract
by reason of or arising out of this Security Agreement or the receipt by the
Agent or any such Bank of any payment relating to such Account or Contract
pursuant hereto, nor shall the Agent or any Bank be obligated in any manner to
perform any of the obligations of the Debtors under or pursuant to any Account
(or any agreement giving rise thereto) or under or pursuant to any Contract, to
make any payment, to make any inquiry as to the nature or the sufficiency of any
payment received by it or as to the sufficiency of any performance by any party
under any Account (or any agreement giving rise thereto) or under any Contract,
to present or file any claim, to take any action to enforce any performance or
to collect the payment of any amounts which may have been assigned to it or to
which it may be entitled at any time or times.
(b) Notice to Account Debtors and Contracting Parties. Upon
the request of the Agent at any time after the occurrence and during the
continuance of an Event of Default, the Debtors shall notify account debtors on
the Accounts and parties to the Contracts that the Accounts and the Contracts
have been
4
<PAGE> 5
assigned to the Agent for the ratable benefit of the Banks and shall indicate on
all billings that payments in respect thereof shall be made directly to the
Agent. The Agent may in its own name or in the name of others communicate with
account debtors on the Accounts and parties to the Contracts to verify with them
to its satisfaction the existence, amount and terms of any Accounts or
Contracts.
(c) Analysis of Accounts. The Agent shall have the right to
make test verifications of the Accounts in any manner and through any medium
that it reasonably considers advisable, and the Debtors shall furnish all such
assistance and information as the Agent may require in connection therewith. At
any time and from time to time, upon the Agent's request and at the expense of
the Debtors, the Debtors shall cause independent public accountants or others
satisfactory to the Agent to furnish to the Agent reports showing
reconciliations, aging and test verifications of, and trial balances for, the
Accounts.
(d) Collections on Accounts. The Agent hereby authorizes the
Debtors to collect the Accounts, subject to the Agent's direction and control,
from the account debtors. Prior to the occurrence of an Event of Default, the
Proceeds of Accounts so collected by the Debtors shall be received and held by
the Debtors in trust for the Agent and the Banks but may be applied by the
Debtors in their discretion towards payment of the Obligations or other
corporate purposes. Upon occurrence of an Event of Default, the authority hereby
given to the Debtors to collect the Proceeds of Accounts in trust for the Agent
and the Banks may be terminated by the Agent at any time and the Debtors shall
deliver to the Agent on the date of receipt thereof by the Debtors all Proceeds
in the form of cash, checks, drafts, notes and other remittances received in
payment of or on account of any Debtor's Accounts. Following receipt by the
Agent such Proceeds shall be deposited in a special bank account (the "Cash
Collateral Account") maintained with the Agent over which the Agent alone shall
have power of withdrawal. All Proceeds other than cash shall be deposited in
precisely the form in which received, except for the addition thereto of the
endorsement of the Debtors when necessary to permit collection of the items,
which endorsement the Debtors agree to make. The Debtors will not commingle any
such Proceeds with any of the Debtor's other funds or property but will hold
them separate and apart from any other funds or property and upon an express
trust for the Agent until deposit thereof is made in the Cash Collateral
Account.
4. Representations and Warranties. Each of the Debtors hereby
represents and warrants that:
(a) Title; No Other Liens. Except for the Lien granted to
the Agent for the ratable benefit of the Banks
5
<PAGE> 6
pursuant to this Security Agreement and the other Liens permitted to exist on
the Collateral pursuant to the Credit Agreement, the Debtors own each item of
the Collateral free and clear of any and all Liens or claims of others. No
security agreement, financing statement or other public notice with respect to
all or any part of the Collateral is on file or of record in any public office,
except such as may have been filed in favor of the Agent, for the ratable
benefit of the Banks, pursuant to this Security Agreement or as may be permitted
pursuant to the Credit Agreement.
(b) Perfected First Priority Liens. Except as set forth on
Schedule 4.1(b)(ii) to the Credit Agreement, the Liens granted pursuant to this
Security Agreement constitute perfected Liens on the Collateral in favor of the
Agent, for the ratable benefit of the Banks, which are prior to all other Liens
on the Collateral created by the Debtors and in existence on the date hereof and
which are enforceable as such against all creditors of and purchasers from the
Debtors and against any owner or purchaser of the real property where any of the
Equipment is located and any present or future creditor obtaining a Lien on such
real property.
(c) Accounts. The amount represented by the Debtors to the
Banks from time to time in any reports requested by or furnished to the Agent or
the Banks as owing by each account debtor or by all account debtors in respect
of the Accounts will at such time be the correct amount actually owing by such
account debtor or debtors thereunder. No amount payable to any of the Debtors
under or in connection with any Account is evidenced by any Instrument or
Chattel Paper which has not been delivered to the Agent. The Debtors keep their
records concerning the Accounts at the location or locations set forth in
Schedule III.
(d) Contracts. No consent of any party (other than the
Debtors) to any Contract is required, or purports to be required, in connection
with the execution, delivery and performance of this Security Agreement, except
to the extent that a non-material Contract may contain a no-assignment
provision. Each Contract is in full force and effect and constitutes a valid and
legally enforceable obligation of the parties thereto, except as enforceability
may be limited by bankruptcy, insolvency, reorganization, moratorium or similar
laws affecting the enforcement of creditor's rights generally. No consent or
authorization of, filing with or other act by or in respect of any Governmental
Authority is required in connection with the execution, delivery, performance,
validity or enforceability of any of the Contracts by any party thereto other
than those which have been duly obtained, made or performed, are in full force
and effect and do not subject the scope of any such Contract to any material
adverse limitation, either specific or general in
6
<PAGE> 7
nature. Neither the Debtors nor (to the best of the Debtors' knowledge) any
other party to any Contract is in default or is likely to become in default in
the performance or observance of any of the terms thereof. The Debtors have
fully performed all their obligations under each Contract. The right, title and
interest of the Debtors in, to and under each Contract are not subject to any
defense, offset, counterclaim or claim which would materially adversely affect
the value of such Contract as Collateral, nor have any of the foregoing been
asserted or alleged against the Debtors as to any Contract. No amount payable to
the Debtors under or in connection with any Contract is evidenced by any
Instrument or Chattel Paper which had not been delivered to the Agent.
(e) Inventory. The types, amounts and valuations of the
Inventory or any other information regarding the same represented by the Debtors
from time to time in any reports requested by or furnished to the Agent or the
Banks will at such time be accurate to the best of the Debtors' knowledge. The
Debtors keep records concerning the Inventory at the location or locations
listed on Schedule IV. The Inventory is kept at the locations listed on Schedule
V hereto.
(f) Equipment. The Equipment is kept at the locations listed
on Schedule VI hereto.
(g) Chief Executive Office. The locations of each of the
Debtor's chief executive office and chief place of business are set forth on
Schedule VII.
(h) Farm Products. None of the Collateral constitutes, or is
the Proceeds of, Farm Products.
(i) Patents and Trademarks. Schedule I hereto includes all
Patents and Patent Licenses owned by a Debtor in its own name as of the date
hereof. Schedule II hereto includes all Trademarks and Trademark Licenses owned
by a Debtor in its own name as of the date hereof. To the best of the Debtors'
knowledge, each Patent and Trademark is valid, subsisting, unexpired,
enforceable and has not been abandoned. Except as set forth in either such
Schedule, none of such Patents and Trademarks is the subject of any licensing or
franchise agreement. No holding, decision or judgment has been rendered by any
Governmental Authority which would limit, cancel or question the validity of any
Patent or Trademark. No action or proceeding is pending (i) seeking to limit,
cancel or question the validity of any Patent or Trademark, or (ii) which, if
adversely determined, would have a material adverse effect on the value of any
Patent or Trademark.
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(j) Power and Authority: Authorization. Each of the Debtors
has the corporate power and authority and the legal right to execute and
deliver, to perform its obligations under, and to grant the Lien on the
Collateral pursuant to, this Security Agreement and has taken all necessary
corporate action to authorize its execution, delivery and performance of, and
grant of the Lien on the Collateral pursuant to, this Security Agreement.
(k) Enforceability. This Security Agreement constitutes a
legal, valid and binding obligation of the Debtors enforceable in accordance
with its terms, except as enforceability may be limited by bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting the enforcement
of creditors' rights generally.
(l) No Conflict. The execution, delivery and performance of
this Security Agreement will not violate any provision of any Requirement of Law
or Contractual Obligation of the Debtors and will not result in the creation or
imposition of any Lien on any of the properties or revenues of the Debtors
pursuant to any Requirement of Law or Contractual Obligation of the Debtors,
except as contemplated hereby.
(m) No Consents, etc. No consent or authorization of, filing
with, or other act by or in respect of, any arbitrator or Governmental Authority
and no consent of any other Person (including, without limitation, any
stockholder or creditor of the Debtors), is required in connection with the
execution, delivery, performance, validity or enforceability of this Security
Agreement.
(n) No Litiqation. No litigation, investigation or
proceeding of or before any arbitrator or Governmental Authority is pending or,
to the knowledge of the Debtors, threatened by or against the Debtors or against
any of their properties or revenues with respect to this Security Agreement or
the granting of the security interests contemplated hereunder.
5. Covenants. Each of the Debtors covenants and
agrees with the Agent and the Banks that from and after the date of this
Security Agreement until the Obligations are paid in full and the Commitments
are terminated it will:
(a) Further Documentation: Pledge of Instruments and Chattel
Paper. At any time and from time to time, upon the written request of the Agent,
and at the sole expense of the Debtors, promptly and duly execute and deliver
such further instruments and documents and take such further action as the Agent
may reasonably request for the purpose of obtaining or preserving the full
benefits of this Security Agreement and of
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<PAGE> 9
the rights and powers herein granted, including, without limitation, the filing
of any financing or continuation statements under the Uniform Commercial Code in
effect in any jurisdiction with respect to the Liens created hereby. Each of the
Debtors also hereby authorizes the Agent to file any such financing or
continuation statements without the signature of such Debtors to the extent
permitted by applicable law. A carbon, photographic, facsimile or other
reproduction of this Security Agreement shall be sufficient as a financing
statement for filing in any jurisdiction. If any amount payable under or in
connection with any of the Collateral shall be or become evidenced by any
Instrument or Chattel Paper, such Instrument or Chattel Paper shall be
immediately delivered to the Agent, duly endorsed in a manner satisfactory to
the Agent, to be held as Collateral pursuant to this Security Agreement.
(b) Indemnification. Pay, and save the Agent and the Banks
harmless from, any and all liabilities, costs and expenses (including, without
limitation, legal fees and expenses) (i) with respect to, or resulting from, any
delay in paying any and all excise, sales or other taxes which may be payable or
determined to be payable with respect to any of the Collateral, (ii) with
respect to, or resulting from, any delay in complying with any Requirement of
Law applicable to any of the Collateral or (iii) in connection with any of the
transactions contemplated by this Security Agreement. In any suit, proceeding or
action brought by the Agent or any Bank under any Account or Contract for any
sum owing thereunder, or to enforce any provisions of any Account or Contract,
each of the Debtors will save, indemnify and keep the Agent and such Bank
harmless from and against all expense, loss or damage suffered by reason of any
defense, setoff, counterclaim, recoupment or reduction or liability whatsoever
of the account debtor or obligor thereunder, arising out of a breach by such
Debtor of any obligation thereunder or arising out of any other agreement,
indebtedness or liability at any time owing to or in favor of such account
debtor or obligor or its successors from a Debtor. Notwithstanding the
foregoing, the Debtors shall have no obligation to the Agent or any Bank under
this paragraph with respect to any liability arising solely from the gross
negligence or willful misconduct of such Person.
(c) Maintenance of Records. Keep and maintain at its own
cost and expense satisfactory and complete records of the Collateral, including,
without limitation, a record of all payments received and all credits granted
with respect to the Accounts. At the request of the Agent, each of the Debtors
will mark its books and records pertaining to the Collateral to evidence this
Security Agreement and the security interests granted hereby. For the Agent's
and the Banks' further security, the Agent, for the ratable benefit of the
Banks, shall have a security interest in all of the Debtors' books and records
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<PAGE> 10
pertaining to the Collateral, and the Debtors shall turn over any such books and
records to the Agent or to their representatives during normal business hours at
the request of the Agent.
(d) Right of Inspection and Audit. Give to the Agent at all
times upon reasonable prior notice full and free access during normal business
hours to all of its books, correspondence and records and the Agent and the
Agent's respective representatives may examine, inspect or audit the same, take
extracts therefrom and make photocopies thereof, and each of the Debtors agrees
to render to the Agent, at the Debtors' cost and expense upon reasonable prior
notice, such clerical and other assistance as may be reasonably requested with
regard thereto. The Agent and its respective representatives shall at all times
also have the right upon reasonable prior notice to enter into and upon any
premises where any of the Inventory or Equipment is located for the purpose of
examining, inspecting or auditing the same, observing its use or otherwise
protecting their interests therein.
(e) Compliance with Laws etc. Comply in all material
respects with all Requirements of Law applicable to the Collateral or any part
thereof or to the operation of its business; provided, however, that such Debtor
may contest any Requirement of Law in any reasonable manner which shall not, in
the sole opinion of the Agent, adversely affect the Agent's or the Banks' rights
or the priority of their Liens on the Collateral.
(f) Compliance with Terms of Contracts etc. Perform and
comply in all material respects with all its obligations under the Contracts and
all its other Contractual Obligations relating to the Collateral.
(g) Payment of Obligations. Pay promptly when due all taxes,
assessments and governmental charges or levies imposed upon the Collateral or in
respect of its income or profits therefrom, as well as all claims of any kind
(including, without limitation, claims for labor, materials and supplies)
against or with respect to the Collateral, except that no such charge need be
paid if (i) the validity thereof is being contested in good faith by appropriate
proceedings, (ii) such proceedings do not involve any material danger of the
sale, forfeiture or loss of any of the Collateral or any interest therein and
(iii) such charge is adequately reserved against such Debtor's books in
accordance with GAAP.
(h) Limitation on Liens on Collateral. Not create, incur or
permit to exist, will defend the Collateral against, and take such other action
as is necessary to remove, any Lien or claim on or to the Collateral, other than
the Liens
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<PAGE> 11
created hereby and other than as permitted pursuant to the Credit Agreement, and
will defend the right, title and interest of the Agent and the Banks in and to
any of the Collateral against the claims and demands of all Persons whomsoever.
(i) Limitations on Dispositions of Collateral. Not sell,
transfer, lease or otherwise dispose of any of the Collateral, or attempt, offer
or contract to do so except as expressly permitted pursuant to the Credit
Agreement.
(j) Limitations on Modifications, Waivers, Extensions of
Contracts and Agreements Giving Rise to Accounts. Not (i) amend, modify,
terminate or waive any provision of any Contract or any agreement giving rise to
an Account in any manner which could reasonably be expected to materially
adversely affect the value of such Contract or Account as Collateral, except, if
no Event of Default shall exist, in the ordinary course of business based on its
reasonable business judgment, (ii) fail to exercise promptly and diligently each
and every material right which it may have under each Contract and each
agreement giving rise to an Account (other than any right of termination),
except, if no Event of Default shall exist, in the ordinary course of business
based on its reasonable business judgment,or (iii) fail to deliver to the Agent
a copy of each demand, notice or document received by it relating in any way to
any Contract or any agreement giving rise to an Account and which could
individually or in the aggregate reasonably be expected to have a Material
Adverse Effect.
(k) Limitations on Discounts Compromises Extensions of
Accounts. Not grant any extension of the time of payment of any of the Accounts,
compromise, compound or settle the same for less than the full amount thereof,
release, wholly or partially, any Person liable for the payment thereof, or
allow any credit or discount whatsoever thereon, other than in the ordinary
course of business as generally conducted by such Debtor over a period of time.
(l) Further Identification of Collateral. Furnish to the
Agent from time to time statements and schedules further identifying and
describing the Collateral and such other reports in connection with the
Collateral as the Agent may reasonably request, all in reasonable detail.
(m) Notices. Advise the Agent promptly, in reasonable
detail, at their respective addresses set forth in the Credit Agreement, (i) of
any Lien (other than Liens created hereby or permitted under the Credit
Agreement) on, or claim asserted against, any of the Collateral and (ii) of the
occurrence of any other event which could reasonably be expected
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<PAGE> 12
to have a material adverse effect on the aggregate value of the Collateral or on
the Liens created hereunder.
(n) Changes in Locations, Name, etc. Unless it shall have
given the Agent at least 30 days prior written notice thereof no Debtor will (i)
change the location of its chief executive office or chief place of business
from that specified in Schedule VII attached hereto or remove its books and
records from the location specified in Section 4(c), (ii) permit any of the
Inventory or Equipment to be kept at a location other than those listed on
Schedules V and VI hereto or (iii) change its name, identity or corporate
structure to such an extent that any financing statement filed by the Agent in
connection with this Security Agreement would become seriously misleading.
(o) Patents and Trademarks.
(i) Except with respect to any Trademark that it shall
reasonably determine is of immaterial economic value to it, (either
itself or through licensees), (i) continue to use each Trademark on
each and every trademark class of goods applicable to their current
line as reflected in their current catalogs, brochures and price lists
in order to maintain such Trademark in full force free from any claim
of abandonment for non-use, (ii) maintain as in the past the quality of
products and services offered under such Trademark, (iii) employ such
Trademark with the appropriate notice of registration, (iv) not adopt
or use any mark which is confusingly similar or a colorable imitation
of such Trademark unless the Agent, for the ratable benefit of the
Banks, shall obtain a perfected security interest in such mark pursuant
to this Security Agreement, and (v) not (and not permit any licensee or
sublicensee thereof to) do any act or knowingly omit to do any act
whereby any Trademark may become invalidated.
(ii) Not, except with respect to any Patent that it
shall reasonably determine is of immaterial economic value to it, do
any act, or omit to do any act, whereby any Patent may become abandoned
or dedicated.
(iii) Notify the Agent immediately if it knows, or has
reason to know, that any application or registration relating to any
Patent or Trademark may become abandoned or dedicated, or of any
adverse determination or development (including, without limitation,
the institution of, or any such determination or development in, any
proceeding in the United States Patent and Trademark Office or any
court or tribunal in any country) regarding its ownership of any Patent
or Trademark or its right to register the same or to keep and maintain
the same.
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(iv) Whenever such Debtor, either by itself or through
any agent, employee, licensee or designee, shall file an application
for the registration of any Patent or Trademark with the United States
Patent and Trademark Office or any similar office or agency in any
other country or any political subdivision thereof, report such filing
to the Agent within five Business Days after the last day of the fiscal
quarter in which such filing occurs. Upon request of the Agent, each of
the Debtors shall execute and deliver any and all agreements,
instruments, documents, and papers as the Agent may request to evidence
the Agent's and the Banks' security interest in any Patent or Trademark
and the goodwill and general intangibles of such Debtor relating
thereto or represented thereby, and each of the Debtors hereby
constitutes the Agent its attorney-in-fact to execute and file all
such writings for the foregoing purposes, all acts of such attorney
being hereby ratified and confirmed; such power being coupled with an
interest is irrevocable until the Obligations are paid in full and the
Commitments are terminated.
(v) Take all reasonable and necessary steps, including,
without limitation, in any proceeding before the United States Patent
and Trademark Office, or any similar office or agency in any other
country or any political subdivision thereof, to maintain and pursue
each application (and to obtain the relevant registration) and to
maintain each registration of the Patents and Trademarks, including,
without limitation, filing of applications for renewal, affidavits of
use and affidavits of incontestability.
(vi) In the event that any Patent or Trademark included
in the Collateral is infringed, misappropriated or diluted by a third
party, promptly notify the Agent after it learns thereof and shall,
unless it shall reasonably determine that such Patent or Trademark is
of immaterial economic value to it, which determination it shall
promptly report to the Agent and the Banks, promptly sue for
infringement, misappropriation or dilution, to seek injunctive relief
where appropriate and to recover any and all damages for such
infringement, misappropriation or dilution, or take such other actions
as it shall reasonably deem appropriate under the circumstances to
protect such Patent or Trademark.
6. Agent's Appointment as Attorney-in-Fact.
(a) Powers. Each of the Debtors hereby irrevocably
constitutes and appoints the Agent and any officer or agent thereof, with full
power of substitution, as its true and
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lawful attorney-in-fact with full irrevocable power and authority in the place
and stead of such Debtor and in the name of such Debtor or in its own name, from
time to time in the Agent's discretion, for the purpose of carrying out the
terms of this Security Agreement, to take any and all appropriate action and to
execute any and all documents and instruments which may be necessary or
desirable to accomplish the purposes of this Security Agreement, and, without
limiting the generality of the foregoing, each of the Debtors hereby gives the
Agent the power and right, on behalf of such Debtor, without notice to or assent
by such Debtor, to do the following:
(i) in the case of any Account, at any time when the
authority of such Debtor to collect the Accounts has been curtailed or
terminated pursuant to the third sentence of Section 3(d) hereof, or in
the case of any other Collateral, at any time when any Event of Default
shall have occurred and is continuing, in the name of such Debtor or
its own name, or otherwise, to take possession of and indorse and
collect any checks, drafts, notes, acceptances or other instruments for
the payment of moneys due under any Account, Instrument, General
Intangible or Contract or with respect to any other Collateral and to
file any claim or to take any other action or proceeding in any court
of law or equity or otherwise deemed appropriate by the Agent for the
purpose of collecting any and all such moneys due under any Account,
Instrument, General Intangible or Contract or with respect to any other
Collateral whenever payable;
(ii) to pay or discharge taxes and Liens levied or
placed on or threatened against the Collateral (provided that, if no
Event of Default shall exist, the foregoing shall not apply to any
Permitted Lien), to effect any repairs or any insurance called for by
the terms of this Security Agreement and to pay all or any part of the
premiums therefor and the costs thereof; and
(iii) upon the occurrence and during the continuance of
any Event of Default, (A) to direct any party liable for any payment
under any of the Collateral to make payment of any and all moneys due
or to become due thereunder directly to the Agent or as the Agent shall
direct; (B) to ask or demand for, collect, receive payment of and
receipt for, any and all moneys, claims and other amounts due or to
become due at any time in respect of or arising out of any Collateral;
(C) to sign and indorse any invoices, freight or express bills, bills
of lading, storage or warehouse receipts, drafts against debtors,
assignments, verifications, notices and other documents in connection
with any of the Collateral; (D) to commence and prosecute
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<PAGE> 15
any suits, actions or proceedings at law or in equity in
any court of competent jurisdiction to collect the Collateral or any
proceeds thereof and to enforce any other right in respect of any
Collateral; (E) to defend any suit, action or proceeding brought
against such Debtor with respect to any Collateral; (F) to settle,
compromise or adjust any suit, action or proceeding described in clause
(E) above and, in connection therewith, to give such discharges or
releases as the Agent may deem appropriate; (G) to assign any Patent or
Trademark (along with the goodwill of the business to which any such
Trademark pertains), throughout the world for such term or terms, on
such conditions, and in such manner, as the Agent shall in its sole
discretion determine; and (H) generally, to sell, transfer, pledge and
make any agreement with respect to or otherwise deal with any of the
Collateral as fully and completely as though the Agent were the
absolute owner thereof for all purposes, and to do, at the Agent's
option and such Debtor's expense, at any time, or from time to time,
all acts and things which the Agent deems necessary to protect,
preserve or realize upon the Collateral and the Agent's and the Banks'
Liens thereon and to effect the intent of this Security Agreement, all
as fully and effectively as such Debtor might do.
Each of the Debtors hereby ratifies all that said attorneys shall lawfully do or
cause to be done by virtue hereof. This power of attorney is a power coupled
with an interest and shall be irrevocable.
(b) Other Powers. Each of the Debtors also authorizes the
Agent and the Banks, at any time and from time to time, to execute, in
connection with the sale provided for in Section 8 hereof, any endorsements,
assignments or other instruments of conveyance or transfer with respect to the
Collateral.
(c) No Duty on Agent or Banks' Part. The powers conferred on
the Agent and the Banks hereunder are solely to protect the Agent's and the
Banks' interests in the Collateral and shall not impose any duty upon the Agent
or any Bank to exercise any such powers. The Agent and the Banks shall be
accountable only for amounts that they actually receive as a result of the
exercise of such powers, and neither they nor any of their officers, directors,
employees or agents shall be responsible to the Debtors for any act or failure
to act hereunder, except for their own gross negligence or willful misconduct.
7. Performance bs Aqent of Debtors' Obligations. If any of the Debtors
fails to perform or comply with any of its agreements contained herein and the
Agent, as provided for by the
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<PAGE> 16
terms of this Security Agreement, shall itself perform or comply, or otherwise
cause performance or compliance, with such agreement, the expenses of the Agent
incurred in connection with such performance or compliance, together with
interest thereon at a rate per annum equal to the rate of interest then payable
on Loans bearing interest at a rate determined by reference to the Base Rate,
shall be payable by the Debtors to the Agent on demand and shall constitute
Obligations secured hereby.
8. Remedies. If an Event of Default shall occur and be continuing, the
Agent, on behalf of the Banks may exercise, in addition to all other rights and
remedies granted to them in this Security Agreement and in any other instrument
or agreement securing, evidencing or relating to the Obligations, all rights and
remedies of a secured party under the Code. Without limiting the generality of
the foregoing, the Agent, without demand of performance or other demand,
presentment, protest, advertisement or notice of any kind (except any notice
required by law referred to below) to or upon the Debtors or any other Person
(all and each of which demands, defenses, advertisements and notices are hereby
waived), may in such circumstances forthwith collect, receive, appropriate and
realize upon the Collateral, or any part thereof, and/or may forthwith sell,
lease, assign, give option or options to purchase, or otherwise dispose of and
deliver the Collateral or any part thereof (or contract to do any of the
foregoing), in one or more parcels at public or private sale or sales, at any
exchange, broker's board or office of the Agent or any Bank or elsewhere upon
such terms and conditions as it may deem advisable and at such prices as it may
deem best, for cash or on credit or for future delivery without assumption of
any credit risk. The Agent or any Bank shall have the right upon any such public
sale or sales, and, to the extent permitted by law, upon any such private sale
or sales, to purchase the whole or any part of the Collateral so sold, free of
any right or equity of redemption in the Debtors, which right or equity is
hereby waived or released. The Debtors further agree, at the Agent's request, to
assemble the Collateral and make it available to the Agent at places which the
Agent shall reasonably select, whether at the Debtors' premises or elsewhere.
The Agent shall apply the net proceeds of any such collection, recovery,
receipt, appropriation, realization or sale, after deducting all reasonable
costs and expenses of every kind incurred therein or incidental to the care or
safekeeping of any of the Collateral or in any way relating to the Collateral or
the rights of the Agent and the Banks hereunder, including, without limitation,
reasonable attorneys' fees and disbursements, to the payment in whole or in part
of the Obligations, in such order as the Agent may elect, and only after such
application and after the payment by the Agent of any other amount required by
any provision of law, including, without limitation, Section 9504(a)(3) of the
Code, need the Agent account for the surplus, if any, to the
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Debtors. To the extent permitted by applicable law, each of the Debtors waives
all claims, damages and demands it may acquire against the Agent or any Bank
arising out of the exercise by them of any rights hereunder. If any notice of a
proposed sale or other disposition of Collateral shall be required by law, such
notice shall be deemed reasonable and proper if given at least 10 days before
such sale or other disposition. The Debtors shall remain liable for any
deficiency if the proceeds of any sale or other disposition of the Collateral
are insufficient to pay the Obligations and the fees and disbursements of any
attorneys employed by the Agent or any Bank to collect such deficiency.
9. Limitation on Duties Regarding Preservation of Collateral. The
Agent's sole duty with respect to the custody, safekeeping and physical
preservation of the Collateral in its possession, under Section 9207 of the Code
or otherwise, shall be to deal with it in the same manner as the Agent deals
with similar property for its own account. Neither the Agent, any Bank, nor any
of their respective directors, officers, employees or agents shall be liable for
failure to demand, collect or realize upon all or any part of the Collateral or
for any delay in doing so or shall be under any obligation to sell or otherwise
dispose of any Collateral upon the request of the Debtors or otherwise.
10. Powers Coupled with an Interest. All authorizations and agencies
herein contained with respect to the Collateral are irrevocable and powers
coupled with an interest.
11. Severability. Any provision of this Security Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
12. Paragraph Headings. The paragraph headings used in this Security
Agreement are for convenience of reference only and are not to affect the
construction hereof or be taken into consideration in the interpretation hereof.
13. No Waiver: Cumulative Remedies. Neither the Agent nor any Bank
shall by any act (except by a written instrument pursuant to Section 14 hereof),
delay, indulgence, omission or otherwise be deemed to have waived any right or
remedy hereunder or to have acquiesced in any Default or Event of Default or in
any breach of any of the terms and conditions hereof. No failure to exercise,
nor any delay in exercising, on the part of the Agent or any Bank, any right,
power or privilege hereunder shall
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operate as a waiver thereof. No single or partial exercise of any right, power
or privilege hereunder shall preclude any other or further exercise thereof or
the exercise of any other right, power or privilege. A waiver by the Agent or
any Bank of any right or remedy hereunder on any one occasion shall not be
construed as a bar to any right or remedy which the Agent or such Bank would
otherwise have on any future occasion. The rights and remedies herein provided
are cumulative, may be exercised singly or concurrently and are not exclusive of
any rights or remedies provided by law.
14. Waivers and Amendments; Parties Bound; Governing Law. None of the
terms or provisions of this Security Agreement may be waived, amended,
supplemented or otherwise modified except by a written instrument executed by
the Debtors and the Agent, provided that any provision of this Security
Agreement may be waived by the Agent in a written letter or agreement executed
by the Agent or by telex or facsimile transmission from the Agent. This Security
Agreement shall be the joint and several obligations of the Debtors and shall be
binding upon the respective successors and permitted assigns of the Debtors and
shall inure to the benefit of the Agent and the Banks and their respective
successors and assigns. THIS SECURITY AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE SUBSTANTIVE LAWS OF THE
COMMONWEALTH OF PENNSYLVANIA.
15. Notices. All notices hereunder to the Debtors, the Agent or any of
the Banks to be effective shall be in writing (including by telecopy), and,
unless otherwise expressly provided herein, shall be deemed to have been duly
given or made when delivered or sent in the manner and to the respective
addresses as provided in subsection 9.2 of the Credit Agreement.
16. Authority of Agent. The Debtors acknowledge that the rights and
responsibilities of the Agent under this Security Agreement with respect to any
action taken by the Agent or the exercise or non-exercise by the Agent of any
option, right, request, judgment or other right or remedy provided for herein or
resulting or arising out of this Security Agreement shall, as between the Agent
and the Banks, be governed by the Credit Agreement and by such other agreement
with respect thereto as may exist from time to time among them, but, as between
the Agent and the Debtors, the Agent shall be conclusively presumed to be acting
as agent for the Banks with full and valid authority so to act or refrain from
acting, and the Debtors shall not be under any obligation, or entitlement, to
make any inquiry respecting such authority.
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17. Submission to Jurisdiction; Waivers.
(a) Each of the Debtors hereby irrevocably and unconditionally:
(i) submits for itself and its property in any legal
action or proceeding relating to this Security Agreement, or for
recognition and enforcement of any judgment in respect thereof to the
non-exclusive general jurisdiction of the courts of the Commonwealth of
Pennsylvania, the courts of the United States of America for the
Eastern District of Pennsylvania, and appellate courts from any
thereof;
(ii) consents that any such action or proceeding may be
brought in such courts, and waives any objection that it may now or
hereafter have to the venue of any such action or proceeding in any
such court or that such action or proceeding was brought in an
inconvenient court and agrees not to plead or claim the same;
(iii) agrees that service of process in any such action
or proceeding may be effected by mailing a copy thereof by registered
or certified mail (or any substantially similar form of mail), postage
prepaid, to the Company at its address set forth in the Credit
Agreement or at such other address of which the Agent shall have been
notified; and
(iv) agrees that nothing herein shall affect the right
to effect service of process in any other manner permitted by law or
shall limit the right to sue in any other jurisdiction.
(b) THE DEBTORS HEREBY UNCONDITIONALLY WAIVE TRIAL BY JURY IN ANY
LEGAL ACTION OR PROCEEDING REFERRED TO IN PARAGRAPH (a) ABOVE.
18. Counterparts. This Security Agreement may be executed by one or
more of the parties to this Security Agreement on any number of separate
counterparts, and all of said counterparts taken together shall be deemed to
constitute one and the same instrument. A set of the copies of this Security
Agreement signed by all the parties shall be lodged with the Company, on behalf
of the Debtors, and each of the Banks.
19
<PAGE> 20
IN WITNESS WHEREOF, the Debtors have caused this Security
Agreement to be duly executed and delivered as of the date first above written.
ATTEST: WEST COAST ENTERTAINMENT
CORPORATION
/s/ Ralph W. Standley III By: /s/ T. Kyle Standley
- ------------------------------ --------------------------------
Chairman Name: T. Kyle Standley
[seal] --------------------------
Title: President
--------------------------
ATTEST: VIDEOSMITH, INCORPORATED
/s/ Ralph W. Standley III By: /s/ T. Kyle Standley
- ------------------------------ --------------------------------
Chairman Name: T. Kyle Standley
[seal] --------------------------
Title: President
--------------------------
ATTEST: WEST COAST FRANCHISING COMPANY
/s/ Ralph W. Standley III By: /s/ T. Kyle Standley
- ------------------------------ --------------------------------
Chairman Name: T. Kyle Standley
[seal] --------------------------
Title: President
--------------------------
ATTEST: PALMER WEST COAST CORPORATION
/s/ Ralph W. Standley III By: /s/ T. Kyle Standley
- ------------------------------ --------------------------------
Chairman Name: T. Kyle Standley
[seal] --------------------------
Title: President
--------------------------
ATTEST: RKT MERGER CO.
/s/ Ralph W. Standley III By: /s/ T. Kyle Standley
- ------------------------------ --------------------------------
Chairman Name: T. Kyle Standley
[seal] --------------------------
Title: President
--------------------------
20
<PAGE> 21
ATTEST: SHOWTIME, INC.
/s/ Ralph W. Standley, III By: /s/ T. Kyle Standley
- ------------------------------ --------------------------------
Secretary Name: T. Kyle Standley
[seal] --------------------------
Title: President
--------------------------
ATTEST: VIDEO GIANT INC.
/s/ Ralph W. Standley, III By: /s/ T. Kyle Standley
- ------------------------------ --------------------------------
Chairman Name: T. Kyle Standley
[seal] --------------------------
Title: President
--------------------------
PNC BANK, NATIONAL ASSOCIATION,
as Agent
By: /s/ Charlene Massih
--------------------------------
Name: Charlene Massih
--------------------------
Title: Vice President
--------------------------
21
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in this Form 8-K of our
reports dated March 12, 1996, November 10, 1995, February 2, 1996, January 19,
1996, January 29, 1996, February 20, 1996, February 22, 1996, January 19, 1996,
February 16, 1996, December 8, 1995 and February 7, 1996, relating to the
financial statements of West Coast Entertainment Corporation, Videosmith
Incorporated, New Age Entertainment, Inc., HB Associates, Inc., Best
Entertainment Inc., Video Innovators, Inc., Showtime Video, Inc., Video
Giant Inc., Anthony Cocca's Videoland, Inc., Vidko Inc. and Kobie-Co Movie
Outlet, respectively, included in the Registration Statement on Form S-1 (No.
333-00272) dated May 3, 1996.
/s/ Price Waterhouse LLP
-------------------------------
Price Waterhouse LLP
Boston Massachusetts
May 2, 1996
<PAGE> 1
EXHIBIT 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in this Form 8-K of our
report dated March 4, 1996 relating to the financial statements of American
Video, Inc. and Red Giraffe Video, Inc. included in the Registration Statement
on Form S-1 (No. 333-00272) dated May 3, 1996.
/s/ Carpenter & Mountjoy, PSC
-----------------------------
Carpenter & Mountjoy, PSC
Carpenter & Mountjoy, PSC
Louisville, Kentucky
May 2, 1996
<PAGE> 1
EXHIBIT 23.3
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference into the Form 8-K to be
filed by West Coast Entertainment Corporation ("Registrant") of our report dated
January 26, 1996 relating to the combined financial statement of West Coast
Entertainment, Inc. and Affiliates which included in the Registration Statement
on Form S-1 (No. 333-00272) filed by the Registrant on May 3, 1996.
/s/ Miller, Glusman, Footer & Mayarick, P.C.
--------------------------------------------
Miller, Glusman, Footer & Mayarick, P.C.
May 31, 1996
Philadelphia, PA
<PAGE> 1
EXHIBIT 23.4
INDEPENDENT AUDITORS' CONSENT
The Stockholders
Lancaster Group, Inc.:
We consent to the incorporation by reference in this Form 8-K of West Coast
Entertainment Corporation of our report dated February 23, 1996, with respect to
the balance sheets of Lancaster Group, Inc. as of December 31, 1995 and 1994,
and the related statements of operations, stockholders' equity and cash flows
for each of the years in the three-year period ended December 31, 1995, which
report appears in the Registration Statement on Form S-1 (No. 333-00272) of West
Coast Entertainment Corporation dated May 4, 1996.
Our report refers to a change in method of accounting for videocassette rental
inventory.
/s/ KPMG Peat Marwich LLP
----------------------------------
KPMG Peat Marwich LLP
Louisville, Kentucky
May 31, 1996
<PAGE> 1
EXHIBIT 23.5
INDEPENDENT AUDITORS' CONSENT
The Stockholders
Palmer Corporation and Subsidiaries:
We consent to the incorporation by reference in this Form 8-K of our report
dated June 16, 1995, except as to note 14, which is as of March 11, 1996, with
respect to the consolidated balance sheets of Palmer Corporation and
subsidiaries as of March 31, 1995 and 1994, and the related consolidated
statement of operations, stockholders' equity and cash flows for the years then
ended, which report appears in the Registration Statement on Form S-1 (No.
333-00272) of West Coast Entertainment Corporation.
Our report refers to a change in method of accounting for videocassette rental
inventory.
/s/ KPMG Peat Marwick LLP
-------------------------
KPMG Peat Marwick LLP
Princeton, New Jersey
May 31, 1996
<PAGE> 1
EXHIBIT 23.6
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
Videosmith, Incorporated
We consent to the incorporation by reference in this Form 8-K of our report
dated March 11, 1994, with respect to the balance sheets of Videosmith
Incorporated as of January 29, 1994 and January 31, 1993, and the related
statements of operations and retained earnings, and cash flows for the years
then ended, which report appears in the Registration Statement on Form S-1 (No.
333-00272) of West Coast Entertainment Corporation.
/s/ KPMG Peat Marwick LLP
-------------------------
KPMG Peat Marwick LLP
Boston, Massachusetts
May 31, 1996
