<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
___________________
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934.
For the quarterly period ended December 31, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934.
For the transition period from _____ to _____
Commission file number 333-18221
DOLLAR FINANCIAL GROUP, INC.
(Exact Name of Registrant as Specified in Its Charter)
NEW YORK 13-2997911
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
1436 LANCASTER AVENUE, SUITE 210
BERWYN, PENNSYLVANIA 19312
(Address of Principal Executive Offices) (Zip Code)
610-296-3400
(Registrant's Telephone Number, Including Area Code)
None
(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check x whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
------ ------
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents
and reports required to be filed by Section 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. Yes No
------ ------
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date. 100
-------
DOLLAR FINANCIAL GROUP, INC.
<PAGE>
INDEX
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION Page No.
-----------------
<S> <C> <C>
Item 1. Financial Statements
Interim Consolidated Balance Sheets as of June 30, 1998
and December 31, 1998 (unaudited)............................................ 3
Interim Unaudited Consolidated Statements of Operations for the Three and Six
Months Ended December 31, 1997 and 1998...................................... 4
Interim Unaudited Consolidated Statements of Cash Flows for the Six Months
Ended December 31, 1997 and 1998............................................. 5
Notes to Interim Unaudited Consolidated Financial Statements................. 6
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations........................................................ 14
Item 3. Quantitative and Qualitative Disclosures
About Market Risk............................................................ 24
PART II. OTHER INFORMATION
Item 1. Legal Proceedings............................................................ 25
Item 2. Changes in Securities and Use of Proceeds.................................... 25
Item 3. Defaults Upon Senior Securities.............................................. 25
Item 4. Submission of Matters to a Vote of Security Holders.......................... 25
Item 5. Other Information............................................................ 25
Item 6. Exhibits and Reports on Form 8-K............................................. 25
</TABLE>
2
<PAGE>
PART I.
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
DOLLAR FINANCIAL GROUP, INC.
INTERIM CONSOLIDATED BALANCE SHEETS
(In thousands except share amounts)
<TABLE>
<CAPTION>
June 30, December 31,
1998 1998
------------------------ ------------------------
ASSETS (unaudited)
<S> <C> <C>
Cash and cash equivalents.......................................... $ 55,501 $ 61,979
Accounts receivable................................................ 5,726 7,234
Income taxes receivable............................................ 0 5,228
Prepaid expenses................................................... 1,814 1,738
Deferred income taxes.............................................. 1,070 1,070
Note receivable officers.......................................... 200 2,851
Property and equipment, net of accumulated depreciation
of $4,616 and $5,740........................................... 7,820 8,841
Cost assigned to contracts acquired, net of accumulated
amortization of $461 and $527.................................. 231 165
Cost in excess of net assets acquired, net of accumulated
amortization of $6,559 and $8,761................................ 87,036 83,695
Covenants not to compete, net of accumulated amortization
of $917 and $1,142.............................................. 786 547
Debt issuance costs, net of accumulated amortization of
$885 and $1,351............................................ 4,856 11,523
Other.............................................................. 810 960
------------------------ ------------------------
$165,850 $185,831
======================== ========================
LIABILITIES AND SHAREHOLDER'S EQUITY
Accounts payable................................................... $ 12,806 $ 10,352
Income taxes payable............................................... 2,002 1,957
Advance from money transfer agent.................................. 3,000 3,000
Accrued expenses................................................... 3,722 5,657
Accrued interest payable........................................... 2,191 2,358
Revolving credit facilities........................................ 0 18,500
Long-term debt and subordinated notes payable...................... 2,675 2,656
10-7/8 % Senior Notes due 2006..................................... 110,000 110,000
Shareholder's equity:
Common stock, $1 par value: 20,000 shares
authorized; 100 shares issued and outstanding at
June 30, 1998 and December 31, 1998............................. 0 0
Additional paid-in capital......................................... 40,941 50,784
Accumulated deficit................................................ (8,875) (15,406)
Accumulated other comprehensive loss............................... (2,612) (4,027)
------------------------ ------------------------
Total shareholder's equity...................................... 29,454 31,351
------------------------ ------------------------
$165,850 $185,831
======================== ========================
</TABLE>
See notes to interim unaudited consolidated financial statements.
3
<PAGE>
DOLLAR FINANCIAL GROUP, INC.
INTERIM UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
December 31, December 31,
---------------------------------------- ----------------------------------------
1997 1998 1997 1998
---------------------------------------- ----------------------------------------
<S> <C> <C> <C> <C>
Revenues...................................... $26,861 $ 28,929 $53,005 $ 56,020
Store and regional expenses:
Salaries and benefits...................... 8,265 8,527 16,724 17,026
Occupancy.................................. 2,452 2,273 4,909 4,662
Depreciation............................... 447 526 885 1,005
Other...................................... 6,411 5,917 12,918 11,844
--------------- ----------------- ---------------- ------------------
Total store and regional expenses............. 17,575 17,243 35,436 34,537
Corporate expenses............................ 3,009 3,100 5,651 6,346
(Gain) loss on store closings and sales....... 30 25 (10) 50
Other depreciation and amortization........... 1,186 1,412 2,389 2,823
Recapitalization costs........................ 0 2,551 0 2,551
Non-cash compensation......................... 0 10,024 0 10,024
Interest expense.............................. 3,175 3,271 6,394 6,498
--------------- ----------------- ---------------- ----------------
Income before income taxes and
extraordinary item............................ 1,886 (8,697) 3,145 (6,809)
Income tax provision (benefit)................ 1,102 (1,470) 1,743 (363)
--------------- ----------------- ---------------- ----------------
Income (loss) before extraordinary item 784 (7,227) 1,402 (6,446)
Extraordinary loss on debt extinguishment
(net of income tax benefit of $45).......... 0 85 0 85
--------------- ----------------- ---------------- ----------------
Net income (loss)............................. $ 784 ($7,312) $ 1,402 ($6,531)
--------------- ----------------- ---------------- ----------------
</TABLE>
See notes to interim unaudited consolidated financial statements.
4
<PAGE>
DOLLAR FINANCIAL GROUP, INC.
INTERIM UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
<TABLE>
<CAPTION>
Six Months Ended
December 31,
-------------------------------------------------
1997 1998
--------------------- ----------------------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss)........................................... 1,402 ($6,531)
Adjustments to reconcile net income (loss) to
cash provided by operating activities:
Depreciation and amortization......................... 3,542 4,164
(Gain) loss on store closings and sales............... (10) 50
Non-cash compensation................................. 0 10,024
Extraordinary loss on debt extinguishment
(net of income tax benefit of $45).................. 0 85
Deferred tax benefit.................................. (52) 0
Change in assets and liabilities (net of effect of
acquisitions):
Decrease (increase) in accounts receivable and
income taxes receivable............................ 1,704 (6,771)
Increase in prepaid expenses and other............... (637) (97)
Increase (decrease) in accounts payable, income
taxes payable, accrued expenses and accrued
interest payable..................................... 3,037 (156)
--------------------- ----------------------
Net cash provided by operating activities................... 8,986 768
Cash flows from investing activities:
Acquisitions, net of cash acquired........................ (193) (55)
Gross proceeds from sales of property and equipment....... 197 0
Additions to property and equipment....................... (1,210) (2,356)
--------------------- ----------------------
Net cash used in investing activities....................... (1,206) (2,411)
Cash flows from financing activities:
Payments on subordinated notes payable.................... (127) (9)
Net (decrease) increase in revolving credit facilities.... (8,194) 18,500
Payment of debt issuance costs............................ (56) (7,133)
Advances to officers...................................... 0 (2,651)
Payments of financed insurance premiums................... (161) (10)
--------------------- ----------------------
Net cash (used in) provided by financing activities......... (8,538) 8,697
Effect of exchange rate changes on cash and cash equivalents (374) (576)
--------------------- ----------------------
Net increase (decrease) in cash and cash equivalents........ (1,132) 6,478
Cash and cash equivalents at beginning of period............ 55,205 55,501
--------------------- ----------------------
Cash and cash equivalents at end of period.................. $54,073 $ 61,979
===================== ======================
Supplemental disclosures of cash flow information:
Interest paid............................................... $ 6,270 $ 6,027
--------------------- ----------------------
Income taxes paid........................................... $ 878 $ 4,910
===================== ======================
Supplemental schedule of non-cash investing and financing
activities
Non-cash compensation....................................... $ 0 $ 10,024
===================== ======================
</TABLE>
See notes to interim unaudited consolidated financial statements.
5
<PAGE>
DOLLAR FINANCIAL GROUP, INC.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying condensed unaudited interim consolidated financial statements
of Dollar Financial Group, Inc. (the "Company") have been prepared in accordance
with generally accepted accounting principles for interim financial information
and the rules and regulations of the Securities and Exchange Commission. They do
not include all information and footnotes required by generally accepted
accounting principles for complete financial statements. Although management
believes that the disclosure is adequate to prevent the information from being
misleading, it is suggested that the interim consolidated financial statements
be read in conjunction with the Company's audited financial statements in its
Annual Report on Form 10-K for the fiscal year ended June 30, 1998 filed with
the Securities and Exchange Commission. In the opinion of management, all
adjustments, consisting of normal recurring accruals, considered necessary for a
fair presentation have been included. Operating results for the six-month
period ended December 31, 1998 are not necessarily indicative of the results
that may be expected for the year ending June 30, 1999.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the consolidated financial statements and
accompanying notes. Actual results could differ from those estimates.
Principles of Consolidation
The consolidated financial statements include the accounts of the Company and
its wholly owned subsidiaries. All significant intercompany accounts and
transactions have been eliminated.
Operations
Dollar Financial Group, Inc., organized in 1979 under the laws of the State of
New York, is a wholly owned subsidiary of DFG Holdings, Inc. ("Holdings"). The
activities of Holdings consist primarily of its investment in the Company.
Holdings has no employees or operating activities. The Company, through its
subsidiaries, provides retail financial and government contractual services to
the general public through a network of 434 (of which 351 are company owned)
locations operating as ABC Check Cashing(TM), Almost-A-Banc(R), Any Kind Check
Cashing Centers, C&C Check Cashing(TM), Cash-N-Dash Check Cashing(TM), Check
Mart, Chex$Cashed, Financial Exchange Company, Money Mart, Quikcash, QwiCash,
The Service Centers and Loan Mart(TM) in thirteen states, the District of
Columbia and Canada. The services provided at the Company's retail locations
include check cashing, sale of money orders, money transfer services, consumer
loans, issuance of food stamps and other welfare benefits, and various other
related services. Additionally, the Company, through its merchant services
division, maintains and services a network of electronic government benefits
distribution to approximately 1200 retail locations throughout the State of New
York.
6
<PAGE>
2. SUBSIDIARY GUARANTOR CONDENSED FINANCIAL INFORMATION
The Company raised approximately $110 million of gross proceeds in 1996 by
issuing 10 7/8% Senior Notes due in November 2006 (the "Notes"). The Company's
payment obligations under the Notes are jointly and severally guaranteed on a
full and unconditional basis by all of the Company's existing and future
subsidiaries. The subsidiaries' guarantees rank pari passu in right of payment
with all existing and future senior indebtedness of the Guarantors, including
the obligations of the Guarantors under the Company's existing credit facilities
and any successor credit facilities. Pursuant to the indenture of the Senior
Notes, every direct and indirect subsidiary of the Company, each of which is
wholly owned, serves as a guarantor of the notes, including the Company's
Canadian subsidiary.
The Company is a holding company with no assets, independent operations, or cash
flows other than its investment in its subsidiaries. There are no restrictions
on the Company's and the Guarantors' ability to obtain funds from their
subsidiaries by dividend or by loan. Separate financial statements of each
Guarantor have not been presented because management has determined that they
would not be material to investors. The accompanying tables set forth the
condensed consolidating balance sheet at December 31, 1998, and the
consolidating statements of operations and cash flows for the six month period
ended December 31, 1998 of the Company (on a parent-company basis), combined
domestic Guarantors, Canadian subsidiary Guarantor, and the consolidated
Company.
7
<PAGE>
DOLLAR FINANCIAL GROUP, INC.
NOTES TO INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)
CONSOLIDATING BALANCE SHEET
(In thousands)
<TABLE>
<CAPTION>
At December 31, 1998: Dollar Domestic Canadian
Financial Subsidiary Subsidiary
Group, Inc. Guarantors Guarantor Eliminations Consolidated
----------- ---------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C>
ASSETS
Cash and cash equivalents..................... $ 2,163 $ 44,941 $14,875 $ 0 $ 61,979
Accounts receivable........................... 6,842 4,271 1,422 (5,301) 7,234
Income taxes receivable....................... 5,228 0 0 0 5,228
Prepaid expenses.............................. 533 994 211 0 1,738
Deferred income taxes......................... 1,008 62 0 0 1,070
Note receivable-officers...................... 2,851 0 0 0 2,851
Due from affiliates........................... 68,564 0 0 (68,564) 0
Property and equipment, net................... 1,193 5,261 2,387 0 8,841
Cost assigned to contracts acquired, net...... 0 165 0 0 165
Cost in excess of net assets acquired, net.... 0 57,428 26,267 0 83,695
Covenants not to compete...................... 0 447 100 0 547
Debt issuance costs, net...................... 11,523 0 0 0 11,523
Investment in subsidiaries.................... 68,178 0 0 (68,178) 0
Other......................................... 292 446 222 0 960
-------- -------- -------- -------- --------
$168,375 $114,015 $45,484 ($142,043) $185,831
======== ======== ======== ======== ========
LIABILITIES AND SHAREHOLDER'S EQUITY
Accounts payable.............................. $ 46 $ 8,514 $ 1,792 $ 0 $ 10,352
Income taxes payable.......................... 0 191 1,766 0 1,957
Advance from money transfer agent............. 3,000 0 0 0 3,000
Accrued expenses.............................. 2,642 2,148 867 0 5,657
Accrued interest payable...................... 1,538 820 5,301 (5,301) 2,358
Due to affiliates............................. 0 43,709 24,855 (68,564) 0
Revolving credit facilities................... 18,500 0 0 0 18,500
Long term debt and subordinated notes payable. 0 2,656 0 0 2,656
10 7/8% Senior Notes due 2006................. 110,000 0 0 0 110,000
-------- -------- -------- -------- --------
135,726 $ 58,038 34,581 (73,865) 154,481
Shareholder's equity:
Common Stock.................................. 0 0 0 0 0
Additional paid-in capital.................... 50,824 46,613 10,797 (57,450) 50,784
(Accumulated deficit) retained earnings....... (15,406) 9,364 1,364 (10,728) (15,406)
Accumulated other comprehensive loss.......... (2,769) 0 (1,258) 0 (4,027)
-------- -------- -------- -------- --------
Total shareholder's equity.................... 32,649 55,977 10,903 (68,178) 31,351
-------- -------- -------- -------- --------
$168,375 $114,015 $45,484 ($142,043) $185,831
======== ======== ======== ======== ========
</TABLE>
8
<PAGE>
DOLLAR FINANCIAL GROUP, INC.
NOTES TO INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)
CONSOLIDATING STATEMENT OF OPERATIONS
(In thousands)
<TABLE>
<CAPTION>
Six Months Ended December 31, 1998:
Dollar Domestic Canadian
Financial Subsidiary Subsidiary
Group, Inc. Guarantors Guarantor Eliminations Consolidated
------------ ---------- --------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Revenues..................................................... $ 0 $42,265 $13,755 $ 0 $ 56,020
Store and regional expenses:
Salaries and benefits..................................... 0 13,022 4,004 0 17,026
Occupancy................................................. 0 3,569 1,093 0 4,662
Depreciation.............................................. 0 774 231 0 1,005
Other..................................................... 0 9,825 2,019 0 11,844
--------- --------- --------- --------- ---------
Total store and regional expenses............................ 0 27,190 7,347 0 34,537
Corporate expenses........................................... 4,857 0 1,489 0 6,346
Loss on store closings and sales............................. 50 0 0 0 50
Other depreciation and amortization.......................... 206 2,057 560 0 2,823
Recapitalization costs....................................... 2,551 0 0 0 2,551
Non-cash compensation........................................ 10,024 0 0 0 10,024
Interest expense............................................. 4,642 127 1,729 0 6,498
--------- --------- --------- --------- ---------
(Loss) income before income taxes and
extraordinary item......................................... (22,330) 12,891 2,630 0 (6,809)
Income taxes (benefit) provision............................. (2,477) 602 1,512 0 (363)
--------- --------- --------- --------- ---------
(Loss) income before extraordinary item...................... (19,853) 12,289 1,118 0 (6,446)
Extraordinary loss on debt extinguishment
(net of income tax benefit of $45)......................... 85 0 0 0 85
--------- --------- --------- --------- ---------
(Loss) income before equity in net income of subsidiaries.. (19,938) 12,289 1,118 0 (6,531)
Equity in net income of subsidiaries:
Domestic subsidiary guarantors............................... 12,289 0 0 (12,289) 0
Canadian subsidiary guarantor................................ 1,118 0 0 (1,118) 0
--------- --------- --------- --------- ---------
Net (loss) income............................................ ($6,531) $12,289 $ 1,118 ($13,407) ($6,531)
========= ========= ========= ========= =========
</TABLE>
9
<PAGE>
DOLLAR FINANCIAL GROUP, INC.
NOTES TO INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)
CONSOLIDATING STATEMENT OF CASH FLOWS
(In thousands)
<TABLE>
<CAPTION>
Six Months Ended December 31, 1998: Dollar Domestic Canadian
Financial Subsidiary Subsidiary
Group, Inc. Guarantors Guarantor Eliminations Consolidated
---------- ----------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net (loss) income............................................ ($6,531) $12,289 $ 1,118 ($13,407) ($6,531)
Adjustments to reconcile net (loss) income to net
cash (used in) provided by operating activities:
Undistributed income of subsidiaries.................. (13,407) 0 0 13,407 0
Depreciation and amortization......................... 542 2,831 791 0 4,164
Loss on store closings and sales...................... 50 0 0 0 50
Non-cash compensation................................. 10,024 0 0 0 10,024
Extraordinary loss on debt extinguishment
(net of income tax benefit of $45).................. 85 0 0 0 85
Change in assets and liabilities (net of effect of
acquisitions):
Increase in accounts receivable
and income taxes receivable..................... (8,658) (185) (224) 2,296 (6,771)
(Increase) decrease in prepaid expenses and other.. (283) 41 145 0 (97)
Increase (decrease) in accounts payable, income
taxes payable, accrued expenses and accrued
interest payable.................................. 2,380 (1,036) 796 (2,296) (156)
------- ------- ------- ------- -------
Net cash (used in) provided by operating activities.......... (15,798) 13,940 2,626 0 768
Cash flows from investing activities:
Acquisitions, net of cash acquired.................... 0 0 (55) 0 (55)
Additions to property and equipment................... (445) (1,242) (669) 0 (2,356)
Net decrease in due to affiliates..................... 7,767 0 0 (7,767) 0
------- ------- ------- ------- -------
Net cash (used in) provided by investing activities.......... 7,322 (1,242) (724) (7,767) (2,411)
Cash flows from financing activities:
Payments on subordinated notes payable................ 0 (9) 0 0 (9)
Net increase in revolving credit facilities........... 18,500 0 0 0 18,500
Payments of debt issuance costs....................... (7,133) 0 0 0 (7,133)
Advances to officers.................................. (2,651) 0 0 0 (2,651)
Payments of financed insurance premiums............... (10) 0 0 0 (10)
Net decrease in due to affiliates..................... 0 (7,443) (324) 7,767 0
------- ------- ------- ------- -------
Net cash provided by (used in) financing activities.......... 8,706 (7,452) (324) 7,767 8,697
Effect of exchange rate changes on cash and
cash equivalents.................................... 0 0 (576) 0 (576)
------- ------- ------- ------- -------
Net increase in cash and cash equivalents.................... 230 5,246 1,002 0 6,478
Cash and cash equivalents at beginning of period............. 1,933 39,695 13,873 0 55,501
------- ------- ------- ------- -------
Cash and cash equivalents at end of period................... $ 2,163 $44,941 $14,875 $ 0 $ 61,979
======== ======= ======= ======= ========
</TABLE>
10
<PAGE>
DOLLAR FINANCIAL GROUP, INC.
NOTES TO INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)
3. STORE CLOSINGS AND SALES
During the year ended June 30, 1998, the Company sold all of its stores in
Michigan, sold or closed five locations in southern California and closed
sixteen stores in Pennsylvania whose primary business was to provide services
for the distribution of public assistance benefits under existing contracts with
state and local municipalities. As a result of declining caseloads, increasing
costs and the termination of the Company's contracts with the Commonwealth of
Pennsylvania, the Company determined that these locations could not provide
acceptable levels of profitability. The Company also closed five kiosks in
Texas due to contractual requirements with the Southland Corporation. Included
in the accompanying consolidated statements of operations for the six months
ended December 31, 1997 are revenues of $3.6 million and store expenses of $2.3
million related to these stores. The gain recognized related to the sale and
closure of these stores was not material.
4. RECENT ACCOUNTING PRONOUCEMENTS
In September 1997, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 130, "Reporting Comprehensive
Income" ("SFAS No. 130"). The Company adopted SFAS No. 130 on July 1, 1998.
The overall objective of SFAS No. 130 is to provide new rules for the reporting
and display of comprehensive income and its components; however, the adoption of
this statement had no impact on the Company's net income or stockholder's
equity. SFAS No. 130 requires foreign currency translation adjustments, which
prior to adoption were reported separately in stockholder's equity, to be
included in other comprehensive income. Prior year financial statements have
been restated to conform to the provisions of SFAS No. 130. The following shows
the comprehensive income (loss) for the periods stated:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
December 31, December 31,
1997 1998 1997 1998
----------------- ----------------- ------------------ ----------------
<S> <C> <C> <C> <C>
Net income (loss) $ 784 ($7,312) $ 1,402 ($6,531)
Foreign currency translation adjustment (1,222) (219) (1,236) (1,415)
----------------- ----------------- ------------------ ----------------
Total comprehensive income (loss) ($438) ($7,531) $ 166 ($7,946)
================= ================= ================== ================
</TABLE>
5. MERGER AGREEMENT
On November 13, 1998, DFG Holdings, Inc. ("Holdings"), a Delaware corporation
and parent company of Dollar Financial Group, Inc., a New York corporation (the
"Registrant"), entered into an agreement and plan of merger (the "Merger
Agreement") with DFG Acquisition, Inc., ("Acquisition") a Delaware corporation,
controlled by Green Equity Investors II, L.P., a Delaware limited partnership
("GEI II") and the stockholders of Holdings party thereto, providing for the
merger of Acquisition with and into Holdings, with Holdings as the surviving
corporation (the "Merger"). Holdings and Acquisition consummated the Merger on
December 18, 1998, and in the Merger, the
11
<PAGE>
senior members of management of Holdings retained substantially all of their
stock in the surviving corporation and the other stockholders received cash in
exchange for their shares of Holdings. Immediately prior to the merger,
managment exercised their options in Holdings which were converted into
equivalent amounts of stock A-D resulted in a non-cash charge of $10.0 million.
The Merger was accounted for as a recapitalization of Holdings.
The management (other than the employment of Donald F. Gayhardt, Jr. as the
President), Board of Directors and equity ownership of the Registrant did not
change in the Merger and Holdings continues to own one hundred percent of the
voting securities of the Registrant.
In connection with the Merger, Holdings, the Registrant and Jeffrey Weiss, the
current chief executive officer of Holdings and the Registrant, entered into a
new employment agreement, dated November 13, 1998, effective concurrently with
the consummation of the Merger, pursuant to which Jeffrey Weiss will continue to
serve as the chief executive officer of Holdings and the Registrant. In
addition the Registrant, Holdings and Donald F. Gayhardt, Jr., entered into an
employment agreement, dated December 18, 1998, pursuant to which Donald F.
Gayhardt, Jr. will serve as the President of Holdings and the Registrant.
Donald F. Gayhardt, Jr. formerly served as the executive vice president and
chief financial officer of the Registrant from 1992 to 1997.
In connection with the Merger, the Registrant terminated the Second Amended and
Restated Credit Agreement, dated as of November 15, 1996 (as amended and
modified) with Bank of America National Trust and Savings Association, as
administrative agent, Lehman Commercial Paper, Inc., as documentation agent, and
certain lenders party thereto. The Registrant entered into a new Credit
Agreement, dated as of December 18, 1998 (the "Credit Agreement"), obtaining a
new $160 million credit facility from a syndicate of banks led by Wells Fargo
Bank, National Association as administrative agent and co-arranger, First Union
Capital Markets, as co-arranger, First Union National Bank, as syndication
agent, and U.S. Bank National Association, as documentation agent. On January
8, 1999, Dresdner Bank AG became an additional participant in the Credit
Agreement. The Credit Agreement provides for a revolving credit facility in
favor of the Registrant of up to $70 million and two term loans aggregating up
to $90 million. The $90 million term loans may be used only to fund the
Registrant's repurchase obligations, if any, in connection with its 10 7/8%
Senior Notes Due 2006 (the "Indenture Senior Notes"), under the Indenture, dated
November 15, 1996 (the "Indenture"), with State Street Bank and Trust Company
(successor in interest to Fleet National Bank), as trustee.
In connection with the Merger, the Registrant entered into a Purchase Agreement,
dated as of December 18, 1998 (the "Purchase Agreement"), among GS Mezzanine
Partners, L.P., GS Mezzanine Partners Offshore, L.P., Stone Street Fund 1998,
L.P., Bridge Street Fund 1998, L.P., Ares Leveraged Investment Fund, L.P. and
Ares Leveraged Investment Fund II, L.P. (collectively, the "Investors"),
pursuant to which the Registrant may issue up to $20 million aggregate principal
amount of its 10 7/8% Senior Subordinated Notes Due 2006 (the "Subordinated
Notes"), to (i) fund the Registrant's repurchase obligations, if any, in
connection with its Indenture Senior Notes, under the Indenture, or (ii) to
finance or refinance acquisitions of the Registrant. In connection with the
Purchase Agreement, the Registrant entered into an Exchange and Registration
Rights Agreement, dated December 18, 1998, with the parties to the Purchase
Agreement, pursuant to which the Registrant is obligated under certain
circumstances to exchange the Subordinated Notes and register such Subordinated
Notes under the Securities Act of 1933.
On February 8, 1999, the Company announced that it had signed a definitive
purchase agreement A-D a letter of intent to acquire sixteen stores in two
separate transactions. The Company had signed a definitive purchase agreement
for the acquisition of 86.5% of a partnership which owns and operates six stores
in Alberta, Canada. The Company currently holds the remaining 13.5% interest. In
addition, the Company has completed the acquisition of a company which owns and
operates ten stores in the United Kingdom. The acquisitions were funded through
internally generated cash and approximately $5 million of borrowings on its
revolving credit facility.
12
<PAGE>
SUPPLEMENTAL STATISTICAL DATA
<TABLE>
<CAPTION>
December 31,
Company Operating Data: 1997 1998
----------- ----------
<S> <C> <C>
Stores in operation:
Company-Owned..................................... 351 351
Franchised Stores................................. 70 83
------- -------
Total................................................ 421 434
======= =======
</TABLE>
----------------------------------------------------------------------------
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
December 31, December 31,
----------------------------------------------------
Operating Data: 1997 1998 1997 1998
------------- ----------- ------------ ----------
<S> <C> <C> <C> <C>
Face amount of checks cashed (in millions)........... $ 569 $ 564 $ 1,133 $ 1,116
Face amount of average check......................... $268.90 $295.13 $ 271.70 $286.86
Face amount of average check (excluding Canada)...... $273.47 $320.52 $ 277.46 $305.59
Average fee per check................................ $ 8.09 $ 9.45 $ 8.09 $ 9.03
Number of checks cashed (in thousands)............... 2,116 1,910 4,170 3,889
Adjusted EBITDA /1/.................................. $ 6,775 $ 9,180 $12,854 $16,310
Adjusted EBITDA Margin /1/........................... 25.2% 31.7% 24.3% 29.1%
Three Months Ended Six Months Ended
December 31, December 31,
----------------------------------------------------
Collections Data: 1997 1998 1997 1998
------------- ------------- ------------ --------
Face amount of returned checks (in thousands)........ $3,594 $4,318 $6,989 $8,414
Collections (in thousands)........................... 2,443 3,137 4,827 6,127
------ ------ ------ ------
Net write-offs (in thousands)........................ $1,151 $1,181 $2,162 $2,287
====== ====== ====== ======
Collections as a percentage of
returned checks................................... 68.0% 72.6% 69.1% 72.8%
Net write-offs as a percentage of
check cashing revenues....................... 6.7% 6.4% 6.4% 6.4%
Net write-offs as a percentage of the
face amount of checks cashed...................... .20% .21% .19% .20%
</TABLE>
- --------------------------
/1/ Adjusted EBITDA is earnings before interest, taxes, depreciation,
amortization, noncash charges, recapitalization costs and (gain) loss
on store closings and sales. Adjusted EBITDA does not represent cash flows as
defined by generally accepted accounting principles and does not necessarily
indicate that cash flows are sufficient to fund all of the Company's cash needs.
Adjusted EBITDA should not be considered in isolation or as a substitute for net
income (loss), cash flows from operating activities, or other measures of
liquidity determined in accordance with generally accepted accounting
principles. The Adjusted EBITDA margin represents Adjusted EBITDA as a
percentage of revenues. Management believes that these ratios should be
reviewed by prospective investors because the Company uses them as one means of
analyzing its ability to service its debt, the Company's lenders use them for
the purpose of analyzing the Company's performance with respect to the Company's
new revolving credit facility and the Indenture, and the Company understands
that they are used by certain investors as one measure of a company's historical
ability to service its debt. Not all companies calculate EBITDA in the same
fashion and therefore these ratios as presented may not be comparable to other
similarly titled measures of other companies.
13
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
General
The Company is a consumer financial services company operating the second
largest check cashing store network in the United States and the largest such
network in Canada. The Company provides a diverse range of consumer financial
products and services primarily consisting of check cashing, money orders, money
transfers, consumer loans, bill payment and distribution of public assistance
benefits.
The Company, in its opinion, has included all adjustments (consisting only of
normal recurring accruals) necessary for a fair presentation of its financial
position at December 31, 1998 and the results of operations for the three and
six months ended December 31, 1998 and 1997. The results for the three and six
months ended December 31, 1998 are not necessarily indicative of the results for
the full fiscal year.
On November 13, 1998, DFG Holdings Inc. ("Holdings"), entered into an agreement
and plan of merger (the "Merger Agreement") with DFG Acquisition, Inc.,
("Acquisition") controlled by Green Equity Investors II, L.P., and the
stockholders of Holdings party thereto, providing for the merger of Acquisition
with and into Holdings, with Holdings as the surviving corporation (the
"Merger"). Holdings and Acquisition consummated the Merger on December 18,
1998, and in the Merger, the senior members of management of Holdings retained
substantially all of their stock in the surviving corporation and the other
stockholders received cash in exchange for their shares of Holdings. The Merger
will be accounted for as a recapitalization of Holdings.
The management (other than the employment of Donald F. Gayhardt, Jr. as the
President), Board of Directors and equity ownership of the Company did not
change in the Merger and Holdings continues to own one hundred percent of the
voting securities of the Company.
In connection with the Merger, Holdings, the Company and Jeffrey Weiss, the
current chief executive officer of Holdings and the Company, entered into a new
employment agreement, dated November 13, 1998, effective concurrently with the
consummation of the Merger, pursuant to which Jeffrey Weiss will continue to
serve as the chief executive officer of Holdings and the Company. In addition
the Company, Holdings and Donald F. Gayhardt, Jr., entered into an employment
agreement, dated December 18, 1998, pursuant to which Donald F. Gayhardt, Jr.
will serve as the President of Holdings and the Company. Donald F. Gayhardt,
Jr. formerly served as the executive vice president and chief financial officer
of the Company from 1992 to 1997.
The Company's revenues from government services decreased for the three and six
months ended December 31, 1998 as compared to the three and six months ended
December 31, 1997. The Company expects that its government revenues will
continue to decline due to a number of factors, including a continued reduction
in the number of recipients eligible for public assistance benefits.
Additionally, a number of state and local governmental agencies have initiated
processes to install electronic benefits transfer systems designed to disburse
public assistance benefits directly to individuals (sometimes referred to as
"EBT" systems). The Commonwealth of Pennsylvania initiated an EBT system in
January 1998 which was fully implemented during fiscal 1998. As a result, all of
the Company's contracts with the Commonwealth of Pennsylvania were terminated
during fiscal 1998. The Company's contracts with the Commonwealth of
Pennsylvania contributed 0.0% and 5.9% of consolidated gross revenues for the
three months ended December 31, 1998 and 1997 and 0.0% and 6.1% of consolidated
gross revenues for the six months ended December 31, 1998 and 1997,
respectively. The installation of such systems has not had a material adverse
effect on the Company's results of operations or financial condition.
14
<PAGE>
RESULTS OF OPERATIONS
<TABLE>
<CAPTION>
Three Months Ended December 31, Six Months Ended December 31,
- -------------------------------------------------------------------------------------------------------------------------
(Percentage of (Percentage of
($ in thousands) Total Revenue) ($ in thousands) Total Revenue)
---------------------------------------------------------------------------------------------------
1997 1998 1997 1998 1997 1998 1997 1998
------------- ----------- --------- --------- ---------- --------- ---------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Check Cashing......... $17,122 $18,371 63.7% 63.5% $33,733 $35,434 63.7% 63.3%
Cash `Til Payday(R)
origination fees...... 1,564 4,488 5.8 15.5 2,428 7,988 4.6 14.3
Government services... 3,506 1,493 13.1 5.2 7,439 3,085 14.0 5.4
Other Revenue......... 4,669 4,577 17.4 15.8 9,405 9,513 17.7 17.0
------- ------- ------- ------- ------- ------- ------- -------
Total Revenue......... $26,861 $28,929 100.0% 100.0% $53,005 $56,020 100.0% 100.0%
======= ======= ======= ======= ======= ======= ======= =======
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
QUARTER COMPARISON
Total revenues were $28.9 million for the three months ended December 31, 1998
compared to $26.9 million for the three months ended December 31, 1997, an
increase of $2.0 million or 7.4%.
Comparable retail store sales at those locations owned by the Company for the
entire period increased $2.5 million or 10.5%. Check cashing revenue increased
3.5%, Cash `Til Payday(R) origination fees increased 168.0% and other revenues
decreased 0.8%. The increase in Cash `Til Payday(R) origination fees resulted
from the full roll-out of the Cash `Til Payday(R) loan product. Partially
offsetting this increase, however, was a 50.6% decline in revenues from
government services resulting from a decrease in the volume of benefits
distributed by the Company and the termination of all of the Company's contracts
with the Commonwealth of Pennsylvania in fiscal year 1998. Government services
revenues accounted for 5.2% of total revenues for the three months ended
December 31, 1998, a decrease from 13.1% of total revenues for the three months
ended December 31, 1997.
SIX MONTH COMPARISON
Total revenues were $56.0 million for the six months ended December 31, 1998
compared to $53.0 million for the six months ended December 31, 1997, an
increase of $3.0 million or 5.7%.
Comparable retail store sales at those locations owned by the Company for the
entire period increased $4.5 million or 9.8%. Check cashing revenue increased
3.4%, Cash `Til Payday(R) origination fees increased 186.6% and other revenues
increased 1.4%. The increase in Cash `Til Payday(R) origination fees resulted
from the full roll-out of the Cash `Til Payday(R) loan product. Partially
offsetting this increase, however, was a 49.3% decline in revenues from
government services resulting from a decrease in the volume of benefits
distributed by the Company and the termination of all of the Company's contracts
with the Commonwealth of Pennsylvania in fiscal year 1998. Government services
revenues accounted for 5.4% of total revenues for the six months ended December
31, 1998, a decrease from 14.0% of total revenues for the six months ended
December 31, 1997.
15
<PAGE>
Store and Regional Expense Analysis
<TABLE>
<CAPTION>
Three Months Ended December 31, Six Months Ended December 31,
- ---------------------------------------------------------------------------------------------------------------------------
(Percentage of (Percentage of
($ in thousands) total revenue) ($ in thousands) total revenue)
------------------------ ------------------- ----------------------- ------------------
1997 1998 1997 1998 1997 1998 1997 1998
---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Salaries and benefits.......... $ 8,265 $ 8,527 30.8% 29.5% $16,724 $17,026 31.6% 30.4%
Occupancy...................... 2,452 2,273 9.1 7.9 4,909 4,662 9.3 8.3
Depreciation................... 447 526 1.7 1.8 885 1,005 1.7 1.8
Other.......................... 6,411 5,917 23.8 20.5 12,918 11,844 24.3 21.1
------- ------- ------- ------ ------- ------- ------- ------
Total store and regional
expenses.................... $17,575 $17,243 65.4% 59.7% $35,436 $34,537 66.9% 61.6%
======= ======= ======= ======= ======= ======= ======= =======
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
QUARTER COMPARISON
Store and regional expenses were $17.2 million for the three months ended
December 31, 1998 compared to $17.6 million for the three months ended December
31, 1997, a decrease of $400,000 or 2.3%. Total store and regional expenses
associated with stores closed during fiscal 1998 were $900,000 for the three
months ended December 31, 1997. For the three months ended December 31, 1998
total store and regional expenses declined to 59.7% of total revenue compared to
65.4% of total revenue for the three months ended December 31, 1997 due to an
improvement in store level profitability and increased revenues.
SIX MONTH COMPARISON
Store and regional expenses were $34.5 million for the six months ended December
31, 1998 compared to $35.4 million for the six months ended December 31, 1997, a
decrease of $900,000 or 2.5%. Total store and regional expenses associated with
stores closed during fiscal 1998 were $2.3 million for the six months ended
December 31, 1997. For the six months ended December 31, 1998 total store and
regional expenses declined to 61.6% of total revenue compared to 66.9% of total
revenue for the six months ended December 31, 1997 due to an improvement in
store level profitability and increased revenues.
16
<PAGE>
Other Expense Analysis
<TABLE>
<CAPTION>
Three Months Ended December 31, Six Months Ended December 31,
- -----------------------------------------------------------------------------------------------------------------------------------
($ in thousands) (Percentage of revenues) ($ in thousands) (Percentage of revenues)
-------------------- ------------------------- ------------------- -----------------------
1997 1998 1997 1998 1997 1998 1997 1998
---------- --------- ----------- ----------- -------- --------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Corporate expenses.................... $3,009 $ 3,100 11.2% 10.7% $5,651 $ 6,346 10.7% 11.3%
(Gain) loss on store closings
and sales.......................... 30 25 0.1 0.1 (10) 50 0.0 0.1
Other depreciation and amortization... 1,186 1,412 4.4 4.9 2,389 2,823 4.5 5.0
Recapitalization costs................ 0 2,551 0.0 8.8 0 2,551 0.0 4.6
Non-cash compensation................. 0 10,024 0.0 34.7 0 10,024 0.0 17.9
Interest expense...................... 3,175 3,271 11.8 11.3 6,394 6,498 12.1 11.6
Income taxes.......................... 1,102 (1,470) 4.1 (5.1) 1,743 (363) 3.3 (0.6)
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
QUARTER COMPARISON
Corporate Expenses
Corporate expenses were $3.1 million for the three months ended December 31,
1998 compared to $3.0 million for the three months ended December 31, 1997, an
increase of $100,000 or 3.3%.
Other Depreciation and Amortization
Other depreciation and amortization expenses were $1.4 million and $1.2 million
for the three months ended December 31, 1998 and 1997, respectively, an increase
of $200,000. The increase was mainly due to the accelerated amortization of the
remaining goodwill associated with the Company's government services line of
business which is being amortized over the estimated remaining life of the
future undiscounted cash flows of the government services business. This
increased amortization expense was offset in part by the reduced amortization
related to the writedown of goodwill of $12.9 million in June 1998.
Recapitalization Costs
During the three months ended December 31, 1998, the Company incurred $2.6
million for the consummation of the merger between Holdings and Acquisition
which was accounted for as a recapitalization of Holdings.
Non-Cash Compensation
Immediately prior to the merger between Holdings and Acquisition, management of
the Company exercised their options in Holdings which were converted into
equivalent amounts of stock and resulted in a non-cash charge of $10.0 million.
17
<PAGE>
Interest Expense
Interest expense was $3.3 million for the three months ended December 31, 1998
and was $3.2 million for the three months ended December 31, 1997, an increase
of $100,000 or 3.1%. Interest expense has remained constant due to the average
outstanding indebtedness remaining constant.
Income Taxes
The (benefit) provision for income taxes was ($1.5) million for the three months
ended December 31, 1998 compared to $1.1 million for the three months ended
December 31, 1997, a decrease of $2.6 million. The Company's effective tax rate
is significantly greater than the federal statutory rate of 34% due to non-
deductible goodwill amortization, state taxes and foreign taxes. This decrease
is primarily attributable to the expenses related to the merger and
recapitalization.
SIX MONTH COMPARISON
Corporate Expenses
Corporate expenses were $6.3 million for the six months ended December 31, 1998
compared to $5.7 million for the six months ended December 31, 1997, an increase
of $600,000 or 10.5%. Additional costs, primarily salaries and benefits, have
been incurred as a result of the implementation of various strategic initiatives
including full roll-out of the Cash `Til Payday(R) loan product and the opening
of Loan Mart(TM) stores, which offer only Cash `Til Payday(R) unsecured short-
term loans.
(Gain) Loss on Store Closings and Sales
During the six months ended December 31, 1997 the Company sold all of its stores
in Michigan and sold or closed five locations in southern California whose
primary business was to provide services for the distribution of public
assistance benefits under existing contracts with state and local
municipalities.
Other Depreciation and Amortization
Other depreciation and amortization expenses were $2.8 million and $2.4 million
for the six months ended December 31, 1998 and 1997, respectively, an increase
of $400,000. The increase was mainly due to the accelerated amortization of the
remaining goodwill associated with the Company's government services line of
business which is being amortized over the estimated remaining life of the
future undiscounted cash flows of the government services business. This
increased amortization expense was offset in part by the reduced amortization
related to the writedown of goodwill of $12.9 million in June 1998.
Recapitalization Costs
During the six months ended December 31, 1998, the Company incurred $2.6 million
for the consummation of the merger between Holdings and Acquisition which was
accounted for as a recapitalization of Holdings.
18
<PAGE>
Non-Cash Compensation
Immediately prior to the merger between Holdings and Acquisition, management of
the Company exercised their options in Holdings which were converted into
equivalent amounts of stock A-D resulted in a non-cash charge of $10.0 million.
Interest Expense
Interest expense was $6.5 million for the six months ended December 31, 1998 and
was $6.4 million for the six months ended December 31, 1997. Interest expense
has remained constant due to the average outstanding indebtedness remaining
constant.
Income Taxes
The (benefit) provision for income taxes was ($400,000) for the six months ended
December 31, 1998 compared to $1.7 million for the six months ended December 31,
1997, a decrease of $2.1 million. The Company's effective tax rate is
significantly greater than the federal statutory rate of 34% due to non-
deductible goodwill amortization, state taxes and foreign taxes. This decrease
is primarily attributable to the expenses related to the merger and
recapitalization of Holdings.
19
<PAGE>
Changes in Financial Condition
Cash and cash equivalent balances and the revolving credit facilities balance
fluctuate significantly as a result of seasonal, monthly and day-to-day
requirements for funding check cashing and other operating activities. For the
six months ended December 31, 1998, cash and cash equivalents increased by $6.5
million due to the net activity of the increase of the revolving credit facility
of $18.5 million, cash generated by operations of $800,000 and the expenses
related to the merger and recapitalization.
Income taxes receivable and note receivable - officers increased due to the
merger and recapitalization of Holdings.
Accrued expenses also increased due to expenses relating to the merger and
recapitalization of Holdings.
Liquidity and Capital Resources
The Company raised approximately $110 million of gross proceeds by issuing 10
7/8% Senior Notes due in November 2006 (the "Notes"). The Notes require semi-
annual cash interest payments due in November and May. In connection with the
Merger, the Company terminated the Second Amended and Restated Credit Agreement,
dated as of November 15, 1996. The Company entered into a new Credit Agreement,
dated as of December 18, 1998 obtaining a new $160 million credit facility. The
Credit Agreement provides for a revolving credit facility of up to $70 million
and two term loans aggregating up to $90 million. The $90 million term loans
may be used only to fund the Company's repurchase obligations, if any, in
connection with its 10 7/8% Senior Notes Due 2006. Also, in connection with the
Merger, the Company entered into a Purchase Agreement dated December 18, 1998,
to which the Company may issue up to $20 million aggregate principal amount of
its 10 7/8% Senior Subordinated Notes Due 2006 (the "Subordinated Notes"), to
(i) fund the Company's repurchase obligations, if any, in connection with its 10
7/8% Senior Notes Due 2006, or (ii) to finance or refinance acquisitions of the
Company. Borrowings under the New Credit Facility as of December 31, 1998 were
$18.5 million. The Senior Notes and the New Revolving Credit Facility contain
certain financial and other restrictive covenants, which, among other things,
require the Company to achieve certain financial ratios, limit capital
expenditures, restrict payment of dividends, and require certain approvals in
the event the Company wants to increase the borrowings. The Company also
established an overdraft credit facility to fund peak working capital needs for
its Canadian operation, which provides for borrowings up to $4.6 million.
The Company's principal sources of cash are from operations, borrowings under
its credit facilities and sales of Holdings Common Stock. The Company
anticipates its principal uses of cash will be to provide working capital,
finance capital expenditures, meet debt service requirements and finance
acquisitions. For the six months ended December 31, 1998 and 1997, the Company
had net cash provided by operating activities of $800,000 and $9.0 million,
respectively, which cash was used for purchases of equipment related to existing
stores, recently acquired stores and investments in technology. The Company's
total budgeted capital expenditures are currently anticipated to aggregate
approximately $2.7 million during its fiscal year ending June 30, 1999. As of
December 31, 1998, the Company had made capital expenditures of $2.4 million.
The actual amount of capital expenditures will depend in part upon the number of
new stores acquired and the number of stores remodeled. In addition, the Company
intends to spend up to $2.4 million during fiscal 1999 to purchase the equipment
necessary to implement a point-of-sale system.
The Company is highly leveraged, and borrowings under the new revolving credit
facility and the overdraft facility will increase the Company's debt service
requirements. Management believes that, based on current levels of operations
and anticipated improvements in operating results, cash flows from operations
and borrowings available under the revolving credit facility will enable the
Company to fund its liquidity and capital expenditure requirements for the
foreseeable future, including scheduled payments of interest on the Notes and
payment of interest and principal on the Company's other indebtedness. The
Company's belief that it will be able to fund its liquidity and capital
expenditure requirements for the foreseeable future is based upon the historical
growth rate of the Company and the anticipated benefits resulting from operating
efficiencies. Additional revenue growth is expected to be generated by increased
check cashing revenues (consistent with historical growth), and an expansion of
the Cash 'Til Payday Loan(R) Program. The Company also expects operating
expenses to increase, although the rate of increase is expected to be less than
the rate of revenue growth. Furthermore, the Company does not believe
20
<PAGE>
that additional acquisitions or expansion are necessary in order for it to be
able to cover its fixed expenses, including debt service. As discussed earlier
within this Management's Discussion and Analysis, the Commonwealth of
Pennsylvania initiated an EBT system in January 1998 which was fully implemented
during fiscal 1998. As a result, all of the Company's contracts with the
Commonwealth of Pennsylvania were terminated during fiscal 1998. The Company
believes the termination of these contracts will not have a material impact on
the Company's liquidity or capital resources. As a result of the foregoing
assumptions, which the Company believes to be reasonable, the Company expects to
be able to fund its liquidity and capital expenditure requirements for the
foreseeable future, including scheduled payments on the Notes and payments of
interest and principal on other indebtedness. There can be no assurance,
however, that the Company's business will generate sufficient cash flow from
operations or that future borrowings will be available under the new revolving
credit facility in an amount sufficient to enable the Company to service its
indebtedness, including the Notes, or to make anticipated capital expenditures.
It may be necessary for the Company to refinance all or a portion of the
principal of the Notes on or prior to maturity, under certain circumstances, but
there can be no assurance that the Company will be able to effect such
refinancing on commercially reasonable terms or at all.
On February 8, 1999, the Company announced that it had signed a definitive
purchase agreement A-D a letter of intent to acquire sixteen stores in two
separate transactions. The Company had signed a definitive purchase agreement
for the acquisition of 86.5% of a partnership which owns and operates six stores
in Alberta, Canada. The Company currently holds the remaining 13.5% interest. In
addition, the Company has completed the acquisition of a company which owns and
operates ten stores in the United Kingdom. The acquisitions were funded through
internally generated cash and approximately $5 million of borrowings on its
revolving credit facility.
Seasonality and Quarterly Fluctuations
The Company's business is seasonal due to the impact of tax-related services,
including cashing tax refund checks. Historically, the Company has generally
experienced its highest revenues and earnings during its third fiscal quarter
ending March 31 when revenues from these tax-related services peak. Due to the
seasonality of the Company's business, therefore, results of operations for any
fiscal quarter are not necessarily indicative of the results that may be
achieved for the full fiscal year. In addition, quarterly results of operations
depend significantly upon the timing and amount of revenues and expenses
associated with acquisitions and the addition of new stores.
Impact of Year 2000
General Description of the Year 2000 Issue and the Nature and Effect of the Year
2000 on Information Technology (IT) and Non-IT Systems
The Year 2000 Issue is the result of computer programs being written using two
digits rather than four to define the applicable year. Any of the Company's
computer programs that have time-sensitive software may recognize a date using
"00" as the year 1900 rather than the year 2000. This could result in a system
failure or miscalculations causing disruptions of operation, including, among
other things, a temporary inability to process transactions or engage in similar
normal business activities.
Based on recent assessments, the Company determined that it would be required to
modify or replace portions of its software and certain hardware so that those
systems will properly utilize dates beyond December 31, 1999. The Company
presently believes that with modifications or replacements of existing software
and certain hardware, the Year 2000 Issue can be mitigated. However, if such
modifications and replacements are not made, or are not completed timely, the
Year 2000 Issue will not have a material impact on the operations of the
Company.
The Company's plan to resolve the Year 2000 Issue involves the following four
phases: assessment, remediation, testing and implementation. To date the
Company has fully completed its assessment of all systems that could be
significantly affected by the Year 2000. The completed assessment indicated
that hardware systems could be affected. However, the Company has determined
that these systems will not present a material exposure as it related to the
Company's service to its customers.
Timetable for Completion of Each Remaining Phase Progress in Becoming Year 2000
Compliant
The remediation of hardware systems is expected to be completed by April 1999.
The testing of the hardware is expected to be completed by May 1999 with full
implementation by June 1999.
21
<PAGE>
Nature and Level of Importance of Third Parties and their Exposure to the Year
2000
To date, the Company is not aware of any external agent that would materially
impact the Company's results of operations, liquidity, or capital resources.
However, the Company has no means of ensuring that external agents will be Year
2000 ready. The inability of external agents to complete their Year 2000
resolution process in a timely fashion would not materially impact the Company.
Costs
The Company does not expect the costs to be material and does not expect the
projects to have a significant impact on operations.
Risks
Management of the Company believes it has an effective program in place to
resolve the Year 2000 Issue in a timely manner. As noted above, the Company has
not yet completed all necessary phases of the Year 2000 program. In the event
that the Company does not complete the remaining phases, there would not be a
material impact on the Company's results of operations, liquidity, or capital
resources, since the Company is not significantly dependent on technology.
Contingency Plans
The Company has contingency plans for maintaining its store operations. These
plans do not involve any technological tools because the Company is not
significantly dependent on technology.
Recent Accounting Pronouncements
The Company has adopted the Financial Accounting Standards Board, "FASB"
Statement No. 130, "Reporting Comprehensive Income" for the fiscal year ended
June 30, 1999. The adoption of this standard has not had a material effect on
the Company's results of operations, financial position, capital resources, or
liquidity.
In June 1997, the FASB issued Statement of Financial Accounting Standards No.
131, "Disclosures about Segments of an Enterprise and Related Information"
("SFAS 131"). SFAS 131 establishes standards for the way that public business
enterprises report information about operating segments in annual financial
statements and requires that those enterprises report selected information about
operating segments in interim financial reports. It also establishes standards
for related disclosures about products and services, geographic areas and major
customers. SFAS 131 is effective for financial statements for fiscal years
beginning after December 15, 1997, and therefore the Company will adopt its
requirements in connection with its annual reporting for the fiscal year ending
June 30, 1999.
In June 1998, the FASB issued Statement of Financial Accounting Standards No.
133, "Accounting for Derivative and Hedging Activities" ("SFAS 133"). SFAS 133
requires companies to record derivatives on the balance sheet as assets or
liabilities at fair value. It is effective for financial statements for fiscal
years beginning after June 15, 1999. The Company believes that SFAS 133 will
have no impact on the Company's future earnings and financial position,
as the Company does not currently engage in any derivative or hedging
activities.
22
<PAGE>
Forward-Looking Statements
This report may contain certain forward-looking statements regarding the
Company's expected performance for future periods, and actual results for such
periods may materially differ. Such forward-looking statements involve risks and
uncertainties, including risks of changing market conditions in the overall
economy and the industry, consumer demand, the success of the Company's
acquisition strategy and other factors detailed from time to time in the
Company's annual and other reports filed with the Securities and Exchange
Commission.
23
<PAGE>
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
There have been no material changes in quantitative and qualitative disclosures
in fiscal year 1999. Reference is made to Item 7A in the Annual Report on Form
10-K for the year ended June 30, 1998.
24
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
See Item 3. Legal Proceedings in the Company's audited financial
statements in its Annual Report of Form 10-K for the fiscal year ended
June 30, 1998.
Item 2. Changes in Securities and Use of Proceeds
Not Applicable
Item 3. Defaults Upon Senior Securities
Not Applicable
Item 4. Submission of Matters to a Vote of Security Holders
Not Applicable
Item 5. Other Information
Not Applicable
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
10.4 Employment Agreement, dated November 13, 1998, between the
Company, DFG Holdings, Inc., and Jeffrey Weiss.
10.5 Employment Agreement, dated December 18, 1998, between the
Company, DFG Holdings, Inc., and Donald F. Gayhardt, Jr.
10.13 Credit Agreement, dated as of December 18, 1998, among the
Company, DFG Holdings, Inc., the lenders from time to time
party thereto, Wells Fargo Bank, National Association, as
administrative agent, First Union Capital Markets and Wells
Fargo as arrangers, First Union National Bank, as
syndication agent, and U.S. Bank National Association, as
documentation agent.
10.17 Pledge and Security Agreement, dated as of December 18,
1998, among the Company, Wells Fargo Bank, National
Association, as administrative agent for itself and the
Lenders under the Credit Agreement .
10.18 Subordination Agreement, dated as of December 18, 1998,
among the Company, DFG Holdings, Inc., and Wells Fargo Bank,
National Association, as administrative agent for itself and
the Lenders under the Credit Agreement.
10.19 Supplemental Security Agreement (Trademarks), dated as of
December 18, 1998, among the Company and Wells Fargo Bank,
National Association, as administrative agent for itself and
the Lenders under the Credit Agreement.
25
<PAGE>
10.20 Purchase Agreement, dated as of December 18, 1998, among the
Company, GS Mezzanine Partners, L.P., GS Mezzanine Partners
Offshore, L.P., Stone Street Fund 1998, L.P., Bridge Street
Fund 1998, L.P., Ares Leveraged Investment Fund, L.P., and
Ares Leveraged Investment Fund II, L.P., relating to the
$20,000,000 aggregate principal amount of 10 7/8% Senior
Subordinated Notes Due 2006.
10.21 Exchange and Registration Rights Agreement, dated as of
December 18, 1998, among the Company, GS Mezzanine Partners,
L.P., GS Mezzanine Partners Offshore, L.P., Stone Street
Fund 1998, L.P., Bridge Street Fund 1998, L.P., Ares
Leveraged Investment Fund, L.P., and Ares Leveraged
Investment Fund II, L.P., relating to the $20,000,000
aggregate principal amount of 10 7/8% Senior Subordinated
Notes Due 2006.
10.22 Secured Note, dated December 18, 1998, made by Jeffrey Weiss
in favor of the Company.
10.23 Pledge Agreement, dated December 18, 1998, between the
Company and Jeffrey Weiss.
21.1 Subsidiaries of the Registrant.
27.1 Financial Data Schedule
(b) Reports on Form 8-K
None
26
<PAGE>
SIGNATURES
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 thereunto duly authorized.
DOLLAR FINANCIAL GROUP, INC.
Dated: February 16, 1999 *By: /s/ Richard S. Dorfman
----------------------------------
Name: Richard S. Dorfman
Title: Executive Vice President
and Chief Financial
Officer, (principal
financial and chief
accounting officer)
* The signatory hereto is the principal financial and chief accounting officer
and has been duly authorized to sign on behalf of the registrant.
27
<PAGE>
EXHIBIT 10.4
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement") is made and entered into as of
November 13, 1998, by and among DOLLAR FINANCIAL GROUP, INC., a New York
corporation ("DFG"), DFG HOLDINGS, INC., a Delaware corporation ("Holdings" and,
together with DFG, the "Employer") and JEFFREY WEISS, who resides at 260 Radnor-
Chester Road, Villanova, PA 19085 (the "Executive").
W I T N E S S E T H :
WHEREAS, Employer and Executive are parties to a certain Employment
Agreement, dated as of August 8, 1996 (the "Prior Agreement");
WHEREAS, certain subsequent events, including a Recapitalization of
Holdings and a Merger of Holdings with DFG Acquisition, Inc. (the "Merger"),
make a termination of the Prior Agreement appropriate as of the first business
day immediately subsequent to the consummation of the Merger (the "Effective
Date");
WHEREAS, Employer and Executive mutually agree to terminate the Prior
Agreement, effective as of the Effective Date;
WHEREAS, in the event the Merger is not consummated, the Prior Agreement
shall remain effective and this Agreement will be considered null and void
without liability or obligation to any party hereto;
WHEREAS, Employer desires to continue to employ Executive and Executive
desires to accept employment by Employer upon the terms and conditions
hereinafter set forth; and
NOW, THEREFORE, in consideration of the premises and the mutual covenants
hereinafter set forth, and intending to be legally bound hereby, the parties
hereby agree as follows:
1. Effective Date and Termination of Prior Agreement. The Prior Agreement is
hereby terminated effective as of the Effective Date and superseded by this
Agreement. In the event that the Merger is not consummated, this Agreement
shall be deemed null and void without liability or obligation to any party
hereto and the Prior Agreement shall remain effective without any
modifications thereto. The Executive shall be entitled to his accrued salary
and bonus under the Prior Agreement, prorated to the Effective Date. Except
as set forth in this paragraph 1, as of the Effective Date, Employer and
Executive shall have no further obligations under the Prior Agreement.
2. Employment.
a. Employer agrees to employ Executive, and Executive agrees to be so
employed, in the capacity of Chief Executive Officer of each of Holdings
and DFG, for the Term (as defined herein), unless earlier terminated in
accordance with the provisions of this Agreement.
<PAGE>
b. Each of Holdings and DFG agrees to use its commercially reasonable
efforts, subject to stockholder vote, to nominate Executive to the
boards of directors of both DFG and Holdings, and further to nominate
Executive as Chairman of such boards for so long as he is employed by
Employer in the capacity of Chief Executive Officer.
c. Executive's employment hereunder shall be principally based in the
Berwyn, Pennsylvania area or within reasonable commuting distance of
Villanova, Pennsylvania.
3. Term and Termination.
a. The term of Executive's employment hereunder shall be for a period of
five (5) years, commencing on the Effective Date (the "Term").
b. Upon Executive's decision to terminate his employment, Employer shall
have no further obligation to Executive, except as otherwise expressly
provided herein.
c. Notwithstanding any other provisions herein, Executive's employment
under this Agreement may be terminated by the Employer without further
obligation to Executive, at any time for Cause (defined, for purposes of
this Agreement, as (i) Executive's failure to cure or remedy any
material mismanagement or negligence in the management of Employer's
business within fifteen (15) days after written notice by Employer of
such mismanagement or negligence; (ii) Executive's willful refusal,
after written notice by Employer, to cure within a period of fifteen
(15) days any material breach of this Agreement or failure to perform
any material obligation set forth herein; (iii) an act of fraud, theft,
dishonesty or deceit committed against the Employer, including any
intentional material misrepresentation to the board of directors of
either Holdings or DFG; or (iv) a final non-appealable adjudication in a
criminal or civil proceeding (including any settlement or plea of nolo
contendere) that Executive has committed a fraud, dishonest act, an act
of moral turpitude or any other felony or misdemeanor relating to or
adversely affecting Executive's employment, the business of the Employer
or the ability of Executive to perform his obligations herein).
d. In the event that Executive is terminated by the Employer, other than
for Cause, in relation to a Change of Control (as defined herein),
Executive shall have the right to demand payment in full, discounted to
present value at the prime rate of interest charged by the Employer's
primary lender, of any unpaid Base Salary for the Term, without
mitigation (the "Severance Benefit").
e. In the event Executive is terminated by the Employer, other than for
Cause, under any circumstances not related to a Change of Control,
Executive shall be paid his Base Salary in equal installments in
accordance with past payroll practices of Employer for the remainder of
the Term. Executive shall not be
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<PAGE>
required to seek alternative employment following the payment to him of
any such Base Salary pursuant to this paragraph 3(e); however, any
-------
compensation earned or amounts paid to Executive in any such alternate
employment shall serve to mitigate Employer's severance obligations to
Executive hereunder. Notwithstanding the foregoing, Employer shall be
responsible for not less than the lesser of one (1) year's Base Salary
or the Base Salary remaining unpaid for the Term, regardless of
mitigation offsets.
f. For purposes of this Agreement, a Change of Control shall be deemed to
have occurred if and when:
i) a person or entity other than Green Equity Investors II, L.P., or
any affiliate, related party or entity controlled by Leonard Green
& Partners, L.P., or sponsored fund thereof (collectively "GEI
II") owns equity securities having at least 51% of the voting
power of Holdings (or any successor or surviving entity);
ii) either DFG or Holdings becomes a subsidiary of an entity
unaffiliated with GEI II or shall be merged or consolidated into
another entity and the voting power of the surviving entity is
owned at least 51% by a person or entity other than GEI II; or
iii) all or substantially all of the assets of either DFG or Holdings
shall have been sold to a party or parties the equity of which is
owned at least 51% by a person or entity other than GEI II.
g. Except as otherwise required by law, (i) in the event of Executive's
termination with Cause, the benefits payable to Executive pursuant to
paragraph 6 of this Agreement shall cease effective as of the date of
termination and (ii) in the event of Executive's termination without
Cause, Employer shall maintain the health benefits provided to Executive
by Employer at the time of termination for the remainder of the Term,
subject to mitigation offset.
4. Time and Efforts.
a. Executive shall diligently and conscientiously devote substantially all
of his business time and attention and best efforts to the business
affairs of Employer and the discharge of his duties hereunder.
b. Notwithstanding the foregoing, Employer acknowledges and agrees that
Executive may:
i) maintain current board memberships in companies that do not
compete against Employer or any subsidiaries (including, without
limitation, Avalon Investment Partners, LLC, NCI Acquisition
Corporation and Cloverdale Press, Inc.). Executive must obtain
prior consent of Employer to engage in additional board
memberships, which consent shall not be unreasonably withheld or
delayed; and
-3-
<PAGE>
ii) reasonably maintain or add to current personal investments;
provided, however, any involvement or additional activities allowed
under this paragraph 4(b), including any investment holdings or
activities, shall not be competitive or detrimental to Employer or
otherwise interfere in any manner with Executive's performance of his
duties under this Agreement.
5. Compensation.
a. Base Salary. In consideration of the services of the Executive, Holdings
-----------
shall pay or cause one of its subsidiaries to pay to Executive a salary
at an annual rate of Five Hundred Thousand Dollars ($500,000) (the "Base
Salary"), in equal installments in accordance with the past payroll
practices of Employer, but in no event less frequently than monthly. The
Base Salary will be reviewed bi-annually by the board of directors of
Holdings in good faith and may be increased in the discretion of the
board of directors of Holdings, or a committee thereof.
b. Bonus and Incentive Compensation. As additional compensation for the
services of Executive, Holdings shall pay or cause one of its
subsidiaries to pay to Executive a cash bonus with respect to each
fiscal year payable within thirty (30) days after the conclusion of the
financial audit of the relevant fiscal year.
i) Determination based on EBITDA. The actual bonus due under clause
(ii) below and all actual incentive compensation due under clause
(iii) below for the fiscal year ended June 30, 1999 ("FY1999") and
for any subsequent fiscal year shall be determined based upon the
achievement by the Employer of target annual income before income
taxes, depreciation, amortization and management fees ("EBITDA").
EBITDA for any fiscal year shall be based on the financial data as
reported in the audited annual financial statements of Holdings
and its subsidiaries for such year. The EBITDA target for FY1999
shall be $36 million. EBITDA targets for fiscal years subsequent
to FY 1999 shall be determined in good faith by the board of
directors of Holdings, or a committee thereof. EBITDA targets for
a given fiscal year shall be adjusted in the good faith
determination of the board of directors of Holdings for any
acquisitions or dispositions made in such fiscal year taking into
consideration the impact of such acquisition or disposition on
EBITDA in such fiscal year.
ii) Annual bonus. For FY1999, Executive shall receive a maximum annual
bonus of Three Hundred Fifty Thousand Dollars ($350,000) (pro
rated accordingly) for the period employed based upon achieving an
EBITDA of $36 million; provided, however, that the annual bonus
-------- -------
shall be reduced ratably as EBITDA drops below $36 million and
shall be zero ($0), if EBITDA is $32.5 million or less. The annual
bonus for subsequent fiscal years during the Term shall be based
on a
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<PAGE>
formula similar to that used in FY1999, with adjustments made in
good faith by the board of directors of Holdings. Any annual
bonuses hereunder shall be paid pro rata for the period during
which Executive is employed by Employer hereunder.
iii) Annual incentive compensation. For FY1999, Holdings shall pay or
cause one of its subsidiaries to pay 2.5% of the incremental
FY1999 EBITDA above $36 million to the Executive, subject to the
limitations of paragraph 5(c). The annual incentive compensation
for subsequent fiscal years during the Term shall be based on
EBITDA targets established by the board of directors pursuant to
subparagraph (i) above, subject to the limitations in paragraph
5(c), with adjustments made in good faith by the board of
directors of Holdings, and shall be paid pro rata for the period
during which Executive is employed by Employer hereunder.
iv) Bonus, incentive compensation and termination. Notwithstanding
anything to the contrary in this Agreement: (i) in the event
Executive's employment is terminated by reason of Cause, or by
Executive's decision to terminate his employment, no bonus or
incentive compensation for the year in which termination or
resignation occurs shall be payable; and (ii) if Executive's
employment terminates for any other reason, Executive's bonus and
incentive compensation for the year in which termination occurs
shall be calculated on the basis of the EBITDA results for the
full fiscal year in which termination occurs, but Executive's
bonus and incentive compensation shall be pro rated based upon the
number of days in such year in which he was employed by Employer.
v) Compliance with debt payment obligations. Regardless of whether an
EBITDA target is achieved, no bonus or incentive compensation will
be paid or payable to Executive if the Employer has defaulted or
is not current on its debt payment obligations under any of its
then outstanding credit facilities, indentures or other debt
instruments; provided, that such withheld compensation shall be
--------
paid if such default is of a technical and nonsubstantive nature
and is cured within thirty (30) days of notice thereof.
c. Total compensation. Notwithstanding the foregoing provisions of this
------------------
paragraph 5, the total compensation paid or caused to be paid to
Executive by Employer with respect to any fiscal year, including salary,
bonuses and annual incentive compensation but excluding the value of the
benefits set forth in paragraph 6, shall not exceed One Million Two
Hundred Thousand Dollars ($1,200,000).
6. Benefits. Executive shall be entitled to full benefits as historically
provided to Executive by Employer, subject to compliance with all applicable
laws. Executive
-5-
<PAGE>
shall be eligible to participate in all fringe benefit programs of Employer
offered from time to time to its senior management employees including:
i) auto allowance at present rate;
ii) club memberships at present rate;
iii) appropriate class of travel;
iv) $35,000 annually for Executive to purchase his own life insurance
and disability insurance (the "Executive Insurance Policy");
v) reimbursement of tax and financial planning costs, not to exceed
$10,000 annually;
vi) uninsured medical and dental costs, not to exceed $15,000
annually;
vii) participation in any non-discriminatory profit-sharing or ERISA
pension, 401(k) and related plans as they are or may be in
effect; and
viii) one month paid vacation.
7. Expenses. Employer will reimburse Executive for all reasonable, ordinary
and necessary expenses (including travel, business entertainment and business
development) incurred by him in carrying out his duties under this Agreement.
Executive shall present Employer with an itemized statement of such expenses in
such form as the Employer may request or consistent with policies of the
Employer. The availability of such reimbursements from the Employer is subject
to compliance with all applicable laws.
8. Equity Obligations and Rights.
a. During the Term, except in a transaction expressly permitted in this
Agreement or a transaction described in Sections 2.4, 3.1 and 4.3 of the
Stockholder's Agreement (as defined below), Executive agrees not to,
directly or indirectly, sell, transfer or otherwise dispose of (the
"Sale") any of the equity securities of Holdings now owned or hereafter
acquired by Executive, unless: (i) such Sale is to the spouse or minor
child of Executive or any trust in which Executive has voting control
and established for estate planning purposes (provided such spouse,
minor child or trust is subject to the pledge of shares, restrictions on
transfer and the repurchase rights and obligations set forth herein);
(ii) such Sale is part of a transaction in which GEI II sells at least
five percent (5%) of the then outstanding equity securities of Holdings
to a third party (subject to such terms and conditions as may be
determined by GEI II) or (iii) the board of directors of Holdings
approves of such Sale by Executive.
b. On the closing date of the Merger, Executive shall have the right (the
"Initial Right") to purchase 1335.9908 shares of Class A Common Stock of
Holdings (the "Shares") on the same economic terms with the common
equity investment in Holdings of GEI II, but subject to repurchase and
other terms as described herein. If GEI II makes any additional equity
investment in Holdings after the closing date of the Merger, Executive
shall have the right (together with the Initial Right, the "Rights") to
purchase the same equity securities in Holdings on the same economic
terms as GEI II (the "Additional
-6-
<PAGE>
Shares"), in an amount sufficient to enable Executive to maintain the
6.29% equity investment in Holdings represented by the Shares on a fully
diluted basis, after Executive and GEI II have been diluted pro-rata by
the issuance of any equity securities at the closing of the Merger as
set forth in Schedule 1 attached hereto or subsequent to the Merger
----------
(including options, warrants and other convertible securities) to
unaffiliated third parties and by the grant and exercise of any
management options as set forth on Schedule 1 attached hereto and
----------
provided for in a management option plan to be adopted by Holdings at
the closing of the Merger or shortly thereafter.
c. Employer will make available to Executive an interest free loan or loans
(the "Equity Loan") equal to the aggregate purchase price of the Shares
and Additional Shares (if any). Such Equity Loan shall be repayable on
the date that is one (1) year after the end of the Term; provided,
--------
however, subject to the rights of the Employer (or GEI II) to repurchase
-------
the Shares or Additional Shares, the Equity Loan shall be repayable
immediately in the event that Executive is terminated, Executive
terminates his employment or Executive dies or becomes disabled;
provided, further, however, in the event of a termination by Employer
-------- ------- -------
not for Cause or the death or disability of Executive, such acceleration
and repayment obligation shall be reasonably held in abeyance (not to
exceed 150 days) if the Executive or his legal representative requires
such additional 150 days to liquidate the equity securities in order to
repay such Executive Loan. For purposes of this Agreement, "disabled" or
"disability" shall mean Executive's inability to perform substantially
all of his duties and responsibilities to the Employer by reason of a
physical or mental illness, injury, infirmity or condition for a
continuous period of one hundred eighty (180) days or one or more
periods aggregating one hundred eighty (180) days in any twelve (12)
month period or at such earlier time as Executive or Employer submits
medical evidence in the form of a physician's certification that
Executive has a physical or mental illness, injury, infirmity or
condition that will likely prevent Executive from substantially
performing all of his duties and responsibilities for one hundred eighty
(180) days or longer. Such Equity Loan will be collateralized by a
pledge of the Shares, the Additional Shares and 400.85 shares of Class A
Common Stock of Holdings previously owned by Executive (collectively,
the "Collateral"). The recourse of the Employer to collect upon the
Equity Loan shall be limited to the Collateral and Employer shall have
no further recourse against Executive in order to collect any such
amounts. In the event that Employer forecloses upon the Collateral,
Executive shall retain the benefit of the amount by which the value of
the Collateral (as determined in accordance with paragraph 8(d)(i)
below) exceeds the principal due on the Equity Loan. If Holdings shall
exercise a right, or have an obligation hereunder or under the
Stockholder's Agreement to repurchase from the Executive any equity
securities in Holdings, the outstanding principal balance of the Equity
Loan shall be applied against the purchase price of such repurchase
rights or obligations. Subject to compliance with this Agreement and the
Stockholder's Agreement, in the event of a Sale of the Collateral by
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<PAGE>
Executive, the proceeds of such Sale shall first be applied to
immediately repay the Equity Loan, regardless of the maturity date of
the Equity Loan.
d. The Shares and Additional Shares shall be subject to the following terms
and provisions:
i) In the event Executive's employment is terminated by Employer for
Cause or by Executive's decision to terminate his employment, or
in the event of Executive's death or disability, then Employer (or
GEI II) shall have the option to repurchase from Executive the
Shares and the Additional Shares. The repurchase price of such
Shares and Additional Shares shall be determined as set forth
herein. A certain number of Shares and Additional Shares shall be
repurchased at the purchase price paid by Executive (the "Purchase
Price Shares"), which number shall be determined in the following
manner: (A) for the Shares, by multiplying the number of Shares
purchased by Executive by a fraction, the numerator of which is
the number of months remaining in the Term, and the denominator of
which is 60; and (B) for the Additional Shares, if any, by (i)
multiplying the number of Additional Shares purchased on any
specific date by a fraction, the numerator of which is the number
of whole months remaining from the date of termination to the date
that is 60 months from the specific purchase date (the "Additional
Term(s)") of such Additional Shares and the denominator of which
is 60, and (ii) aggregating the number of Additional Shares
determined pursuant to the foregoing clause (i) for each specific
purchase date (the number of shares determined by subparagraphs
(A) and (B) above shall be referred to as the "Repurchase
Number"); provided, however, in the event that: (i) GEI II shall
-------- -------
sell, transfer, or otherwise dispose of for profit (including
through a merger or public offering) any of its equity securities
of Holdings to a third party during the Term (any such sale,
transfer or disposition being referred to as a "GEI II Sale"), the
number of Purchase Price Shares shall be limited to a number which
is the lesser of (I) the Repurchase Number or (II) the amount
determined by multiplying the total number of Shares and
Additional Shares by a fraction the numerator of which shall be
the total number of equity securities then held by GEI II and the
denominator of which shall be the total number of equity
securities that would have been held by GEI II, if no GEI II Sale
had theretofore occurred; or (ii) a death or disability of the
Executive shall occur during the Term, the number of months
remaining in the Term or the Additional Term(s) shall be rounded
down to the nearest 12 month increment. Any equity securities of
Holdings that do not constitute Purchase Price Shares shall be
repurchased at the then fair market value as determined in good
faith by the board of directors of Holdings in accordance with
Schedule 2 attached hereto. The purchase price to be paid by
----------
Employer shall be applied against the outstanding balance of the
Equity Loan.
-8-
<PAGE>
ii) Subject to the provisions of paragraph 8(e) below, in the event of
Executive's death or disability during the Term, at the election
of the Executive or his legal representative, the Employer shall
be obligated to repurchase the Shares and Additional Shares with
the purchase price being applied against the outstanding balance
of the Equity Loan (the "D&D Put"). The repurchase price of the
Shares and Additional Shares subject to the D&D Put shall be
determined in accordance with the provision of paragraph 8(d)(i)
above. The repurchase obligation of the Employer pursuant to the
D&D Put is limited to the outstanding balance of the Equity Loan.
The obligation of Employer to repurchase the Shares or Additional
Shares is subject to Employer's compliance with certain covenants
and other obligations under its credit agreements, indentures and
other debt instruments. The Shares and Additional Shares subject
to repurchase shall be free and clear of any and all liens,
claims, charges and encumbrances other than the pledge of such
shares to secure the Equity Loan.
iii) In the event that the repurchase of the equity securities of
Holdings would result in a violation of applicable law or of any
contract of Holdings (including, without limitation, a violation
of any covenants in an indenture, credit agreement or other debt
instrument) such repurchase right or obligation shall be tolled
for up to six (6) months to allow Holdings to take reasonable
actions to avoid or cure such violation. If Holdings is unable to
avoid or cure such violation within the six (6) month period, the
repurchase right or obligation shall terminate and expire without
affecting the nonrecourse status of the Equity Loan.
e. During the Term of this Agreement, the Employer shall use commercially
reasonable efforts to maintain the two key man insurance policies on the
life and disability of the Executive for coverage equal to an aggregate
of Ten Million Dollars ($10,000,000) (the "Key Man Policy") that are
currently in place as of the date hereof. Holdings or DFG shall own the
Key Man Policy and Holdings shall be the beneficiary thereunder.
Provided that Employer is able to maintain such insurance, in the event
of Executive's death or disability, the Executive or his legal
representative shall have the right to put (the "Put") any equity
securities of Holdings (including the Shares and Additional Shares) held
by Executive or his legal representative to Holdings for up to the full
amount of the net proceeds actually received by Holdings under the Key
Man Policy; provided, however, if any Shares, Additional Shares or other
-------- -------
equity securities are subject to the Equity Loan, the Executive Loan or
any other indebtedness to the Employer, any outstanding balance of such
loans shall be repaid first before any payments are made by Holdings
from the proceeds of the Key Man Policy. The repurchase price of the
Shares and Additional Shares shall be determined in accordance with the
provisions set forth in paragraph 8(d)(i) above. The aggregate amount of
the Put shall not exceed the aggregate value of: (i) the outstanding
balances of the Equity
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<PAGE>
Loan, the Executive Loan and any other indebtedness of the Executive to
the Employer and (ii) the net proceeds actually received by Holdings
pursuant to the Key Man Policy. If properly exercised, the Put shall be
settled first by the cancellation of any outstanding balance under the
Equity Loan, the Executive Loan and any other indebtedness of Executive
to Employer, and then in cash promptly following receipt of the
insurance proceeds by Holdings. The Put shall be exercised, if at all,
by written notice from the Executive or his legal representative to
Holdings within sixty (60) days following Executive's death or
disability. To the extent that the Key Man Policy is not available on
commercially reasonable terms or an exclusion from coverage is
applicable, the obligations of Holdings to repurchase equity securities
pursuant to the Put shall be limited to a total amount of One Million
Dollars ($1,000,000) in cash, in addition to any repurchase of equity
securities for up to the full amount of any outstanding indebtedness of
Executive to Holdings. The obligation of Holdings to repurchase the
equity securities pursuant to the Put is subject to Employer's
compliance with certain covenants and other obligations in its credit
agreements, indentures and other debt instruments. The equity securities
in Holdings owned by the Executive subject to the Put shall be free and
clear of any and all liens, claims, charges and encumbrances other than
the pledge of such shares to Holdings.
f. In the event that Executive terminates his employment (including a death
or disability of Executive) or Employer terminates Executives employment
for Cause, the Employer (or GEI II) shall have the option and right to
repurchase all of the equity securities of Holdings (other than the
Shares and Additional Shares which are governed by paragraph 8(d)(i))
(the "Call Option"), then owned, directly or indirectly, by Executive.
The repurchase price of such equity securities shall be determined in
good faith by the board of directors of Holding in accordance with
Schedule 2 attached hereto. The repurchase price paid to Executive shall
----------
be applied against any outstanding balances of the Equity Loan, the
Executive Loan or any other indebtedness of Executive to Employer, in
the case of the Equity Loan, to the extent that the shares covered by
such repurchase are the subject of a pledge securing the Equity Loan.
g. On the date hereof, GEI II, Holdings and its stockholders have executed
a Stockholder's Agreement (the "Stockholder's Agreement"). All equity
securities now owned or subsequently acquired by Executive shall be
subject to the terms of the Stockholder's Agreement. The Rights are
personal to the Executive and are non-transferable.
h. The repurchase price and the number of shares subject to the repurchase
rights or obligations of Holdings are subject to equitable adjustment to
take into account stock dividends, stock splits, recapitalizations and
other dilutive events, all as reasonably determined in good faith by the
board of directors of Holdings.
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<PAGE>
9. Executive Loan. In addition to the Equity Loan, Employer shall make
available to Executive an interest free loan for up to Two Million Dollars
($2,000,000) (the "Executive Loan"). The Executive Loan will be secured by
310.0775 shares of Class A Common Stock of Holdings that are not already
subject to the Equity Loan. The Executive Loan shall be repayable on the
date that is one (1) year from the end of the Term; provided, however,
-------- -------
subject to the rights of the Employer (or GEI II) to repurchase the equity
securities of Executive, the Executive Loan shall be repayable immediately
in the event that Executive is terminated, Executive terminates his
employment or Executive dies or becomes disabled; provided, further,
-------- -------
however, in the event of a termination by Employer not for Cause or the
-------
death or disability of Executive, such acceleration and repayment obligation
shall be reasonably held in abeyance (not to exceed 150 days) if the
Executive or his legal representative requires such additional 150 days to
liquidate the equity securities in order to repay such Executive Loan. The
shares pledged in connection with the Executive Loan will be valued at the
then current fair market value, in accordance with Schedule 2 attached
----------
hereto for purposes hereof and in the event of foreclosure. Subject to
compliance with this Agreement and the Stockholder's Agreement, in the event
of a Sale by the Executive of the equity securities pledged pursuant to the
Equity Loan, the proceeds of such Sale shall first be applied to immediately
repay the Executive Loan, regardless of the maturity date of the Executive
Loan.
10. Corporate Opportunities. If Executive receives notice of or otherwise
obtains information regarding potential acquisitions and other corporate
opportunities within Employer's then current and prospective lines of
business, Executive agrees to offer such acquisitions and other corporate
opportunities first to Employer and second to GEI II, after which Executive
shall be free to proceed independently to exploit such acquisitions and
other corporate opportunities, subject to the provisions of paragraph 4
hereof.
11. Covenant Not to Compete. In consideration of the compensation and other
benefits to be paid to Executive pursuant to this Agreement, Executive
agrees that he will not, without prior written consent of the board of
directors of Holdings, for a period the greater of: (i) two (2) years
following the termination of Executive's employment with Employer for any
reason whatsoever or (ii) one (1) year beyond any payment or repurchase made
pursuant to this Agreement by Employer (or to such lesser extent and for
such lesser period as may be deemed enforceable by a court of competent
jurisdiction, it being the intention of the parties that this paragraph 11
shall be so enforced):
a. directly or indirectly engage in the United States, Canada or any other
country in which the Employer now or hereafter conducts business, in any
business in direct competition with the business conducted by Employer
at the time of termination or any business that Employer has a bona fide
plan to commence or enter into, either as an officer, director,
employee, independent contractor or as a 2% or greater owner, partner,
or stockholder in a publicly traded entity;
-11-
<PAGE>
b. directly or indirectly cause or request a curtailment or cancellation of
any significant business relationship that Employer has with a current
or prospective vendor, business partner, supplier or other service or
goods provider that would have a material adverse impact on the business
of Employer; or
c. directly or indirectly induce or attempt to influence any employee of
Employer to terminate his or her employment with Employer.
d. In addition to and without limiting the foregoing, upon the termination
of the Executive's employment by the Employer for any reason, whether
before or after the expiration of the Term, Executive shall not at any
time directly or indirectly disclose, use, transfer or sell to any
person, firm or other entity any trade, technical or technological
secrets, any details of organization or business affairs, or any
confidential or proprietary information of Employer. For the purposes of
this paragraph 11, the term Employer shall be deemed to include Employer
and all of its subsidiaries.
12. Inventions. All patents, trademarks, trade names, copyrights, inventions,
discoveries, financial models, computer software, graphics products,
advertising products, promotional materials, market studies and business
plans (collectively, the "Intellectual Property") relating to Employer's
business that Executive may make, conceive or learn during the term of his
employment by the Employer (whether before, during or after the Term,
whether during working hours or otherwise, or within six (6) months
following the termination of his employment for any reason) shall be the
exclusive property of Employer. Executive agrees to disclose any such
Intellectual Property to the board of directors of Holdings and to do at
Employer's expense all lawful things necessary or useful to assist Employer
in securing their full enjoyment and protection. In the event of any breach
or threatened breach of the provisions of this paragraph 12 or the preceding
paragraph 11, Employer may apply to any court of competent jurisdiction to
enjoin such breach. Any such remedy shall be in addition to Employer's
remedies at law under such circumstances.
13. Notices. Any notice given hereunder shall be in writing and delivered or
mailed by certified mail or overnight courier service (with proof of
delivery) and addressed to the appropriate party at the address set forth
below or at such other address as the party shall designate from time to
time in a notice.
-12-
<PAGE>
If to Executive:
---------------
Jeffrey Weiss
260 Radnor-Chester Road
Villanova, PA 19085
Telephone: (610) 995-9170
With a copy to:
--------------
Wolf, Block, Scherr and Solis-Cohen LLP
111 South 15th Street, 12th Floor
Philadelphia, PA 19102
Attention: Mark Alderman
Telephone: (215) 977-2100
If to Employer:
--------------
DFG Holdings, Inc.
1436 Lancaster Avenue, Suite 210
Berwyn, PA 19312
Attention: Chief Financial Officer
Telephone: (610) 296-3400
With a copy to:
--------------
Green Equity Investors II, L.P.
11111 Santa Monica Boulevard, Suite 2000
Los Angeles, CA 90025
Attention: Greg Annick
Telephone: (310) 954-0404
14. Binding Effect. This Agreement shall inure to the benefit of and be binding
upon Employer, and its successors and assigns. Executive acknowledges that
these services are unique and personal. Accordingly, Executive may not
assign any of his rights or delegate any of his duties or obligations under
this Agreement.
15. Waiver. Failure to insist in any one or more instances on strict compliance
with the terms of this Agreement shall not be deemed a waiver. Waiver of a
breach of any provision of this Agreement shall not be construed as a waiver
of any subsequent breach.
16. Governing Law; Disputes. This Agreement is made and delivered in, and shall
be construed in accordance with the substantive laws of, the Commonwealth of
Pennsylvania and the United States of America without regard to conflict of
law principles. Any claims, controversies, demands, disputes or differences
between or among the parties hereto arising out of, or by virtue of, or in
connection with, or otherwise relating to this Agreement shall be submitted
to and settled by arbitration conducted in Philadelphia, Pennsylvania before
three arbitrators, each of whom shall be knowledgeable in the field of
employment law. Such arbitration shall otherwise
-13-
<PAGE>
be conducted in accordance with the rules then obtaining of the American
Arbitration Association. The parties hereto agree to share equally the
responsibility for all fees of the arbitrators, abide by any decision
rendered as final and binding, and waive the right to appeal the decision or
otherwise submit the dispute to a court of law for a jury or non-jury trial.
The parties hereto specifically agree that neither party may appeal or
subject the award or decision of any such arbitrator to appeal or review in
any court of law or in equity or by any other tribunal, arbitration system
or otherwise. Judgment upon any award granted by such an arbitrator may be
enforced in any court having jurisdiction thereof.
17. Severability. In the event that any provision of this Agreement shall be
determined to be invalid by a court of competent jurisdiction, such
determination shall in no way affect the validity or enforceability of any
other provisions hereof.
18. Entire Agreement; Miscellaneous. The parties acknowledge and agree that they
are not relying on any representations, oral or written, other than those
expressly contained herein. This Agreement supersedes all proposals, oral or
written, all negotiations, conversations or discussions between the parties
and all course of dealing. All prior understandings and agreements between
the parties regarding employment matters are hereby merged in this
Agreement, which alone is the complete and exclusive statement of their
understanding as to employment. No waiver or modification of this Agreement
shall be valid unless the same shall be in writing and signed by the party
sought to be charged therewith. Time is of the essence in this Agreement and
each and every provision hereof. This is a personal services agreement; no
agency, partnership, joint venture or other joint relationship is created
hereby. The parties acknowledge that they each participated in drafting this
Agreement, and there shall be no presumption against any party on the ground
that such party was responsible for preparing this Agreement or any part
hereof. Paragraph headings are for convenience of reference only and are not
intended to create substantive rights or obligations.
-14-
<PAGE>
IN WITNESS WHEREOF, this Agreement has been duly executed by the
undersigned as of the day and year first above written.
DFG HOLDINGS, INC. DOLLAR FINANCIAL GROUP, INC.
By: By:
------------------------ ----------------------------
(Employer) (Employer)
------------------------
Jeffrey A. Weiss
-15-
<PAGE>
Schedule 1
----------
<TABLE>
<CAPTION>
Stockholder Number of Shares
- ----------- ----------------
<S> <C>
GS Mezzanine Partners, L.P. 522.6861
GS Mezzanine Partners Offshore, L.P. 280.6742
Stone Street Fund 1998, L.P. 22.3748
Bridge Street Fund 1998, L.P. 6.7531
Ares Leveraged Investment Fund, L.P. 104.0610
Ares Leveraged Investment Fund II, L.P. 104.0610
New Mgmt Option Plan 1,413.3186
</TABLE>
-16-
<PAGE>
Schedule 2
----------
Fair market value of the Class A Common Stock, par value $.001 (the "Common
Stock"), of DFG Holdings, Inc. (the "Company") shall be determined as follows:
(a) for the purposes of the Agreement, the "fair market value" of each
of the shares of the Common Stock of the Company shall be determined on the
basis of the fair market value of the entire common equity of the Company
as of the date of valuation, less an appropriate discount for lack of
liquidity and minority interest; provided however, such discount for lack
-------- -------
of liquidity and minority interest shall not apply in the event such
stockholder owns on the closing date of the Merger at least ten percent
(10%) of the entire common equity of the Company;
(b) during the 60 day period following the date of termination or the
date on which an option or other repurchase event occurs or a repurchase
right is exercised (as the case may be), the Executive with respect to whom
such event occurred or such right was exercised (as the case may be), or
his personal representative, on the one hand, and the Board of Directors of
the Company (the "Board of Directors") (following consultations with GEI
II, if GEI II other than the Company is exercising a repurchase right), on
the other hand, shall attempt, reasonably and in good faith, to agree upon
the fair market value;
(c) in the event the Executive (or his personal representative, as the
case may be) and the Board of Directors are unable to so agree, than within
ten (10) business days after the expiration of said sixty (60) day period,
the Board of Directors and such Executive (or his personal representative,
as the case may be) shall mutually agree upon, and retain, a nationally
recognized independent appraiser of closely held businesses (the
"Appraiser"). The Executive (or his personal representative, as the case
may be), on the one hand, and the Board of Directors, on the other hand,
shall each submit to the Appraiser such parties' respective opinions as to
the fair market value, together with such supporting data as such party
deems relevant. The Appraiser shall then conduct its own evaluation of
such opinions and such data, and shall conduct such independent procedures
and investigation as the Appraiser shall deem necessary in order to form an
opinion as to the fair market value. However, the Appraiser shall be
limited to selecting, as the fair market value, either (x) the opinion of
the Executive (or his personal representative, as the case may be), or (y)
the opinion of the Board of Directors. The Appraiser shall give written
notice of its determination to the Executive (or his personal
representative, as the case may be) and the Company. The fair market value
as determined by the Board of Directors shall be the "Board Fair Market
Value" and the fair market value as determined by the Executive (or his
personal representative) shall be the "Executive Fair Market Value". If
the Appraiser shall select the Board Fair Market Value, the fees and costs
of the Appraiser shall be paid by the Executive (or his personal
representative, as the case may be). If the Appraiser shall select the
Executive Fair Market Value, the fees and costs of the Appraiser shall be
paid by the Company.
-17-
<PAGE>
EXHIBIT 10.5
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement") is made and entered into as of
December 18, 1998, by and among DOLLAR FINANCIAL GROUP, INC., a New York
corporation ("DFG"), DFG HOLDINGS, INC., a Delaware corporation ("Holdings" and,
together with DFG, the "Employer") and DONALD F. GAYHARDT, JR., who resides at
511 Lynmere Road, Bryn Mawr, PA 19010 (the "Executive").
W I T N E S S E T H :
WHEREAS, in connection with that certain Recapitalization of Holdings and a
Merger of DFG Acquisition, Inc. ("Acquisition") with Holdings (the "Merger"),
pursuant to the Agreement and Plan of Merger, dated as of November 13, 1998,
among Holdings, Acquisition and certain stockholders of Holdings (the "Merger
Agreement"), Employer desires to employ Executive and Executive desires to
accept employment by Employer upon the terms and conditions hereinafter set
forth;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
hereinafter set forth, and intending to be legally bound hereby, the parties
hereby agree as follows:
1. Employment.
a. Employer agrees to employ Executive, and Executive agrees to be so
employed, in the capacity of President of each of Holdings and DFG.
b. Executive's employment hereunder shall be principally based in the
Berwyn, Pennsylvania area or within reasonable commuting distance of
Bryn Mawr, Pennsylvania. Reasonable travel in the normal course of
business may be required of Executive.
2. Term and Termination.
a. Executive's employment with Employer shall be for a term of two (2)
years, beginning on the date hereof and expiring on the second
anniversary of the date hereof (the "Term"). Upon expiration of the
Term, Executive shall immediately and automatically, with no notice
required, continue his employment "at will" and this Agreement shall
become an "at will" agreement which may thereafter be terminated by
either Executive or Employer at any time and for any reason.
b. Notwithstanding anything to the contrary in this Agreement, in the event
of Executive's decision to terminate his employment, Employer shall have
no further obligation to Executive, and no bonus or incentive
compensation for the year in which termination or resignation occurs
shall be payable.
c. In the event Executive's employment is terminated for Cause (defined as
willful misconduct, dishonesty, or the final, non-appealable
adjudication in a criminal or civil proceeding that Executive has
committed a criminal act), or
<PAGE>
Executive resigns, Employer shall have no further obligation to
Executive, and no bonus or incentive compensation for the year in which
termination or resignation occurs shall be payable.
d. In the event Employer terminates Executive for any reason other than for
Cause: (i) during the first 12 months of the Term, Employer shall pay to
Executive severance payments, payable over a period of 12 months
consistent with Employer's normal payroll policies, equal in the
aggregate to the Base Salary and (ii) after the completion of the
initial 12 month period, Employer shall pay to Executive severance
payments payable over a period of 12 months, equal in the aggregate to
fifty percent (50%) of the Base Salary. In addition, in the event
Employer terminates Executive for any reason other than for Cause,
Executive's bonus for the year in which termination occurs shall be
calculated on the basis of the EBITDA results for the full fiscal year
in which termination occurs, but shall be pro rated based on the number
of days in such year in which Executive was employed by Employer.
e. In the event that Executive is terminated without Cause during the first
year, Executive shall not be required to seek alternative employment
which would serve to mitigate the payment to him of any severance
payment hereunder. In the event that Executive is terminated without
Cause during the term of this Agreement after the first year, Executive
shall be required to undertake good faith efforts to seek alternative
employment, and any compensation earned or amounts paid to Executive in
any such alternative employment shall serve to mitigate Employer's
severance payments to Executive hereunder.
3. Time and Efforts. Executive shall diligently and conscientiously devote
substantially his full business time and attention and best efforts to the
business of Employer and the discharge of his duties hereunder. It is
understood that Executive may serve as an outside director of one or more
corporations, without violating the terms hereof, provided that such
entities are not principally engaged in a business directly competitive with
Employer and subject to approval by the Board of Directors of Holdings.
4. Compensation.
a. Base Salary. In consideration of the services of the Executive, Holdings
-----------
shall pay or cause one of its subsidiaries to pay to Executive a salary
at an annual rate of Two Hundred Twenty Five Thousand Dollars ($225,000)
(the "Base Salary"), in equal installments in accordance with the past
payroll practices of Employer, but in no event less frequently than
monthly. The Base Salary will be reviewed bi-annually by the board of
directors of Holdings in good faith and may be increased in the
discretion of the board of directors of Holdings, or a committee
thereof.
b. Bonus and Incentive Compensation. As additional compensation for the
--------------------------------
services of Executive, Holdings shall pay or cause one of its
subsidiaries to pay to Executive a cash bonus with respect to each
fiscal year, payable within
-2-
<PAGE>
thirty (30) days after the conclusion of the financial audit of the
relevant fiscal year.
i) Determination based on EBITDA. The actual bonus due under clause
(ii) below and all actual incentive compensation due under clause
(iii) below for the fiscal year ended June 30, 1999 ("FY1999") and
for any subsequent fiscal year shall be determined based upon the
achievement by the Employer of target annual income before income
taxes, depreciation, amortization and management fees ("EBITDA").
EBITDA for any fiscal year shall be based on the financial data as
reported in the audited annual financial statements of Holdings and
its subsidiaries for such year. The EBITDA target for FY1999 shall
be $36 million. EBITDA targets for fiscal years subsequent to FY
1999 shall be determined in good faith by the board of directors of
Holdings, or a committee thereof. EBITDA targets for a given fiscal
year shall be adjusted in the good faith determination of the board
of directors of Holdings for any acquisitions or dispositions made
in such fiscal year taking into consideration the impact of such
acquisition or disposition on EBITDA in such fiscal year.
ii) Annual bonus. For FY1999, Executive shall receive a maximum annual
bonus of One Hundred Thirty Five Thousand Dollars ($135,000) (pro
rated accordingly) for the period employed based upon achieving an
EBITDA of $36 million; provided, however, that the annual bonus
-------- -------
shall be reduced ratably as EBITDA drops below $36 million and shall
be zero ($0), if EBITDA is $32.5 million or less. The annual bonus
for subsequent fiscal years during Executive's employment with
Employer shall be based on a formula similar to that used in FY1999,
with adjustments made in good faith by the board of directors of
Holdings. Any annual bonuses for FY 1999 hereunder shall be paid pro
rata for the period during which Executive is employed by Employer
hereunder.
iii) Annual incentive compensation. For FY1999, Holdings shall pay or
cause one of its subsidiaries to pay 1.3% of the incremental FY1999
EBITDA above $36 million to the Executive, subject to the
limitations of paragraph 4(c). The annual incentive compensation for
subsequent fiscal years during Executive's employment with Employer
shall be based on EBITDA targets established by the board of
directors pursuant to subparagraph (i) above, subject to the
limitations in paragraph 4(c), with adjustments made in good faith
by the board of directors of Holdings. Incentive compensation for FY
1999 shall be paid pro rata for the period during which Executive is
employed by Employer hereunder.
iv) Compliance with debt payment obligations. Regardless of whether an
EBITDA target is achieved, no bonus or incentive compensation will
be paid or payable to Executive if the Employer has defaulted or is
-3-
<PAGE>
not current on its debt payment obligations under any of its then
outstanding credit facilities, indentures or other debt instruments;
provided, that such withheld compensation shall be paid if such
--------
default is of a technical and nonsubstantive nature and is cured
within thirty (30) days of notice thereof.
c. Total compensation. Notwithstanding the foregoing provisions of this
------------------
paragraph 4, the total compensation paid or caused to be paid to
Executive by Employer with respect to any fiscal year, including salary,
bonuses and annual incentive compensation but excluding the value of the
benefits set forth in paragraph 5, shall not exceed Four Hundred Ninety
Five Thousand ($495,000).
5. Benefits. Executive shall be entitled to full benefits as historically
provided to its senior management employees by Employer, subject to
compliance with all applicable laws. Executive shall also be eligible to
participate in all fringe benefit programs of Employer offered from time to
time to its senior management employees including, without limitation, auto
allowance, life insurance, disability insurance, dental and medical
coverage, profit sharing, pension, 401(k), and vacation.
6. Expenses. Employer will reimburse Executive for all reasonable, ordinary
and necessary expenses (including travel, business entertainment and
business development) incurred by him in carrying out his duties under this
Agreement. Executive shall present Employer with an itemized statement of
such expenses in such form as the Employer may request or consistent with
policies of the Employer. The availability of such reimbursements from the
Employer is subject to compliance with all applicable laws.
7. Equity Obligations and Rights.
a. On the closing date of the Merger, Executive shall become entitled to
receive options to purchase up to 399.4319 shares (representing
approximately two percent (2%)) of the Class A Common Stock of Holdings
(the "Options") and such Options shall vest over a five (5) year period
in equal monthly installments and shall not be entitled to any
preemptive rights. The Options shall be subject to dilution pro-rata by
the issuance of any equity securities at the closing of the Merger or
subsequent to the Merger (including options, warrants and other
convertible securities) to unaffiliated third parties and by the grant
and exercise of any management options. In the event that Executive's
employment shall terminate for any reason, any unvested Options issued
to Executive shall terminate and be cancelled, and Executive shall have
sixty (60) days to exercise any vested portion of the Options which
shall terminate and be cancelled if unexercised within such sixty (60)
day period.
b. The shares issuable pursuant to the Options are subject to equitable
adjustment to take into account stock dividends, stock splits,
recapitalizations
-4-
<PAGE>
and other dilutive events, all as reasonably determined in good faith by
the board of directors of Holdings.
8. Corporate Opportunities. If Executive receives notice of or otherwise
obtains information regarding potential acquisitions and other corporate
opportunities within Employer's then current and prospective lines of
business, Executive agrees to offer such acquisitions and other corporate
opportunities first to Employer and second to GEI II or its affiliates,
after which Executive shall be free to proceed independently to exploit such
acquisitions and other corporate opportunities, subject to the provisions of
paragraph 3 hereof.
9. Covenant Not to Compete. In consideration of the compensation and other
benefits to be paid to Executive pursuant to this Agreement, Executive
agrees that he will not, without prior written consent of the board of
directors of Holdings, for a period the greater of: (i) two (2) years
following the termination of Executive's employment with Employer for any
reason whatsoever or (ii) one (1) year beyond any payment or repurchase made
pursuant to this Agreement by Employer (or to such lesser extent and for
such lesser period as may be deemed enforceable by a court of competent
jurisdiction, it being the intention of the parties that this paragraph 9
shall be so enforced):
a. directly or indirectly engage in the United States, Canada or any other
country in which the Employer now or hereafter conducts business, in any
business in direct competition with the business conducted by Employer
at the time of termination or any business that Employer has a bona fide
plan to commence or enter into, either as an officer, director,
employee, independent contractor or as a 2% or greater owner, partner,
or stockholder in a publicly traded entity;
b. directly or indirectly cause or request a curtailment or cancellation of
any significant business relationship that Employer has with a current
or prospective vendor, business partner, supplier or other service or
goods provider that would have a material adverse impact on the business
of Employer; or
c. directly or indirectly induce or attempt to influence any employee of
Employer to terminate his or her employment with Employer.
d. In addition to and without limiting the foregoing, upon the termination
of the Executive's employment by the Employer for any reason, Executive
shall not at any time directly or indirectly disclose, use, transfer or
sell to any person, firm or other entity any trade, technical or
technological secrets, any details of organization or business affairs,
or any confidential or proprietary information of Employer. For the
purposes of this paragraph 9, the term Employer shall be deemed to
include Employer and all of its subsidiaries.
10. Inventions. All patents, trademarks, trade names, copyrights, inventions,
discoveries, financial models, computer software, graphics products,
advertising
-5-
<PAGE>
products, promotional materials, market studies and business plans
(collectively, the "Intellectual Property") relating to Employer's business
that Executive may make, conceive or learn during his employment by the
Employer (whether during working hours or otherwise, or within six (6)
months following the termination of his employment for any reason) shall be
the exclusive property of Employer. Executive agrees to disclose any such
Intellectual Property to the board of directors of Holdings and to do at
Employer's expense all lawful things necessary or useful to assist Employer
in securing their full enjoyment and protection. In the event of any breach
or threatened breach of the provisions of this paragraph 10 or the preceding
paragraph 8, Employer may apply to any court of competent jurisdiction to
enjoin such breach. Any such remedy shall be in addition to Employer's
remedies at law under such circumstances.
11. Notices. Any notice given hereunder shall be in writing and delivered or
mailed by certified mail or overnight courier service (with proof of
delivery) and addressed to the appropriate party at the address set forth
below or at such other address as the party shall designate from time to
time in a notice.
If to Executive:
---------------
Donald F. Gayhardt, Jr.
511 Lynmere Road
Bryn Mawr, PA 19010
Telephone: (610) 519-9783
If to Employer:
--------------
DFG Holdings, Inc.
1436 Lancaster Avenue, Suite 210
Berwyn, PA 19312
Attention: Chief Executive Officer
Telephone: (610) 296-3400
With a copy to:
--------------
Green Equity Investors II, L.P.
11111 Santa Monica Boulevard, Suite 2000
Los Angeles, CA 90025
Attention: Greg Annick
Telephone: (310) 954-0444
12. Binding Effect. This Agreement shall inure to the benefit of and be binding
upon Employer, and its successors and assigns. Executive acknowledges that
these services are unique and personal. Accordingly, Executive may not
assign any of his rights or delegate any of his duties or obligations under
this Agreement.
13. Waiver. Failure to insist in any one or more instances on strict compliance
with the terms of this Agreement shall not be deemed a waiver. Waiver of a
breach of any
-6-
<PAGE>
provision of this Agreement shall not be construed as a waiver of any
subsequent breach.
14. Governing Law; Disputes. This Agreement is made and delivered in, and shall
be construed in accordance with the substantive laws of, the Commonwealth of
Pennsylvania and the United States of America without regard to conflict of
law principles. Any claims, controversies, demands, disputes or differences
between or among the parties hereto arising out of, or by virtue of, or in
connection with, or otherwise relating to this Agreement shall be submitted
to and settled by arbitration conducted in Philadelphia, Pennsylvania before
three arbitrators, each of whom shall be knowledgeable in the field of
employment law. Such arbitration shall otherwise be conducted in accordance
with the rules then obtaining of the American Arbitration Association. The
parties hereto agree to share equally the responsibility for all fees of the
arbitrators, abide by any decision rendered as final and binding, and waive
the right to appeal the decision or otherwise submit the dispute to a court
of law for a jury or non-jury trial. The parties hereto specifically agree
that neither party may appeal or subject the award or decision of any such
arbitrator to appeal or review in any court of law or in equity or by any
other tribunal, arbitration system or otherwise. Judgment upon any award
granted by such an arbitrator may be enforced in any court having
jurisdiction thereof.
15. Severability. In the event that any provision of this Agreement shall be
determined to be invalid by a court of competent jurisdiction, such
determination shall in no way affect the validity or enforceability of any
other provisions hereof.
16. Entire Agreement; Miscellaneous. The parties acknowledge and agree that they
are not relying on any representations, oral or written, other than those
expressly contained herein. This Agreement supersedes all proposals, oral or
written, all negotiations, conversations or discussions between the parties
and all course of dealing. All prior understandings and agreements between
the parties regarding employment matters are hereby merged in this
Agreement, which alone is the complete and exclusive statement of their
understanding as to employment. No waiver or modification of this Agreement
shall be valid unless the same shall be in writing and signed by the party
sought to be charged therewith. Time is of the essence in this Agreement and
each and every provision hereof. This is a personal services agreement; no
agency, partnership, joint venture or other joint relationship is created
hereby. The parties acknowledge that they each participated in drafting this
Agreement, and there shall be no presumption against any party on the ground
that such party was responsible for preparing this Agreement or any part
hereof. Paragraph headings are for convenience of reference only and are not
intended to create substantive rights or obligations.
-7-
<PAGE>
IN WITNESS WHEREOF, this Agreement has been duly executed by the
undersigned as of the day and year first above written.
DFG HOLDINGS, INC. DOLLAR FINANCIAL GROUP, INC.
By: __________________________ By: ________________________
(Employer) (Employer)
__________________________
Donald F. Gayhardt, Jr.
-8-
<PAGE>
EXHIBIT 10.13
CREDIT AGREEMENT
THIS CREDIT AGREEMENT (the "Credit Agreement") is made and dated as of
the 18th day of December, 1998, by and among DOLLAR FINANCIAL GROUP, INC., a New
York corporation (the "Company"), DFG HOLDINGS, INC., a Delaware corporation
(the "Parent"), the lenders from time to time party hereto (the "Lenders"),
WELLS FARGO BANK, NATIONAL ASSOCIATION, a national banking association ("Wells
Fargo"), as administrative agent for the Lenders (in such capacity, the
"Administrative Agent"), FIRST UNION CAPITAL MARKETS and WELLS FARGO, as
arrangers of the credit facilities evidenced hereby (in such capacity, the
"Arrangers"), FIRST UNION NATIONAL BANK, as syndication agent (in such capacity,
the "Syndication Agent"), and U.S. BANK NATIONAL ASSOCIATION, as documentation
agent (in such capacity, the "Documentation Agent").
RECITALS
A. The Company has requested the Lenders to extend credit to the
Company in the form of a secured revolving line of credit and certain secured
term loans and that Wells Fargo agree to act as administrative agent for the
benefit of the Lenders with respect thereto.
B. The Lenders party hereto have agreed to extend such credit
facilities and Wells Fargo has agreed to act as administrative agent on behalf
of the Lenders on the terms and subject to the conditions set forth herein and
in the other Loan Documents (as that term and capitalized terms not otherwise
defined herein are used with the meanings given such terms in the Glossary
attached hereto as Annex I and by this reference incorporated herein).
-------
NOW, THEREFORE, in consideration of the above Recitals and for other
good and valuable consideration, the receipt and adequacy of which are hereby
acknowledged, the parties hereto hereby agree as follows:
AGREEMENT
1. Credit Facilities.
-----------------
1(a) Revolving Loan Facility. On the terms and subject to the
-----------------------
conditions set forth herein, the Revolving Facility Lenders severally agree that
they shall from time to time to but not including the Revolving Facility
Maturity Date fund their respective Revolving Facility Percentage Shares of
loans (the "Revolving Loans" or a "Revolving Loan"), in an aggregate amount not
to exceed at any one time outstanding the lesser of:
(1) The Revolving Credit Limit; and
(2) The Collateral Value of the Borrowing Base.
Subject to the mandatory prepayment requirements of Paragraph 3(f) below, the
--------------
outstanding principal balance of all Revolving Loans and interest accrued and
unpaid thereon shall be due and payable in full on the Revolving Facility
Maturity Date. Revolving Loans prepaid hereunder may be reborrowed, subject to
the terms and conditions of this Credit Agreement, it being agreed and
understood that the credit facility provided pursuant to this Paragraph 1(a) is
--------------
a revolving credit facility.
<PAGE>
1(b) Term Loan Facility A. On the terms and subject to the
--------------------
conditions set forth herein, the Term Loan A Lenders severally agree that on the
Change of Control Payment Date (or, at the request of the Company, on the
Business Day immediately preceding the Change of Control Payment Date) they
shall fund their respective Term Loan A Percentage Shares of a loan ("Term Loan
A"), in an aggregate amount not to exceed the Term Loan A Credit Limit;
provided, however, that if the Change of Control Payment Date shall not have
occurred on or before the Outside Term Loan Disbursement Date then the
commitments of the Term Loan A Lenders hereunder shall terminate and be of no
further force or effect. The principal amount of Term Loan A shall be payable in
quarterly installments on the last Business Day of each March, June, September
and December, commencing September 30, 1999, in accordance with the following
amortization schedule:
Quarterly Payment Required Principal Payment (Expressed
----------------- -------------------------------------
Dates Occurring: as Percentage of Original Principal Balance:
--------------- --------------------------------------------
September 30, 1999 through 1.000%
June 30, 2000
September 30, 2000 through 2.500%
June 30, 2001
September 30, 2001 through 5.000%
June 30, 2002
September 30, 2002 through 7.500%
June 30, 2003
September 30, 2003 through 9.000%
March 31, 2004
June 30, 2004 Outstanding Principal
Balance of Term Loan A
Payable in Full
1(c) Term Loan Facility B. On the terms and subject to the conditions
--------------------
set forth herein, the Term Loan B Lenders severally agree that on the Change of
Control Payment Date (or, at the request of the Company, on the Business Day
immediately preceding the Change of Control Payment Date) they shall fund their
respective Term Loan B Percentage Shares of a loan ("Term Loan B"), in an
aggregate amount not to exceed the Term Loan B Credit Limit; provided, however,
that if the Change of Control Payment Date shall not have occurred on or before
the Outside Term Loan Disbursement Date then the commitments of the Term Loan B
Lenders hereunder shall terminate and be of no further force or effect. The
principal amount of Term Loan B shall be payable in quarterly installments on
the last Business Day of each March, June, September and December, commencing
September 30, 1999, in accordance with the following amortization schedule:
Quarterly Payment Required Principal Payment (Expressed
----------------- -------------------------------------
Dates Occurring: as Percentage of Original Principal Balance
--------------- -------------------------------------------
September 30, 1999 through 0.4167%
June 30, 2004
2
<PAGE>
September 30, 2004 through 11.4583%
September 30, 2005
December 31, 2005 Outstanding Principal
Balance of Term Loan B
Payable in Full
2. Interest Rate and Yield-Related Provisions.
-- ------------------------------------------
2(a) Applicable Interest Rates.
-------------------------
(1) The outstanding principal balance of Revolving Loans, and
portions thereof, shall bear interest from the date disbursed to but not
including the date of payment calculated at a per annum rate equal to, at
the option of and as selected by the Company from time to time (subject to
the provisions of Paragraphs 2(c), 2(d) and 2(e) below): (i) the
--------------- ---- ----
Applicable LIBO Rate for the applicable Interest Period, (ii) the daily
average Applicable Floating Eurodollar Rate in effect during the
applicable interest computation period, or (iii) the daily average
Applicable Base Rate in effect during the applicable interest computation
period, said interest to be payable as provided more particularly in
Paragraph 2(b) below.
--------------
(2) The outstanding principal balance of Term Loan A, and
portions thereof, shall bear interest from the date disbursed to but not
including the date of payment calculated at a per annum rate equal to, at
the option of and as selected by the Company from time to time (subject to
the provisions of Paragraphs 2(c), 2(d) and 2(e) below): (i) the
--------------- ---- ----
Applicable LIBO Rate for the applicable Interest Period, or (ii) the daily
average Applicable Base Rate in effect during the applicable interest
computation period , said interest to be payable as provided more
particularly in Paragraph 2(b) below.
--------------
(3) The outstanding principal balance of Term Loan B, and
portions thereof, shall bear interest from the date disbursed to but not
including the date of payment calculated at a per annum rate equal to, at
the option of and as selected by the Company from time to time (subject to
the provisions of Paragraphs (2(c), 2(d) and 2(e) below): (i) the
---------------- ---- ----
Applicable LIBO Rate for the applicable Interest Period, or (ii) the daily
average Applicable Base Rate in effect during the applicable interest
computation period, said interest to be payable as provided more
particularly in Paragraph 2(b) below.
--------------
2(b) Payment of Interest.
-------------------
(1) The Company shall pay interest on Floating Eurodollar
Rate Loans and Base Rate Loans monthly, in arrears, on the last Business
Day of each calendar month as set forth on an interest billing delivered
by the Administrative Agent to the Company (which delivery may be by
facsimile transmission) no later than 9:00 a.m. (San Francisco time) on
such date.
(2) The Company shall pay interest on LIBO Rate Loans on the
last day of the applicable Interest Period or, in the case of LIBO Rate
Loans with an Interest Period ending later than three months after the
date funded, at the end of each three month period from the date funded
and on the last day of the applicable Interest Period as set forth on an
interest
3
<PAGE>
billing delivered by the Administrative Agent to the Company (which
delivery may be by facsimile transmission) no later than 9:00 a.m. (San
Francisco time) on such date.
2(c) Procedures for Interest Rate Election.
-------------------------------------
(1) The Company may elect from time to time to have Loans funded
as LIBO Rate Loans, to convert Revolving Loans outstanding as Base Rate
Loans or Floating Eurodollar Rate Loans and to convert portions of Term
Loan A and Term Loan B outstanding as Base Rate Loans to LIBO Rate Loans by
giving the Administrative Agent prior irrevocable notice of such election
no later than 9:00 a.m. (San Francisco time) on the third Eurodollar
Business Day preceding the proposed funding or conversion date.
(2) The Company may elect from time to time to have Revolving
Loans funded as Floating Eurodollar Rate Loans or Base Rate Loans and to
have portions of Term Loan A and Term Loan B funded as Base Rate Loans by
giving the Administrative Agent irrevocable notice of such election no
later than 9:00 a.m. (San Francisco time) on the proposed funding date.
(3) The Company may elect to convert Revolving Loans outstanding
as LIBO Rate Loans to Floating Eurodollar Rate Loans or Base Rate Loans and
to convert portions of Term Loan A and Term Loan B Advances outstanding as
LIBO Rate Loans to Base Rate Loans effective upon the last day of the
applicable Eurodollar Interest Period by giving the Administrative Agent
irrevocable notice of such election no later than 9:00 a.m. (San Francisco
time) on the proposed funding date.
(4) Any LIBO Rate Loan may be continued as such upon the
expiration of the Interest Period with respect thereto by the Company
giving the Administrative Agent prior irrevocable notice of such election
on the third Eurodollar Business Day preceding the proposed continuation
date. If the Company shall fail to give notice as provided above, the
Company shall be deemed to have elected to convert any affected LIBO Rate
Loan to a Base Rate Loan on the last day of the applicable Interest Period.
(5) No Loan shall be funded or continued as a LIBO Rate Loan and
no Loan shall be converted into a LIBO Rate Loan if an Event of Default or
Potential Default has occurred and is continuing on the day occurring three
Eurodollar Business Days prior to the date of, or on the date of, any
requested funding, continuation or conversion.
(6) Each Floating Eurodollar Rate Loan and each Base Rate Loan
shall be in the principal amount of $500,000.00 and whole multiples of
$10,000.00 in excess thereof and each LIBO Rate Loan shall be in the
principal amount of $5,000,000.00 or whole multiples of $1,000,000.00 in
excess thereof.
(7) Each request for the funding, continuation or conversion of a
Loan shall be evidenced by the timely delivery by the Company to the
Administrative Agent of a duly executed Loan and/or Rate Request (which
delivery may be by facsimile transmission).
2(d) Inability to Determine Rate. In the event that the
---------------------------
Administrative Agent shall have reasonably determined (which determination shall
be conclusive and binding upon the Company) that by reason of circumstances
affecting the interbank market adequate and reasonable means do not exist for
ascertaining the LIBO Rate for any Interest Period, the Administrative Agent
4
<PAGE>
shall forthwith give telephonic notice of such determination to each affected
Lender and to the Company. If such notice is given: (1) no Loan may be funded
as a LIBO Rate Loan, (2) any Revolving Loan or portion of Term Loan A Term Loan
B Advance that was to have been converted to a LIBO Rate Loan shall, subject to
the provisions hereof, be continued as the type of Loan it is currently, and (3)
any outstanding as a LIBO Rate Loan shall be converted, on the last day of the
Interest Period applicable thereto, to a Base Rate Loan. Until such notice has
been withdrawn by the Administrative Agent, the Company shall not have the right
to convert any Loan to a LIBO Rate Loan or to fund any Loan as a LIBO Rate Loan
or to continue a LIBO Rate Loan as such. The Administrative Agent shall
withdraw such notice in the event that the circumstances giving rise thereto no
longer pertain and that adequate and reasonable means exist for ascertaining the
LIBO Rate for the Interest Period requested by the Company, and, following
withdrawal of such notice by the Administrative Agent, the Company shall have
the right to have any Loan funded as a LIBO Rate Loan or to convert any Loan to
a LIBO Rate Loan and to continue any LIBO Rate Loan as such in accordance with
the terms and conditions of this Credit Agreement.
2(e) Illegality. Notwithstanding any other provisions herein, if any
----------
law, regulation, treaty or directive or any change therein or in the
interpretation or application thereof, shall make it unlawful for any Lender to
make or maintain LIBO Rate Loans as contemplated by this Credit Agreement: (1)
the commitment of such Lender hereunder to make or to continue LIBO Rate Loans
or to convert Loans to LIBO Rate Loans shall forthwith be cancelled and (2)
Loans held by such Lender then outstanding as LIBO Rate Loans, if any, shall be
converted automatically to Base Rate Loans at the end of their respective
Interest Periods or within such earlier period as required by law. In the event
of a conversion of any such Loan prior to the end of its applicable Interest
Period, the Company hereby agrees promptly to pay any Lender affected thereby,
upon demand, the amounts required pursuant to Paragraph 2(i) below, it being
--------------
agreed and understood that such conversion shall constitute a prepayment for all
purposes hereof. The provisions hereof shall survive the termination of this
Credit Agreement and payment of all other Obligations.
2(f) Funding. Each Lender shall be entitled to fund all or any
-------
portion of its share of Loans in any manner it may determine in its sole
discretion, including, without limitation, in the Grand Cayman inter-bank
market, the London inter-bank market and within the United States, but all
calculations and transactions hereunder shall be conducted as though all Lenders
actually fund all LIBO Rate Loans through the purchase of offshore dollar
deposits in the amount of that portion of the relevant LIBO Rate Loan held by
such Lender in maturities corresponding to the applicable Interest Period.
2(g) Requirements of Law; Increased Costs.
------------------------------------
(1) In the event that any applicable law, order, regulation,
treaty or directive issued by any central bank or other governmental
authority, agency or instrumentality or in the governmental or judicial
interpretation or application thereof, or compliance by any Lender with any
request or directive (whether or not having the force of law) issued by any
central bank or other governmental authority, agency or instrumentality:
(i) Does or shall subject any Lender to any tax of any kind
whatsoever with respect to this Credit Agreement or any Loans made
hereunder, or change the basis of taxation of payments to such Lender
of principal, fee, interest or any other amount payable hereunder
(except for change in the rate of tax on the overall net income of
such Lender);
5
<PAGE>
(ii) Does or shall impose, modify or hold applicable any
reserve, capital requirement, special deposit, compulsory loan or
similar requirements against assets held by, or deposits or other
liabilities in or for the account of, advances or loans by, or other
credit extended by, or any other acquisition of funds by, any office
of such Lender which are not otherwise included in the determination
of interest payable on the Obligations; or
(iii) Does or shall impose on such Lender any other
condition;
and the result of any of the foregoing is to increase the cost to such
Lender of making, renewing or maintaining any Loan or to reduce any amount
receivable in respect thereof or the rate of return on the capital of such
Lender or any corporation controlling such Lender, then, in any such case,
the Company shall promptly pay to such Lender, upon its written demand made
through the Administrative Agent, any additional amounts necessary to
compensate such Lender for such additional cost or reduced amounts
receivable or rate of return as determined by such Lender with respect to
this Credit Agreement or Loans made hereunder, so long as such Lender
requires obligors under other commitments of this type made available by
such Lender to similarly so compensate such Lender.
(2) If after the date hereof any Lender shall determine that the
applicability of any treaty, law, rule, regulation or guideline adopted
pursuant to or arising out of the July 1988 report of the Basle Committee
on Banking Regulations and Supervisory Practices entitled "International
Convergence of Capital Measurement and Capital Standards," or any change
after the date hereof in any applicable law, order, regulation treaty or
directive issued by any central bank or other governmental authority,
agency or instrumentality or any governmental or judicial interpretation or
application thereof (whether or not having the force of law) regarding
capital adequacy, has or would have the effect of reducing the rate of
return on the capital of or maintained by such Lender or any corporation
controlling such Lender as a consequence of such Lender's obligations or
Loans hereunder and other commitments of this type to a level below that
which such Lender or corporation could have achieved but for such adoption,
effectiveness, change or compliance (taking into account such Lender's or
corporation's policies with respect to capital adequacy), then the Company
shall from time to time pay to such Lender, upon demand, such additional
amounts as may be specified by such Lender as sufficient to compensate such
Lender for any costs which such Lender determines are attributable to the
maintenance by it of capital required or expected to be maintained by such
Lender or any corporation controlling such Lender in respect of its Loans,
or its Commitments (such compensation to include, without limitation, an
amount equal to any reduction of the rate of return on the capital of such
Lender or such corporation to a level below that which such Lender or
corporation could have achieved as of the date hereof), so long as such
Lender requires obligors under other commitments of this type made
available by such Lender to similarly so compensate such Lender.
(3) If a Lender becomes entitled to claim any additional amounts
pursuant to this Paragraph 2(g), it shall promptly notify the Company of
--------------
the event by reason of which it has become so entitled. A certificate as
to any additional amounts payable pursuant to the foregoing sentence
containing the calculation thereof in reasonable detail submitted by a
Lender to the Company, accompanied by a certification that such Lender has
required obligors under other commitments of this type made available by
such Lender to similarly so compensate such Lender shall constitute prima
facie evidence thereof.
6
<PAGE>
(4) The provisions of this Paragraph 2(g) shall survive the
--------------
termination of this Credit Agreement and payment of the outstanding Loans
and all other Obligations.
2(h) Obligation of Lenders to Mitigate; Replacement of Lenders.
---------------------------------------------------------
Each Lender agrees that:
(1) As promptly as practicable after the officer of such Lender
responsible for administering the Loans of such Lender, as the case may be,
becomes aware of any event or condition that would entitle such Lender to
receive payments under Paragraph 2(g) above or Paragraph 2(j)(6) below or
-------------- -----------------
to cease making LIBO Rate Loans under Paragraph 2(e) above, such Lender
--------------
will use reasonable efforts (i) to make, issue, fund or maintain the
affected Loans of such Lender through another lending office of such Lender
or (ii) take such other measures as such Lender may deem reasonable, if as
a result thereof the additional amounts which would otherwise be required
to be paid to such Lender pursuant to Paragraph 2(g) above or pursuant to
--------------
Paragraph 2(j)(6) below would be materially reduced or eliminated or the
-----------------
conditions rendering such Lender incapable of making LIBO Rate Loans under
Paragraph 2(e) above no longer would be applicable, and if, as determined
--------------
by such Lender in its sole discretion, the making, issuing, funding or
maintaining of such LIBO Rate Loans through such other lending office or in
accordance with such other measures, as the case may be, would not
otherwise materially adversely affect such LIBO Rate Loans or the interests
of such Lender.
(2) If the Company receives a notice pursuant to Paragraph 2(g)
--------------
above or pursuant to Paragraph 2(j)(6) below or a notice pursuant to
-----------------
Paragraph 2(e) above stating that a Lender is unable to extend LIBO Rate
--------------
Loans (for reasons not generally applicable to the Majority Lenders), so
long as (i) no Potential Default or Event of Default shall have occurred
and be continuing, (ii) the Company has obtained a commitment from another
Lender or an Eligible Assignee to purchase at par such Lender's Loans,
Aggregate Commitment, accrued interest and fees and to assume all
obligations of the Lender to be replaced under the Loan Documents and (iii)
such Lender to be replaced is unwilling to withdraw the notice delivered to
the Company, upon thirty (30) days' prior written notice to such Lender and
the Administrative Agent, the Company may require, at the Company's
expense, the Lender giving such notice to assign, without recourse, all of
its Loans, Aggregate Commitment, accrued interest and fees to such other
Lender or Eligible Assignee pursuant to the provisions of Paragraph 11(h)
---------------
below.
2(i) Funding Indemnification. In addition to all other payment
-----------------------
obligations hereunder, in the event: (1) any LIBO Rate Loan is prepaid prior to
the last day of the applicable Interest Period, whether following a voluntary
prepayment, mandatory prepayment (including but not limited to application of
proceeds from the sale of Borrower Collateral) or otherwise, or (2) the Company
shall fail to borrow a LIBO Rate Loan or shall fail to continue or to make a
conversion to a LIBO Rate Loan after the Company has given notice thereof as
required hereunder, then the Company shall immediately pay to each Lender which
would have funded the requested LIBO Rate Loan or holding the LIBO Rate Loans
prepaid or not continued or converted, through the Administrative Agent, an
additional premium sum compensating such Lender for losses, costs and expenses
incurred by such Lender in connection with such prepayment or such failure to
borrow, continue or convert. The Company acknowledges that such losses, costs
and expenses are difficult to quantify and that, in the case of the prepayment
of or failure to borrow or continue as or to convert to a LIBO Rate Loan, the
following formula represents a fair and reasonable estimate of such losses,
costs and expenses:
7
<PAGE>
Amount [Applicable LIBO Rate ] Days Remaining
Being [LIBO Rate for such Incre- ] in Interest
Prepaid or [for Increment ment for Days ] Period
Not x [Being Prepaid - Remaining in ] x -----------
Borrowed, [or Not Interest Period ] 360
Converted or [Borrowed, (as quoted on the first
Continued [Converted or Eurodollar Business
[Continued Day following Lenders'
receipt of notice thereof)
For purposes of calculating the current LIBO Rate for the days remaining in the
Interest Period for both the increment being prepaid or not converted or
continued, said current LIBO Rate shall be an interest rate interpolated between
LIBO Rates quoted for standard calendar periods for subsequent months'
maturities in accordance with normal conventions. Under no circumstances shall
any Lender have any obligation to remit monies to the Company upon prepayment of
any LIBO Rate Loan, even under circumstances which do not result in the
necessity for the payment by the Company of any amount hereunder. The
provisions hereof shall survive termination of this Credit Agreement and payment
of all other Obligations.
2(j) Withholding Taxes.
-----------------
(1) If any Lender is a "foreign corporation, partnership or
trust" within the meaning of the Code, such Lender shall claim exemption
from, or a reduction of, United States withholding tax under Sections 1441
or 1442 of the Code, and such Lender shall deliver to the Administrative
Agent:
(i) If such Lender claims an exemption from, or a reduction
of, withholding tax under a United States tax treaty, properly
completed IRS Forms 1001 and W-8 before the payment of any interest in
the first calendar year and before the payment of any interest in each
third succeeding calendar year during which interest may be paid under
this Agreement;
(ii) If such Lender claims that interest paid under this
Agreement is exempt from United States withholding tax because it is
effectively connected with a United States trade or business of such
Lender, two properly completed and executed copies of IRS Form 4224
before the payment of any interest due in the first taxable year of
such Lender and in each succeeding taxable year of such Lender during
which interest may be paid under this Agreement, and IRS Form W-9; and
(iii) Such other form or forms as may be required under the
Code or other laws of the United States as a condition to exemption
from, or reduction of, United States withholding tax.
Such Lender agrees to promptly notify the Administrative Agent of any
change in circumstances which would modify or render invalid any claimed
exemption or reduction.
(2) If any Lender claiming exemption from, or reduction of,
withholding tax under a United States tax treaty by providing IRS Form 1001
sells, assigns, grants a participation in, or otherwise transfers all or
part of the Obligations of the Company to
8
<PAGE>
another Lender, such Lender agrees to notify the Administrative Agent of
the percentage amount in which it is no longer the beneficial owner of
Obligations of the Company. To the extent of such percentage amount, the
Administrative Agent will treat such Lender's IRS Form 1001 as no longer
valid.
(3) If any Lender claiming exemption from United States
withholding tax by filing IRS Form 4224 with the Administrative Agent
sells, assigns, grants a participation in, or otherwise transfers all or
part of the Obligations of the Company to another Lender, such Lender
agrees to undertake sole responsibility for complying with the withholding
tax requirements imposed by Sections 1441 and 1442 of the Code.
(4) If any Lender is entitled to a reduction in the applicable
withholding tax, the Administrative Agent may withhold from any interest
payment to such Lender an amount equivalent to the applicable withholding
tax after taking into account such reduction. If the forms or other
documentation required by subsection (a) of this Paragraph 6(i) are not
delivered to the Administrative Agent, then the Administrative Agent may
withhold from any interest payment to such Lender not providing such forms
or other documentation an amount equivalent to the applicable withholding
tax.
(5) If the IRS or any other Governmental Authority of the United
States or other jurisdiction asserts a claim that the Administrative Agent
did not properly withhold tax from amounts paid to or for the account of
any Lender (because the appropriate form was not delivered, was not
properly executed, or because such Lender failed to notify the
Administrative Agent of a change in circumstances which rendered the
exemption from, or reduction of, withholding tax ineffective, or for any
other reason) such Lender shall indemnify the Administrative Agent fully
for all amounts paid, directly or indirectly, by the Administrative Agent
as tax or otherwise, including penalties and interest, and including any
taxes imposed by any jurisdiction on the amounts payable to the
Administrative Agent under this Paragraph 2(j) together with all costs and
--------------
expenses (including attorneys fees). The obligation of the Lenders under
this subparagraph (5) shall survive the payment of all other Obligations.
(6) The Company shall not be required to pay any additional
amounts in respect of United States withholding tax pursuant to this
Paragraph 2(j) on account of any Lender:
--------------
(i) If the obligation to pay such additional amounts arises
as a result of a failure by such Lender to comply with its obligations
under this Paragraph 2(j);
--------------
(ii) If such Lender shall have delivered IRS Form 1001
pursuant to this Paragraph 2(j), and such Lender shall not at any time
--------------
be entitled to reduction, partial exemption or exemption from
deduction or withholding of United States federal income tax in
respect of payments by the Company hereunder for the account of such
Lender for any reason other than a change in United States law or
regulations or any applicable tax treaty or regulations or in the
official interpretation of such law, treaty or regulations by any
governmental authority charged with the interpretation or
administration thereof (whether or not having the force of law) after
the date of delivery of such IRS Form 1001;
9
<PAGE>
(iii) If such Lender shall have delivered IRS Form 4224
pursuant to this Paragraph 2(j), and such Lender shall not at any time
--------------
be entitled to exemption from deduction or withholding of United
States federal income tax in respect of payments by the Company
hereunder for the account of such Lender for any reason other than a
change in United States law or regulations or any applicable tax
treaty or regulations or in the official interpretation of such law,
treaty or regulations by any governmental authority charged with the
interpretation or administration thereof (whether or not having the
force of law) after the date of delivery of such IRS Form 4224.
2(k) Fees. The Company shall pay the following fees:
----
(1) To the Administrative Agent for distribution to the
Revolving Facility Lenders pro rata in accordance with their respective
Revolving Facility Percentage Shares, in arrears, on the last Business Day
of each March, June, September and December, commencing December 31, 1998,
and on the Revolving Facility Maturity Date (or on each such earlier date
as the Revolving Credit Limit shall be reduced to zero as permitted
pursuant to Paragraph 3(h)), a commitment fee equal to: (i) the average
--------------
daily Revolving Credit Limit in effect during the calendar quarter (or
portion thereof) then ending, minus the daily average outstanding amount of
Revolving Loans during such calculation period, multiplied by (ii) the
product of: y. the Applicable Fee Percentage, and z. a fraction, the
- -
numerator of which is the number of days in the applicable calculation
period and the denominator of which is 360.
(2) To the Administrative Agent for distribution to the
Term Loan A Lenders in accordance with their respective Term Loan A
Percentage Shares, on the date of funding of Term Loan A, a non-refundable
commitment fee equal to: (i) the Term Loan A Credit Limit minus the initial
principal amount of Term Loan A, multiplied by (ii) the product of: y. five
-
eighths of one percent (0.625%), and z. a fraction, the numerator of which
-
is the number of days from and including the Effective Date to but
excluding the date on which Term Loan A is funded pursuant to Paragraph
---------
1(b) above and the denominator of which is 360.
----
(3) To the Administrative Agent for distribution to the
Term Loan B Lenders in accordance with their respective Term Loan B
Percentage Shares, on the date of funding of Term Loan B, a non-refundable
commitment fee equal to: (i) the Term Loan B Credit Limit minus the initial
principal amount of Term Loan B, multiplied by (ii) the product of: y. five
-
eighths of one percent (0.625%), and z. a fraction, the numerator of which
-
is the number of days from and including the Effective Date to but
excluding the date on which Term Loan B is funded pursuant to Paragraph
---------
1(c) above and the denominator of which is 360.
----
(4) To the Administrative Agent for its own account, such
administrative fees as the Administrative Agent and the Company have agreed
in writing.
(5) To the Arrangers and the Syndication Agent for their
respective accounts, such arrangement and syndication fees as such Persons
and the Company have agreed in writing.
2(l) Post-Default Interest. During such time as there shall occurred
---------------------
and be continuing an Event of Default, all Obligations outstanding, shall, at
the election of the Required
10
<PAGE>
Lenders, bear interest at a per annum rate equal to two percent (2%) above the
Applicable Base Rate in effect during the applicable calculation period.
2(m) Computations. All computations of interest and fees
------------
payable hereunder shall be based upon a year of 360 days for the actual number
of days elapsed.
3. Miscellaneous Provisions.
------------------------
3(a) Use of Proceeds. The proceeds of the initial Revolving
---------------
Loan or Revolving Loans funded hereunder shall be applied to pay in full all
outstanding obligations of the Company under the Existing Credit Agreement, to
pay the Approved Transactional Expenses and Payments and to pay fees and
expenses related to the closing of the credit facilities evidenced hereby.
Following the Effective Date, the proceeds of Revolving Loans shall be used for
working capital and general corporate purposes. The proceeds of Term Loan A and
Term Loan B shall be used by the Company solely for the purpose of purchasing
Senior Notes as required pursuant to Section 4.15 of the Indenture as a result
of the occurrence of a "Change of Control" (as defined in the Indenture).
3(b) Request For Loans; Making of Loans. If the Company
----------------------------------
desires to borrow hereunder, the Company shall deliver a Loan and/or Rate
Request to the Administrative Agent (which delivery may be by facsimile
transmission) not later than:
(1) In the case of a Revolving Loan to be initially funded
as a Floating Eurodollar Rate Loan or a Base Rate Loan or portions of Term
Loan A or Term Loan B to be initially funded as a Base Rate Loan, 9:00 a.m.
(San Francisco time) on the proposed funding date; and
(2) In the case of a Revolving Loan or portions of Term
Loan A or a Term Loan B to be initially funded as a LIBO Rate Loan, 9:00
a.m. (San Francisco time) on the third Eurodollar Business Day preceding
the proposed funding date.
The Administrative Agent shall notify each Lender, as applicable, of such
Lender's respective Revolving Loan Percentage Share, Term Loan A Percentage
Share and/or Term Loan B Percentage Share of the requested Loan or Loans no
later than 10:00 a.m. (San Francisco time) on the date such notice is received
by the Administrative Agent (which notice by the Administrative Agent to the
Lenders may be given telephonically). Each Lender shall make its Percentage
Share of the proposed Loan available to the Administrative Agent, in same-day
funds, on the funding date at the Contact Office, ABA 121000248, for the
Administrative Agent's Account No. 4081656779, Account Name:
SYNDIC/WFBCORP/DOLLAR FINANCIAL, Ref. Dollar Financial Group, or such other
account as the Administrative Agent shall designate, no later than 11:00 a.m.
(San Francisco time). The failure of any Lender to advance its Percentage Share
of a proposed Loan to the extent required under this Credit Agreement shall not
relieve any other Lender of its obligation hereunder to advance its Percentage
Share thereof, if required, and no Lender shall be responsible for the failure
of any other Lender to make any such advance.
3(c) Evidence of Indebtedness. The obligation of the Company to
------------------------
repay the Loans shall be evidenced by notations on the books and records of the
Lenders. Such books and records shall constitute prima facie evidence thereof.
Any failure to record the advance of any Loan, the interest rate applicable
thereto or any other information regarding the Obligations, or any error in
doing so, shall not limit or otherwise affect the obligation of the Company with
respect to any of the Obligations. Upon the request of a Lender, the Company
shall promptly execute a promissory note or
11
<PAGE>
promissory notes in favor of such Lender evidencing the Obligations, if the
Company has not previously done so.
3(d) Borrowing Base Conformity. In support of its obligation to
-------------------------
repay Revolving Loans hereunder, the Company shall cause the Collateral Value of
the Borrowing Base to be not less than, at any date, the aggregate principal
amount of Revolving Loans outstanding on such date. The Company shall
immediately prepay Loans to the Administrative Agent on behalf of the Lenders on
any day in the amount by which the aggregate principal amount of Revolving Loans
outstanding exceeds the Collateral Value of the Borrowing Base.
3(e) Nature and Place of Payments. All payments made on account
----------------------------
of the Obligations shall be made by the Company, without setoff or counterclaim,
in lawful money of the United States of America in immediately available same
day funds, free and clear of and without deduction for any Taxes, fees or other
charges of any nature whatsoever imposed by any taxing authority and must be
received by the Administrative Agent by 11:00 a.m. (San Francisco time) on the
day of payment, it being expressly agreed and understood that if a payment is
received after 11:00 a.m. (San Francisco time) by the Administrative Agent, such
payment will be considered to have been made by the Company on the next
succeeding Business Day and interest thereon shall be payable by the Company at
the rate otherwise applicable thereto during such extension. All payments on
account of the Obligations shall be made to the Administrative Agent through the
Contact Office. If any payment required to be made by the Company hereunder
becomes due and payable on a day other than a Business Day, the due date thereof
shall be extended to the next succeeding Business Day and interest thereon shall
be payable at the then applicable rate during such extension.
3(f) Prepayments.
-----------
(1) No later than 9:00 a.m. (San Francisco time) on any
Business Day, the Company may voluntarily prepay Base Rate Loans and
Floating Eurodollar Rate Loans in whole or in part at any time; provided,
however, that voluntary prepayments of Base Rate Loans and Floating
Eurodollar Rate Loans shall be in the minimum amount of $500,000.00 and
integral multiples of $10,000.00 in excess thereof.
(2) The Company may voluntarily prepay LIBO Rate Loans prior
to the last day of their applicable Interest Periods in whole or in part at
any time upon not less than three Eurodollar Business Days' prior written
notice to the Administrative Agent (which notice will be promptly forwarded
telephonically by the Administrative Agent to the Lenders affected
thereby); provided, however, that voluntary prepayments of LIBO Rate Loans
shall be in the minimum amount of $5,000,000.00 and integral multiples of
$1,000,000.00 in excess thereof.
(3) Subject to the provisions of subparagraph (10) below,
all voluntary prepayments of Term Loan A and Term Loan B must be made
concurrently and pro rata in accordance with the outstanding principal
balances of Term Loan A and Term Loan B on the date of payment thereof.
(4) Revolving Loans are subject to mandatory prepayment as
provided in Paragraph 3(d) above.
--------------
(5) The Company shall remit to the Administrative Agent as a
mandatory prepayment for application against Term Loan A and Term Loan B,
pro rata in
12
<PAGE>
accordance with the outstanding principal balances thereof, subject to the
provisions of subparagraph (10) below, no later than ninety (90) days after
-----------------
the end of each fiscal year of the Company, fifty percent (50%) of Excess
Cash Flow for such fiscal year.
(6) In addition, the Company and the Parent shall, and shall cause
each other Subsidiary of the Parent to, remit to the Administrative Agent
for application against Term Loan A and Term Loan B, pro rata in accordance
with the outstanding principal balances thereof, subject to the provisions
of subparagraph (10) below, immediately upon receipt thereof:
-----------------
(i) One hundred percent (100%) of Net Cash Proceeds received
from the sale or other disposition of any and all assets of the
Parent, the Company or any other Subsidiary of the Parent (other than
sales of inventory in the ordinary course of business) during any
fiscal year in excess of $1,000,000.00; provided, however, that no
such prepayment in respect of any sale or other disposition of such
assets shall be required if and to the extent that the Parent, the
Company or the Subsidiary, as applicable, intends to reinvest the Net
Cash Proceeds in similar assets and shall have done so within three
hundred sixty (360) days of the consummation of such sale or other
disposition (it being agreed and understood that in the event any Net
Cash Proceeds of any sale or other disposition which would be required
to be delivered to the Administrative Agent but for the intention of
the selling Person to so reinvest such funds are not fully so
reinvested within the required time frame, the amount of such Net Cash
Proceeds not so reinvested shall promptly be delivered to the
Administrative Agent for application as required hereunder) and,
provided further, that nothing contained herein shall be construed to
permit any such sale or other disposition unless the same is permitted
pursuant to Paragraph 8(h) below;
--------------
(ii) One hundred percent (100%) of Net Cash Proceeds
received under any casualty or property damage insurance covering any
and all assets of the Parent, the Company or any other Subsidiary of
the Parent during any fiscal year in excess of $500,000.00; provided,
however, that no such prepayment shall be required if and to the
extent that the Parent, the Company or the Subsidiary, as applicable,
intends to reinvest the Net Cash Proceeds in similar assets and shall
have done so within three hundred sixty (360) days of receipt thereof
(it being agreed and understood that in the event any Net Cash
Proceeds which would be required to be delivered to the Administrative
Agent but for the intention of the Person receiving such Net Cash
Proceeds to reinvest such funds are not fully so reinvested within the
required time frame, the amount of such Net Cash Proceeds not so
reinvested shall promptly be delivered to the Administrative Agent for
application as required hereunder); and
(iii) Fifty percent (50%) of the Net Cash Proceeds from
each issuance of debt or equity securities by the Parent, the Company
or any other Subsidiary of the Parent other than: a. issuances of
debt or equity securities contemplated by the Recapitalization and the
funding of any Change of Control Payment (as defined in the
Indenture), b. the issuance of equity securities of the Parent to
members of management of the Company and its
13
<PAGE>
Subsidiaries, and c. the issuance of the Indebtedness permitted under
Paragraph 8(b) below.
--------------
(7) Any prepayment of principal of Term Loan A or Term Loan B
shall be applied against installments thereon pro rata.
(8) The Company shall pay in connection with any prepayment
hereunder, whether voluntary or mandatory, all interest accrued but unpaid
on the Loans to which such prepayment is applied, and in the case of
prepayment of any LIBO Rate Loans, all amounts payable pursuant to
Paragraph 2(i) above, concurrently with payment of any principal amounts.
--------------
(9) Prior to the occurrence of an Event of Default and
acceleration of the Obligations, prepayments shall be applied first to Base
Rate Loans and Floating Eurodollar Rate Loans to the extent possible and
then to LIBO Rate Loans.
(10) Notwithstanding anything to the contrary set forth in this
Paragraph 3(f), each Term Loan B Lender shall have the right to waive
--------------
receipt of its proportionate share of any voluntary or mandatory prepayment
required to be allocated to Term Loan B (a "Waivable Prepayment"). The
Company shall notify the Administrative Agent and each Term Loan B Lender
at least three (3) Business Days prior to its payment of any Waivable
Prepayment. In the event a Term Loan B Lender desires to waive receipt of
its proportionate share of a Waivable Prepayment, such Lender shall so
advise the Administrative Agent no later than 5:00 p.m. (San Francisco
time) on the Business Day immediately preceding the Company's payment of
such Waivable Prepayment. In the event any Term Loan B Lender waives its
right to receive a proportionate share of a Waivable Prepayment, the
Administrative Agent shall apply the amount so waived to prepay Term Loan
A.
3(g) Allocation of Payments Received. Prior to the occurrence
-------------------------------
of an Event of Default and acceleration of the Obligations, all amounts received
by the Administrative Agent on account of the Obligations shall be disbursed by
the Administrative Agent to the Lenders as directed by the Company (consistent
with the requirements for application of prepayments set forth in Paragraph 3(f)
--------------
above and subject, except in the case of a Waivable Prepayment to the
requirement that any application of amounts against the Revolving Loans, Term
Loan A and Term Loan B shall be allocated pro rata among the Revolving Facility
Lenders, the Term Loan A Lenders and the Term Loan B Lenders in accordance with
their respective Percentage Shares of such facilities) by wire transfer of like
funds received on the date of receipt if received by the Administrative Agent
before 10:30 a.m. (San Francisco time) or if received later, by 12:00 noon (San
Francisco time) on the next succeeding Business Day, without further interest
payable by the Administrative Agent. Following the occurrence of an Event of
Default and acceleration of the Obligations, all amounts received by the
Administrative Agent on account of the Obligations, including, without
limitation, as proceeds of the sale or other disposition of Borrower Collateral,
shall be promptly disbursed by the Administrative Agent as follows:
(1) First, to the payment of expenses incurred by the
Administrative Agent in the performance of its duties and the enforcement
of the rights of the Lenders under the Loan Documents, including, without
limitation, all costs and expenses of collection, reasonable and documented
attorneys' fees (including all allocated costs of internal counsel), court
costs and foreclosure expenses, including as provided in Paragraph 7(g)
--------------
below;
14
<PAGE>
(2) Then, to the Lenders, pro rata in accordance with their
respective Consolidated Percentage Shares, until all outstanding Loans and
interest accrued thereon have been paid in full, said amounts to be
allocated by the Lenders first to interest and then, but only after all
accrued interest has been paid in full, to principal of Loans;
(3) Then, to the Lenders pro rata in accordance with the amount
of remaining Obligations owed to such Lenders until all other Obligations
held by the Lenders have been paid in full; and
(4) Then, to such Persons as may be legally entitled thereto.
3(h) Termination or Permanent Reduction of Credit Limit. The
--------------------------------------------------
Company may, upon not less than five Business Days' prior notice to the
Administrative Agent, terminate the Revolving Credit Limit or, from time to
time, permanently reduce the Revolving Credit Limit by an aggregate minimum
amount of $5,000,000.00 per reduction; provided, however, that no such reduction
shall be permitted if, after giving effect thereto and to any prepayments of
Revolving Loans made on the effective date thereof, the then outstanding
principal amount of Revolving Loans outstanding would exceed the Revolving
Credit Limit as so reduced.
4. Security; Guaranties; Additional Documents.
-- ------------------------------------------
4(a) Borrower Security Agreement. As collateral security for
---------------------------
the Obligations, the Company shall execute and deliver to the Administrative
Agent: (1) the Borrower Security Agreement, pursuant to which the Company shall
pledge, assign and grant to the Administrative Agent for the pari passu benefit
---- -----
of the Lenders a first priority perfected security interest in and Lien upon the
Borrower Collateral, including, without limitation, all now owned and hereafter
acquired capital stock of all directly owned Subsidiaries of the Company (other
than Foreign Subsidiaries which are not Guarantor Subsidiaries as to which the
Company need pledge only sixty five percent (65%) of the voting stock thereof),
as collateral security for the Obligations, and (2) such UCC-1 financing
statements as the Administrative Agent may request.
4(b) Initial Required Guaranties; Collateral for Guaranties;
-------------------------------------------------------
Subordination. As additional credit support for the Obligations, each of
- -------------
the Initial Guarantors shall execute and deliver to the Administrative Agent:
(1) a Guaranty, (2) a Guarantor Security Agreement, pursuant to which such
Person shall pledge, assign and grant the Administrative Agent for the pari
----
passu benefit of the Lenders a first priority perfected security interest in and
- -----
Lien upon the Guarantor Collateral described therein, including, without
limitation, all now owned and hereafter acquired capital stock of all directly
owned Subsidiaries of such Person (other than Foreign Subsidiaries which are not
Guarantor Subsidiaries as to which such Person need pledge only sixty five
percent (65%) of the voting stock thereof), as collateral security for the
Guaranty executed by such Initial Guarantor, (3) a Guarantor Subordination
Agreement, and (4) such UCC-1 financing statements as the Administrative Agent
may request.
4(c) Further Documents. Each of the Parent and the Company
-----------------
agrees to execute and deliver and to cause to be executed and delivered to the
Administrative Agent on behalf of the Lenders from time to time:
(1) A Guaranty, a Guarantor Security Agreement, a Guarantor
Subordination Agreement and such UCC-1 financing statements as the
Administrative Agent may request, from each Subsidiary of the Parent
organized or acquired following the Effective
15
<PAGE>
Date, other than any Subsidiary as to which the Parent has demonstrated to
the reasonable satisfaction of the Administrative Agent that the execution
and delivery by such Subsidiary of a Guaranty would:
(i) In the case of a Foreign Subsidiary, result in a
substantial tax liability to, or substantially impair the value of any
tax credits of, the Parent and its Subsidiaries which would not arise
but for the execution and delivery of such Guaranty, or
(ii) In the case of any Subsidiary, including a Foreign
Subsidiary, acquired by the Parent, violate a Contractual Obligation
of such Subsidiary existing prior to (and not entered into or incurred
in contemplation of) the Acquisition thereof by the Parent and which
Contractual Obligation will not be waived by the Person prohibiting
the execution and delivery of such Guaranty,
such Guaranty, Guarantor Security Agreement, Guarantor Subordination
Agreement and UCC-1 financing statements to be delivered immediately upon
the formation or acquisition of such Subsidiary by the Parent; and
(2) From the Parent, the Company and such Persons as the
Administrative Agent may request, such confirmatory or supplementary
security agreements, financing statements and other documents, instruments
or agreements as the Administrative Agent may reasonably request, which are
in the Administrative Agent's judgment necessary or desirable to obtain for
the Administrative Agent on behalf of the Lenders, the benefit of the Loan
Documents, the Borrower Collateral and the Guarantor Collateral (the
"Additional Collateral and Credit Support Documents").
5. Conditions to Making Loans .
--------------------------
5(a) First Loan. As conditions precedent to the funding of
----------
the first Loan hereunder:
(1) The Parent and the Company shall have delivered or shall have
caused to be delivered to the Administrative Agent, in form and substance
satisfactory to the Lenders and their counsel and duly executed by the
appropriate Persons (with sufficient copies for each of the Lenders), each
of the following:
(i) This Credit Agreement;
(ii) To the extent requested by any Lender, the Notes
payable to such Lender;
(iii) The Borrower Security Agreement;
(iv) From each Initial Guarantor: a. a Guaranty, b. a
- -
Guarantor Security Agreement, and c. a Guarantor Subordination
-
Agreement;
(v) The Pledged Shares and stock transfer powers
therefor;
16
<PAGE>
(vi) Acknowledgement copies of all UCC-1 financing
statements required to be delivered by the Company and the Initial
Guarantors pursuant to Paragraph 4(a)(2) and Paragraph 4(b)(4) above
----------------- -----------------
evidencing the filing of such financing statements in the appropriate
offices, in each case accompanied by a UCC Search evidencing the first
priority of the security interest in favor of the Administrative Agent
for the benefit of the Lenders in the Borrower Collateral and the
Guarantor Collateral described therein;
(vii) Such other Additional Collateral and Credit
Support Documents as may be reasonably requested by the Administrative
Agent and the Lenders;
(viii) Such credit applications, financial statements,
authorizations and such information concerning the Company, the
Initial Guarantors and their respective business, operations and
condition (financial and otherwise) as any Lender may reasonably
request;
(ix) Certified copies of resolutions of the Boards of
Directors of the Company and each of the Initial Guarantors approving
the execution, delivery and performance of the Loan Documents to which
such Person is party;
(x) A certificate or certificates of the Secretary or an
Assistant Secretary of each of the Company and each of the Initial
Guarantors certifying the names and true signatures of the officers of
such Person authorized to sign the Loan Documents to which such Person
is party and, on an ongoing basis, to act under and perform such Loan
Documents;
(xi) Opinions of counsel for the Company and the Initial
Guarantors satisfactory to the Administrative Agent, including,
without limitation, Canadian counsel, which opinions shall be in form
and substance satisfactory to the Administrative Agent and cover such
matters as the Administrative Agent may require, such opinions to
include, in any event, opinions as to the enforceability of the Liens
created by the Borrower Security Agreement and each of the Guarantor
Security Agreements under applicable law and the permissibility of the
grant of such Liens and the consistency of such Liens with all
requirements and restrictions of the Indenture;
(xii) A copy of the Certificate of Incorporation of the
Company and each of the Initial Guarantors, certified by the Secretary
of State of the state of incorporation of such Person as of a recent
date;
(xiii) A copy of the Articles of Incorporation and
Bylaws of the Company and each of the Initial Guarantors, certified by
the Secretary or an Assistant Secretary of such Person as of the date
of this Credit Agreement as being accurate and complete;
(xiv) A certificate of authority and good standing as
of a recent date for the Company and each of the Initial Guarantors
for each state in which such Person is qualified to do business;
17
<PAGE>
(xv) A certificate of the chief financial officer or
treasurer of the Company, in form and detail satisfactory to the
Administrative Agent, demonstrating that neither the Company nor any
of the Initial Guarantors are insolvent nor will any of such Persons
be rendered insolvent upon the incurrence of Indebtedness contemplated
hereby;
(xvi) A copy of the executed Acquisition Agreement
certified by the chief financial officer of the Parent as accurate and
complete, setting forth the terms and conditions of the
Recapitalization, which shall be satisfactory to the Administrative
Agent and the Lenders;
(xvii) Evidence satisfactory to the Administrative
Agent that upon the funding of the first Loan, all Indebtedness of the
Company outstanding under the Existing Credit Agreement, as set forth
on a demand statement delivered by the agent for the lenders
thereunder to the Administrative Agent and the Company on or before
the date of the Effective Date, will be paid in full, the credit
facility evidenced thereby terminated and any and all Liens securing
the Indebtedness of the Company thereunder terminated and released;
(xviii) Confirmation from the Administrative Agent, the
Arrangers and the Syndication Agent (which may be oral) that the
written fee arrangements between the Company and such Persons referred
to in Paragraphs 2(k)(4) and 2(k)(5) have been executed and delivered
------------------ -------
and that all fees required to be paid by the Company thereunder on or
before the Effective Date have been or will upon the funding of the
initial Loan hereunder be paid in full;
(xix) Evidence satisfactory to the Administrative Agent
that all reasonable and documented costs and expenses, including,
without limitation, fees of inside and outside counsel to the
Administrative Agent and the Syndication Agent and fees of appraisers,
required to be paid by the Company for which billing statements have
been delivered no less than two Business Days' prior to the Effective
Date have been, or will upon the funding of the initial Loan hereunder
be, paid in full;
(xx) A Borrowing Base Report dated as of the date of
funding of the initial Loan hereunder demonstrating in form and detail
satisfactory to the Administrative Agent that the Collateral Value of
the Borrowing Base at and as of such date is sufficient to support the
Loans requested to be funded on such date;
(xxi) A Covenant Compliance Certificate showing the
Parent's and the Company's compliance with the financial covenants set
forth under Paragraphs 8(i) below at and as of September 30, 1998
---------------
(which Covenant Compliance Certificate may be prepared based on
internally-prepared unaudited financial statements);
(xxii) Consolidated unaudited balance sheets for the
Company and its Subsidiaries as of September 30, 1998 and consolidated
profit and loss and reconciliation of surplus statements and a
statement of cash flows for the period from the beginning of the
current fiscal year to and including such date, certified by the chief
financial officer of the Company as complete and correct and
presenting fairly in accordance with GAAP the financial condition of
the Company and its consolidated
18
<PAGE>
Subsidiaries at such date and the results of their operations and
changes in financial position for the fiscal period then ended,
certified by the chief financial officer of the Company as having been
prepared in accordance with GAAP and consistent with the assumptions
described therein and fairly presenting and anticipated financial
condition of the Company and its consolidated Subsidiaries for the
periods covered thereby;
(xxiii) Certificates of all fire and casualty, liability
and business interruption insurance required to be carried by the
Company, the Parent and the Subsidiaries pursuant to the terms of this
Credit Agreement, showing the Administrative Agent named as an
additional insured and, in the case of business interruption
insurance, the loss payee, thereunder;
(xxiv) Notices of assignment to Obligors which shall be
held by the Administrative Agent and completed and delivered to
Obligors as permitted under the Borrower Security Agreement and the
Guarantor Security Agreements; and
(xxv) Evidence satisfactory to the Administrative Agent and
the Lenders that each of the statements set forth on Schedule 1
----------
attached hereto are accurate and complete and all material respects.
(2) All acts and conditions (including, without limitation, the
obtaining of any third party consents or necessary regulatory approvals and
the making of any required filings, recordings or registrations) required
to be done and performed and to have happened precedent to the execution,
delivery and performance of the Loan Documents and to constitute the same
legal, valid and binding obligations, enforceable in accordance with their
respective terms, shall have been done and performed and shall have
happened in due and strict compliance with all applicable laws.
(3) All documentation, including, without limitation,
documentation for corporate and legal proceedings in connection with the
transactions contemplated by the Loan Documents shall be satisfactory in
form and substance to the Administrative Agent, the Lenders and their
counsel.
5(b) All Loans. As conditions precedent to each Lender's
---------
obligation to fund its Percentage Share of any Loan hereunder, including the
first Loan, at and as of the date of the funding thereof:
(1) There shall have been delivered to the Administrative Agent a
Loan and/or Rate Request therefor;
(2) The representations and warranties of the Company, the Parent
and each of the Guarantor Subsidiaries contained in the Loan Documents to
which such Person is party shall be accurate and complete in all material
respects as if made on and as of the date of such funding or issuance
(unless any such representation and warranty speaks as of a particular
date, in which case it shall remain accurate and complete in all material
respects as of such date);
(3) There shall not have occurred an Event of Default or
Potential Default;
19
<PAGE>
(4) If the requested Loan is a Revolving Loan, following the
funding thereof the aggregate principal amount of Revolving Loans
outstanding will not exceed the limitations of Paragraph 1(a) above;
--------------
(5) If the requested Loan is Term Loan A, the Company has
requested a concurrent funding of Term Loan B in a principal amount which
bears the same relationship to the Term Loan B Credit Limit that the
requested Term Loan A bears to the Term Loan A Credit Limit and if the
requested Loan is Term Loan B, the Company has requested a concurrent
funding of Term Loan A in a principal amount which bears the same
relationship to the Term Loan A Credit Limit that the requested Term Loan B
bears to the Term Loan B Credit Limit; and
(6) If the requested Loan is Term Loan A or Term Loan B, the
credit facility made available to the Company referenced in Paragraph 1 on
Schedule 7 hereto shall have been fully disbursed.
----------
By delivering a Loan and/or Rate Request to the Administrative Agent hereunder,
the Company shall be deemed to have represented and warranted the accuracy and
completeness of the statements set forth in subparagraphs (b)(2) through (b)(5)
above.
6. Representations and Warranties of the Company. As an
-- ---------------------------------------------
inducement to the Administrative Agent and each Lender to enter into this Credit
Agreement and to make Loans hereunder, each of the Parent and the Company,
jointly and severally, represents and warrants to the Administrative Agent, and
Arrangers, the Syndication Agent and each Lender that:
6(a) Financial Condition. The financial statements, dated the
-------------------
Statement Date and the Interim Date, copies of which have heretofore been
furnished to each Lender, are complete and correct and present fairly in
accordance with GAAP the financial condition of the Company and its consolidated
Subsidiaries at such dates and the consolidated and consolidating results of
their operations and changes in financial position for the fiscal periods then
ended.
6(b) No Change. Since the Statement Date there has been no
---------
Material Adverse Effect.
6(c) Corporate Existence; Compliance with Law. Each of the
----------------------------------------
Parent, the Company and each of the other Subsidiaries of the Parent: (1) is
duly organized, validly existing and in good standing as a corporation under the
laws of its jurisdiction of incorporation and is qualified to do business in
each jurisdiction where its ownership of property or conduct of business
requires such qualification and where failure to qualify could be reasonably
expected to result in a Material Adverse Effect, (2) has the corporate power and
authority and the legal right to own and operate its property and to conduct
business in the manner in which it does and proposes so to do, and (3) is in
compliance with all Requirements of Law and Contractual Obligations, the failure
to comply with which could be reasonably expected to result in a Material
Adverse Effect.
6(d) Corporate Power; Authorization; Enforceable Obligations.
-------------------------------------------------------
Each of the Company, the Parent and each of the Guarantor Subsidiaries has the
corporate power and authority and the legal right to execute, deliver and
perform the Loan Documents to which it is a party and has taken all necessary
corporate action to authorize the execution, delivery and performance of such
Loan Documents. The applicable Loan Documents have been duly executed and
delivered on behalf of the Company, the Parent and each of the Guarantor
Subsidiaries and constitute legal, valid and binding
20
<PAGE>
obligations of such Persons enforceable against such Persons in accordance with
their respective terms, subject to the effect of applicable bankruptcy and other
similar laws affecting the rights of creditors generally and the effect of
equitable principles whether applied in an action at law or a suit in equity.
6(e) No Legal Bar. The execution, delivery and performance of
------------
the Loan Documents, the borrowing hereunder and the use of the proceeds thereof,
will not violate any Requirement of Law or any Contractual Obligation of the
Parent, the Company or any other Subsidiary of the Parent the failure to comply
with which could reasonably be expected to result in a Material Adverse Effect,
or create or result in the creation of any Lien (except the Liens created by the
Borrower Security Agreement and the Guarantor Security Agreements) on any assets
of the Parent, the Company or any other Subsidiary of the Parent.
6(f) No Material Litigation. Except as disclosed on Schedule
---------------------- --------
2 hereto, no litigation, investigation or proceeding of or before any arbitrator
- -
or Governmental Authority is pending or, to the knowledge of the Company or the
Parent, threatened by or against the Parent, the Company or any other Subsidiary
of the Parent or against any of such Persons' properties or revenues which is
likely to be adversely determined and which, if adversely determined, could
reasonably be expected to have a Material Adverse Effect or which challenges the
Company's, the Parent's or any Guarantor Subsidiary's right, power or competence
to enter into or perform any of its obligations under the Loan Documents or the
validity or enforceability of any Loan Document.
6(g) Taxes. The Parent, the Company and each of the other
-----
Subsidiaries of the Parent have filed or caused to be filed all tax returns that
are required to be filed and have paid all taxes shown to be due and payable on
said returns or on any assessments made against them or any of their property
other than taxes which are being contested in good faith by appropriate
proceedings and as to which such Person has established adequate reserves in
conformity with GAAP.
6(h) Investment Company Act. Neither the Parent, the Company
----------------------
nor any other Subsidiary of the Parent or any Person controlling the Parent is
an "investment company" or a company "controlled" by an "investment company"
within the meaning of the Investment Company Act of 1940, as amended.
6(i) Subsidiaries. Attached hereto as Schedule 3 is an
------------ ----------
accurate and complete list of all Subsidiaries of the Parent existing at the
Effective Date, their respective jurisdictions of incorporation and the
percentage of their capital stock owned by the Parent or other Subsidiaries.
Neither the Parent, the Company nor any other Subsidiary of the Parent will, nor
will they permit any of their Subsidiaries to, form any Subsidiary except upon
not less than ten (10) Business Days prior written notice to the Administrative
Agent and the Lenders and compliance with the provisions of Paragraph 4(c)(1)
-----------------
above. All of the issued and outstanding shares of capital stock of all existing
Subsidiaries of the Parent have been, and all issued and outstanding shares of
capital stock of Subsidiaries of the Parent formed following the Effective Date
will be, duly authorized and issued and are and will be fully paid and non-
assessable.
6(j) Federal Reserve Board Regulations. Neither the Parent,
---------------------------------
the Company nor any other Subsidiary of the Parent is engaged or will engage,
principally or as one of its important activities, in the business of extending
credit for the purpose of "purchasing" or "carrying" any "margin stock" within
the respective meanings of such terms under Regulation U. No part of the
proceeds of any Loan issued hereunder will be used for "purchasing" or
"carrying" "margin stock" as so defined or for any purpose which violates, or
which would be inconsistent with, the provisions of the Regulations of the Board
of Governors of the Federal Reserve System.
21
<PAGE>
6(k) ERISA Compliance. Except as disclosed on Schedule 4 hereto:
---------------- ----------
(1) Each Plan is in compliance with the applicable provisions of
ERISA, the Code and other federal or state law failure to comply with which
would reasonably be likely to result in a Material Adverse Effect. Each
Plan which is intended to qualify under Section 401(a) of the Code has
received a favorable determination letter from the IRS and to the best
knowledge of the Company and the Parent, nothing has occurred which would
cause the loss of such qualification.
(2) There are no pending or, to be best knowledge of Company or
the Parent, threatened claims, actions or lawsuits, or action by any
Governmental Authority, with respect to any Plan which has resulted or
could reasonably be expected to result in a Material Adverse Effect. There
has been no prohibited transaction or violation of the fiduciary
responsibility rules with respect to any Plan which has resulted or could
reasonably be expected to result in a Material Adverse Effect.
(3) No ERISA Event has occurred or is reasonably expected to
occur with respect to any Pension Plan or Multiemployer Plan.
(4) No Pension Plan has any Unfunded Pension Liability.
(5) Neither the Parent, the Company nor any ERISA Affiliate has
incurred, nor reasonably expects to incur, any liability under Title IV of
ERISA with respect to any Pension Plan (other than premiums due and not
delinquent under Section 4007 of ERISA).
(6) Neither the Parent, the Company nor any ERISA Affiliate has
incurred nor reasonably expects to incur any liability (and no event has
occurred which, with the giving of notice under Section 4219 of ERISA,
would result in such liability) under Section 4201 or 4243 of ERISA with
respect to a Multiemployer Plan.
(7) Neither the Parent, the Company nor any ERISA Affiliate has
transferred any Unfunded Pension Liability to any person or otherwise
engaged in a transaction that could be subject to Section 4069 or 4212(c)
of ERISA.
6(l) Assets. The Parent, the Company and each other Subsidiary
------
of the Parent has good and marketable title to all property and assets reflected
in the financial statements referred to in Paragraph 6(a) above, except property
--------------
and assets sold or otherwise disposed of in the ordinary course of business
subsequent to the respective dates thereof. Neither the Parent, the Company nor
any other Subsidiary of the Parent has outstanding Liens on any of its
properties or assets nor are there any security agreements to which the Parent,
the Company or any other Subsidiary of the Parent is a party, or title retention
agreements, whether in the form of leases or otherwise, relating to any personal
property except as reflected in the financial statements referred to in
Paragraph 6(a) above or as permitted under Paragraph 8(a) below.
- -------------- --------------
6(m) Securities Acts. Neither the Parent nor the Company has
---------------
issued any unregistered securities in violation of the registration requirements
of Section 5 of the Securities Act of 1933, as amended, or any other law, nor is
it in violation of any rule, regulation or requirement under the Securities Act
of 1933, as amended, or the Securities and Exchange Act of 1934, as amended,
other than violations which could not reasonably be expected to result in a
Material Adverse Effect. The Company is not required to qualify an indenture
under the Trust Indenture Act of 1939, as amended, in
22
<PAGE>
connection with its execution and delivery of this Credit Agreement or, if
applicable, issuance of the Notes.
6(n) Consents, etc. No consent, approval, authorization of, or
--------------
registration, declaration or filing with any Governmental Authority is required
on the part of the Parent, the Company or any other Subsidiary of the Parent in
connection with the execution and delivery of the Loan Documents (other than
filings to perfect the Liens granted by such Persons to the Administrative Agent
on behalf of the Lenders under the Loan Documents) or the performance of or
compliance with the terms, provisions and conditions hereof or thereof.
6(o) Hazardous Materials. Except as otherwise disclosed on
-------------------
Schedule 5 hereto, neither the Company, the Parent nor, to the best knowledge
- ----------
of the Company or the Parent, any other Person has: (1) caused or permitted any
Hazardous Materials to be disposed of in, on, under or about the Property or any
part thereof, and neither the Property, nor any part thereof, has ever been used
(whether by the Company, the Parent or, to the best knowledge of the Company and
the Parent, by any other Person) for activities involving, directly or
indirectly, the disposal of any Hazardous Materials; (2) caused or permitted to
be incorporated into or utilized in the construction of any improvements located
on the Property any chemical, material, or substance to which exposure is
prohibited, limited or regulated by any Hazardous Materials Laws or which, even
if not so regulated, is known to pose a hazard (either in its present form or if
disturbed or removed) to the health and safety of the occupants of the Property
or of property adjacent to the Property; or (3) discovered any occurrence or
condition on the Property or any property adjacent to or in the vicinity of the
Property that could cause the Property or any part thereof to be subject to any
restrictions on the ownership, occupancy, transferability or use of the Property
under any Hazardous Materials Laws, which in any instance or in the aggregate
could reasonably be expected to result in a Material Adverse Effect.
6(p) Regulated Entities. Neither the Parent, the Company nor
------------------
any other Subsidiary of the Company is subject to regulation under the Public
Utility Holding Company Act of 1935, the Federal Power Act, the Interstate
Commerce Act, any state public utilities code, or any other Federal or state
statute or regulation limiting its ability to incur Indebtedness.
6(q) Copyrights, Patents, Trademarks and Licenses, etc. The
--------------------------------------------------
Parent, the Company and each of the other Subsidiaries of the Parent own or are
licensed or otherwise have the right to use all of the patents, trademarks,
service marks, trade names, copyrights, contractual franchises, authorizations
and other rights that are necessary for the operation of their respective
businesses, without conflict with the rights of any other Person. To the best
knowledge of the Company and the Parent, no slogan or other advertising device,
product, process, method, substance, part or other material now employed, or now
contemplated to be employed, by the Parent, the Company or any other Subsidiary
of the Parent infringes upon any rights held by any other Person.
6(r) Collateral and Credit Support Documents. The provisions of
---------------------------------------
each of the Collateral and Credit Support Documents are effective to create in
favor of the Administrative Agent for the benefit of the Lenders, a legal, valid
and enforceable first priority security interest in all right, title and
interest of the Company, the Parent and the Guarantor Subsidiaries in the
Borrower Collateral and Guarantor Collateral described therein and financing
statements have been filed in the offices in all of the jurisdictions listed in
the schedule to the Borrower Security Agreement and the Guarantor Security
Agreements
6(s) Insurance. The properties of the Parent, the Company and
---------
each of the other Subsidiaries of the Parent are insured with financially sound
and reputable insurance companies
23
<PAGE>
not Affiliates of the Parent or the Company, in such amounts, with such
deductibles and covering such risks as are customarily carried by companies
engaged in similar businesses and owning similar properties in localities where
the Parent, the Company or such other Subsidiary of the Parent operates. All
such policies of insurance name the Administrative Agent as an additional
insured for the benefit of the Lenders.
6(t) Full Disclosure. None of the representations or
---------------
warranties made by the Parent, the Company or any other Subsidiary of the Parent
in the Loan Documents as of the date such representations and warranties are
made or deemed made, and none of the statements contained in any exhibit,
report, statement or certificate furnished by or on behalf of the Parent, the
Company or any other Subsidiary of the Parent in connection with the Loan
Documents (including the offering and disclosure materials delivered by or on
behalf of the Parent and the Company to the Lenders prior to the Effective
Date), contains any untrue statement of a material fact or omits to state a
material fact necessary to make the statements made therein, in light of the
circumstances under which they are made, not misleading.
6(u) Year 2000. The Parent, the Company and each of the other
---------
Subsidiaries of the Parent will be Year 2000 Compliant except to the extent
failure so to be would not be likely to result in a Material Adverse Effect.
7. Affirmative Covenants. Each of the Parent and the
-- ---------------------
Company, jointly and severally, hereby covenants and agrees with the
Administrative Agent, the Arrangers, the Syndication Agent and each Lender that,
as long as any Obligations remain unpaid or any Lender has any obligation to
make Loans hereunder, the Parent and the Company shall:
7(a) Financial Statements. Furnish or cause to be furnished to
--------------------
the Administrative Agent and each of the Lenders directly:
(1) Within ninety (90) days after the close of each of the
Parent's and the Company's fiscal years, an unqualified audit report
certified by independent certified public accountants of national standing,
prepared in accordance with GAAP on a consolidated basis for itself and its
Subsidiaries, including balance sheets as of the end of such period,
related profit and loss and reconciliation of surplus statements, and a
statement of cash flows, accompanied by (i) any management letter prepared
by said accountants, and (ii) a certificate of said accountants that, in
the course of their examination necessary for their certification of the
foregoing, they have obtained no knowledge of any Event of Default or
Potential Default, or if, in the opinion of such accountants, any Event of
Default or Potential Default shall exist, stating the nature and status
thereof;
(2) Within ninety (90) days after the close of each fiscal
year of National Money Mart Company, condensed financial statements
prepared on a consolidated basis for National Money Mart Company and its
Subsidiaries, including balance sheets as of the end of such period,
related profit and loss and reconciliation of surplus statements, and a
statement of cash flows; provided, however, that to the extent such
condensed financial statements are included in the form 10K filed by the
Company for such annual period, such condensed financial statements need
not be separately provided hereunder;
(3) Within forty five (45) days after the close of each
fiscal quarter of each of the Parent's and the Company's fiscal years, for
itself and its Subsidiaries, consolidated unaudited balance sheets as at
the close of each such period and consolidated profit and loss and
24
<PAGE>
reconciliation of surplus statements and a statement of cash flows for the
period from the beginning of such fiscal year to the end of such quarter,
presented on a comparative basis against corresponding periods in the prior
year and against budgeted performance for such period, all certified by its
chief financial officer and accompanied by any management comments relating
thereto;
(4) Within thirty (30) days after the close of each calendar
month, for each of the Parent, the Company and their Subsidiaries,
consolidated unaudited balance sheets as at the close of each such period
and consolidated profit and loss and reconciliation of surplus statements
and a statement of cash flows for the period from the beginning of such
fiscal year to the end of such calendar month, presented on a comparative
basis against corresponding periods in the prior year and against budgeted
performance for such period, all certified by its chief financial officer
and accompanied by any management comments relating thereto, all certified
by its chief financial officer;
(5) Together with the financial statements required under
subparagraphs (1) and (3) above, a Compliance Certificate signed by its
chief financial officer showing the calculations necessary to determine
compliance with this Credit Agreement and stating that no Event of Default
or Potential Default exists, or if any Event if Default or Potential
Default exists, stating the nature and status thereof;
(6) Within ninety (90) days after the close of each fiscal year,
a financial summary of year to date revenues, expenses and EBITDA presented
separately by region, in form and detail satisfactory to the Administrative
Agent but in any event broken down by material revenue and expense
categories;
(7) To the extent not otherwise delivered pursuant to this
Paragraph 7(a), copies of all financial statements and financial
--------------
information delivered by the Parent, the Company or any other Subsidiary of
the Parent from time to time to the holders of the Indebtedness referred to
as Items 1 and 2 on Schedule 7 attached hereto; and
----------
(8) Copies of all proxy statements, financial statements, and
reports which the Parent sends to its stockholders, and copies of all
regular, periodic and special reports, and all registration statements
under the Act which the Parent files with the Securities and Exchange
Commission or any Governmental Authority which may be substituted therefor,
or with any national securities exchange; provided, however, that there
shall not be required to be delivered hereunder such copies for any Lender
of prospectuses relating to future series of offerings under registration
statements filed under Rule 415 of the Act or other items which such Lender
has indicated in writing to the Parent from time to time need not be
delivered to such Lender.
7(b) Certificates; Reports; Other Information. Furnish or cause
----------------------------------------
to be furnished to the Administrative Agent and each of the Lenders directly:
(1) Within ten (10) days following the end of each calendar
month, as of the close of business of the Company on the last Business Day
of the immediately preceding calendar month and at and as of such other
times as the Administrative Agent may reasonably request, a Borrowing Base
Report;
25
<PAGE>
(2) Promptly after sending, filing or publishing the same, copies
of all proxy statements, financial statements and reports which the Company
or the Parent sends to its public stockholders and copies of all regular
and periodic reports and all registration statements which the Company or
the Parent files with the Securities and Exchange Commission and copies of
all press releases issued by the Parent;
(3) Within thirty (30) days after the close of each of its fiscal
years, a monthly budget for the current fiscal year, in form and detail
reasonably satisfactory to the Administrative Agent and the Lenders and
showing separately the operation of the Canadian Subsidiaries of the Parent
and the United States domestic Subsidiaries of the Parent; and
(4) Promptly, such additional financial and other information,
including, without limitation, financial statements of the Parent, the
Company and the other Subsidiaries of the Parent, and information regarding
the Borrower Collateral and the Guarantor Collateral as any Lender may from
time to time reasonably request, including, without limitation, such
information as is necessary for any Lender to participate out any of its
interests in the Obligations.
7(c) Payment of Indebtedness. And shall cause each of the
-----------------------
Subsidiaries to, pay, discharge or otherwise satisfy at or before maturity or
before it becomes delinquent, defaulted or accelerated, as the case may be, all
its Indebtedness (including taxes), except Indebtedness being contested in good
faith and for which provision is made to the satisfaction of the Administrative
Agent and the Lenders for the payment thereof in the event the Parent, the
Company or any of the Subsidiaries is found to be obligated to pay such
Indebtedness and which Indebtedness is thereupon promptly paid by the Parent,
the Company or such Subsidiaries.
7(d) Maintenance of Existence and Properties. And shall cause
---------------------------------------
each of the Subsidiaries to, maintain its corporate existence and maintain all
rights, privileges, licenses, approvals, franchises, properties and assets
necessary or desirable in the normal conduct of its business, including, without
limitation, all patents, trademarks, service marks, trade names, copyrights,
contractual franchises, authorizations and similar rights.
7(e) Inspection of Property; Books and Records; Discussions.
------------------------------------------------------
And shall cause each of the Subsidiaries to, keep proper books of record and
account in which full, true and correct entries in conformity with GAAP and all
Requirements of Law shall be made of all dealings and transactions in relation
to its business and activities, and permit representatives of the Administrative
Agent or any Lender (at no cost or expense to the Parent, the Company or any
Subsidiary unless there shall have occurred and be continuing an Event of
Default except to the extend provided in Paragraph 7(g)(3) below) to visit and
-----------------
inspect any of its properties and examine and make abstracts from any of its
books and records at any reasonable time upon, unless there shall exist an Event
of Default or Potential Default, at least two Business Days' prior notice to the
Company (which may be telephonic) and as often as may reasonably be desired by
the Administrative Agent or any Lender, and to discuss the business, operations,
properties and financial and other condition of the Parent, the Company and the
Subsidiaries with officers and employees of such Persons, and with their
independent certified public accountants (provided that the Company, if it so
chooses, may be present at and participate in any such discussion).
7(f) Notices. And shall cause each of the Subsidiaries to,
-------
immediately but in any event within two Business Days, give written notice to
the Administrative Agent and each Lender directly of:
26
<PAGE>
(1) The occurrence of any Potential Default or Event of Default;
(2) Any litigation or proceeding affecting the Parent, the
Company or any other Subsidiary of the Parent or the Borrower Collateral or
the Guarantor Collateral which could reasonably be expected to result in a
Material Adverse Effect; and
(3) Any event not disclosed pursuant to subparagraphs (1) and (2)
----------------- ---
above which could reasonably be expected to result in a Material Adverse
Effect.
7(g) Expenses. Pay all reasonable and documented out-of-pocket
--------
expenses (including fees and disbursements of outside counsel and the allocated
costs of internal counsel): (1) of the Administrative Agent and the Syndication
Agent incident to the preparation, negotiation and administration of the Loan
Documents and the protection of the rights of the Lenders, the Administrative
Agent and the Syndication Agent under the Loan Documents, (2) of the
Administrative Agent and each of the Lenders incident to the enforcement of
payment of the Obligations, whether by judicial proceedings or otherwise,
including, without limitation, in connection with bankruptcy, insolvency,
liquidation, reorganization, moratorium or other similar proceedings involving
the Company or a "workout" of the Obligations and (3) of the Administrative
Agent incurred in connection with audits of the Borrower Collateral and the
Guarantor Collateral (including, without limitation, of the books and records of
the Company and the Subsidiaries relating thereto) conducted by the
Administrative Agent not more frequently than once during any consecutive twelve
(12)-month period (copies of which shall be promptly distributed to each
Lender). The obligations of the Parent and the Company under this Paragraph
---------
7(g) shall be effective and enforceable whether or not any Loan is funded
- ----
hereunder and shall survive payment of all other Obligations.
7(h) Loan Documents. And shall cause each of the Guarantor
--------------
Subsidiaries to, comply with and observe all terms and conditions of the Loan
Documents to which such Person is party.
7(i) Insurance. And shall cause each of the Subsidiaries to,
---------
obtain and maintain insurance with responsible companies in such amounts and
against such risks as are usually carried by corporations engaged in similar
businesses similarly situated, which shall name the Administrative Agent as, in
the case of all business interruption insurance policies, loss payee, and in all
other cases an additional insured for the benefit of the Administrative Agent
and each Lender as their interests may appear, and furnish any of the Lenders on
request full information as to all such insurance.
7(j) Hazardous Materials. And shall cause each of the
-------------------
Subsidiaries to (except to the extent failure to comply with the requirements of
this Paragraph 7(j) could not be reasonably expected to result in a Material
Adverse Event):
(1) Keep and maintain all Property in compliance with, and shall
not cause or permit any Property to be in violation of, any Hazardous
Materials Laws or any federal, state or local laws, ordinances or
regulations relating to industrial hygiene or to the environmental
conditions on, under or about any Property, including, but not limited to,
soil and ground water conditions.
(2) Not cause or permit the discharge, release or disposal of any
Hazardous Materials in, on, under or about the Property (except relating to
use of solvents, paints and other chemical products used in connection with
the operation and production of
27
<PAGE>
equipment and inventory in the ordinary course of business in accordance
with all Requirements of Law, including, without limitation, Hazardous
Materials Laws).
(3) Promptly advise the Administrative Agent and each Lender in
writing of: (i) any threatened or actual Hazardous Materials Claims, (ii)
the Company's or any Subsidiary's receipt of any notice of any violation of
Hazardous Materials Laws (and the Company shall promptly provide the Lender
with a copy of such notice of violation), and (iii) the Company's or any
Subsidiary's discovery of any occurrence or condition on the Property or
any property adjacent to or in the vicinity of the Property that could
cause the Property or any part thereof to be in violation of any Hazardous
Materials Laws or to be subject to any restrictions on the ownership,
occupancy, transferability or use of the Property under any Hazardous
Materials Laws. If the Administrative Agent and/or any Lender shall be
joined in any legal proceedings or actions initiated in connection with any
Hazardous Materials Claims, such Person shall have its reasonable and
documented attorneys' fees and disbursements in connection therewith paid
by the Company.
(4) In the event (a "Hazardous Materials Event") of a Hazardous
Materials Claim, the receipt of a notice of violation as described in the
preceding subparagraph (3)(ii), or the discovery of an occurrence or
--------------------
condition as described in the preceding subparagraph (3)(iii):
---------------------
(i) Retain, at the Company's own cost, a reputable and
experienced environmental consultant reasonably acceptable to the
Administrative Agent and the Lenders;
(ii) Cause such environmental consultant to perform a
thorough investigation of the Property and the circumstances that gave
rise to the Hazardous Materials Event, and to produce a complete
report of such investigation with recommendations as to any further
action to be taken on account of such Hazardous Materials Event, a
copy of which report shall be provided to the Administrative Agent and
the Lenders;
(iii) If the report of such environmental consultant so
recommends, or if otherwise required pursuant to any Hazardous
Materials Laws, cause such environmental consultant to prepare a
remediation program pursuant to which the circumstances that have
given rise to the Hazardous Materials Event are to be fully remedied,
which program shall be prepared in coordination with the Company and
all relevant Governmental Authorities, and approved by all relevant
Governmental Authorities;
(iv) Cause such remediation program to be carried out with
diligence and at all times in compliance with all Hazardous Materials
Laws and with the approval of all relevant Governmental Authorities;
(v) Upon completion of such remediation program, cause all
final approvals from relevant Governmental Authorities to be obtained,
and provide evidence to the Administrative Agent and the Lenders that
the program has been completed and all approvals obtained; and
28
<PAGE>
(vi) In the course of carrying out the covenants in
subparagraphs (4)(i) through (v) above, a. provide the Administrative
-------------------- --- -
Agent and the Lenders with such periodic information and notices
regarding the Hazardous Materials Event, the environmental
consultant's investigation, and the preparation, approval and carrying
out of any remediation program as the Administrative Agent and the
Lenders may reasonably require, and b. allow the Administrative Agent
-
and the Lenders to enter and inspect the Property at any time,
provided that any such entry and inspection shall not be deemed to
impose any liability or responsibility on the Administrative Agent or
the Lenders with respect to any Hazardous Materials Event or any
remediation thereof, nor constitute any representation or warranty by
the Lender with respect to any condition, action or activity on or
affecting the Property.
7(k) Compliance with Laws and Contractual Obligations. And
------------------------------------------------
shall cause each of the Subsidiaries to, comply, in all material respects, with:
(1) all Requirements of Law of any Governmental Authority or other Person having
jurisdiction over it or its business (including, without limitation, the Federal
Fair Labor Standards Act, all consumer credit and disclosure laws and
regulations and laws and regulations relating to the check cashing business and
to the collections business), except such as may be contested in good faith or
as to which a bona fide dispute may exist, and (2) all Contractual Obligations,
failure to comply with which could reasonably be expected to result in a
Material Adverse Effect.
7(l) Further Assurances. And shall cause each of the
------------------
Subsidiaries to, promptly upon request by the Administrative Agent or any
Lender, do, execute, acknowledge, deliver, record, re-record, file, re-file,
register and re-register, any and all such further acts, deeds, conveyances,
security agreements, mortgages, assignments, estoppel certificates, financing
statements and continuations thereof, termination statements, notices of
assignment, transfers, certificates, assurances and other instruments the
Administrative Agent or such Lender, as the case may be, may reasonably require
from time to time in order (i) to carry out more effectively the purposes of
this Credit Agreement or any other Loan Document, (ii) to subject to the Liens
created by any of the Collateral and Credit Support Documents any of the
properties, rights or interests covered by any of the Collateral and Credit
Support Documents, (iii) to perfect and maintain the validity, effectiveness and
priority of any of the Collateral and Credit Support Documents and the Liens
intended to be created thereby, and (iv) to better assure, convey, grant,
assign, transfer, preserve, protect and confirm to the Administrative Agent and
Lenders the rights granted or now or hereafter intended to be granted to the
Lenders under any Loan Document or under any other document executed in
connection therewith.
7(m) Year 2000. And will cause each of the Subsidiaries to, perform
---------
all acts within its power as are reasonably necessary to ensure that: (1) the
Parent, the Company and each Subsidiary and any business in which it holds a
substantial interest, and (2) all customers, suppliers and vendors that are
material to its business become Year 2000 Compliant in a timely manner. Such
acts shall include, without limitation, performing a comprehensive review and
assessment of all of such Person's systems and adopting a detailed plan, with
itemized budget, for the remediation, monitoring and testing of such systems.
The Parent and the Company will and will cause each of the Subsidiaries to
immediately upon request of the Administrative Agent provide to the
Administrative Agent and the Lenders such certifications or other evidence of
the Parent's, the Company's or such Subsidiary's compliance with the terms of
this Paragraph 7(m) as the Administrative Agent may from time to time require.
--------------
7(n) Required Hedging Program. Shall, within ninety (90) days
------------------------
following the Effective Date cause the Company to enter into interest rate
protection agreements protecting
29
<PAGE>
against fluctuations in interest rates as to which the material terms are
reasonably satisfactory to the Administrative Agent, which agreement shall
provide coverage in an amount which will result in not less than than fifty
percent (50%) of all non-revolving Debt of the Company outstanding following the
Change of Control Payment Date to be either fixed rate debt or hedged for a
period of not less than three years.
8. Negative Covenants. Each of the Parent and the Company
------------------
hereby jointly and severally agrees that, as long as any Obligations remain
unpaid or any Lender has any obligation to make Loans hereunder, neither the
Parent nor the Company shall, directly or indirectly:
8(a) Liens. And shall not permit any Subsidiary to, create,
-----
incur, assume or suffer to exist, any Lien upon the Borrower Collateral or the
Guarantor Collateral or upon any of its other property and assets except the
Liens created by the Borrower Security Agreement and the Guarantor Security
Agreements and:
(1) Liens or charges for current taxes, assessments or other
governmental charges which are not delinquent or which remain payable
without penalty, or the validity of which are contested in good faith by
appropriate proceedings upon stay of execution of the enforcement thereof,
provided the Parent, the Company or the Subsidiary, as applicable, shall
have set aside on its books and shall maintain adequate reserves for the
payment of same in conformity with GAAP;
(2) Liens, deposits or pledges made to secure statutory
obligations, surety or appeal bonds, or bonds for the release of
attachments or for stay of execution, or to secure the performance of bids,
tenders, contracts (other than for the payment of borrowed money), leases,
workmen's compensation claims and social security claims or for purposes of
like general nature in the ordinary course of the Parent's, the Company's
or the Subsidiary's business;
(3) Purchase money security interests for property hereafter
acquired, conditional sale agreements, or other title retention agreements,
with respect to property hereafter acquired; provided, however, that no
such security interest or agreement shall extend to any property other than
the property acquired.
(4) Statutory Liens of carriers, warehousemen, mechanics,
materialmen, landlords and other similar Liens imposed by law and created
in the ordinary course of business for amounts not yet due or which are
being contested in good faith by appropriate proceedings and with respect
to which adequate reserves are being maintained in conformity with GAAP;
(5) Attachment and judgment Liens not otherwise constituting
an Event of Default each of which Lien is in existence less than sixty (60)
days after the entry thereof or with respect to which execution has been
stayed, payment is covered in full by insurance, or the Parent, the Company
or the Subsidiary shall in good faith be prosecuting an appeal or
proceedings for review and shall have set aside on its books such reserves
as may be required by GAAP with respect to such judgment or award;
(6) Liens securing Acquired Indebtedness existing prior to
the consummation of the related Permitted Acquisition; provided, however,
that such Liens shall
30
<PAGE>
cover only real estate and the tangible personal property located thereon
(but in no event including cash or cash equivalents as "tangible personal
property") at the date of consummation of the related Permitted Acquisition
or shall constitute purchase money security interests which attach solely
to the property acquired with the proceeds thereof;
(7) Liens securing Indebtedness of Foreign Subsidiaries which are
not Guarantor Subsidiaries permitted under Paragraph 8(b)(9) below covering
-----------------
only assets of the Foreign Subsidiary obligated thereon;
(8) Additional Liens described on Schedule 6 attached hereto; and
----------
(9) Replacements, extensions and renewals of Liens permitted
under this Paragraph 8(a) provided that such Liens cover only the property
--------------
and assets previously subject to such Lien and secure only the Indebtedness
previously secured thereby and renewals, extensions, refunding or
refinancing of the same to the extent permitted under Paragraph 8(b) below.
--------------
8(b) Indebtedness. And shall not permit any Subsidiary to,
------------
create, incur, assume or suffer to exist, or otherwise become or be liable in
respect of any Indebtedness other than:
(1) The Obligations and the Guaranty Obligations;
(2) Indebtedness reflected in the financial statements referred
to in Paragraph 6(a) above (other than Indebtedness under the Existing
--------------
Credit Agreement which is to be repaid on the Effective Date);
(3) Trade debt incurred in the ordinary course of business and
outstanding less than sixty (60) days after the same has become due and
payable or which is being contested in good faith, provided provision is
made to the satisfaction of the Lenders for the eventual payment thereof in
the event it is found that such contested trade debt is payable by the
Parent, the Company or the Subsidiary;
(4) Indebtedness secured by Liens permitted under Paragraph 8(a)
--------------
above;
(5) Indebtedness arising from the honoring by a bank or other
financial institution of a check, draft or similar instrument inadvertently
(except in the case of daylight overdrafts) drawn against insufficient
funds in the ordinary course of business and provided that such
Indebtedness is extinguished within two Business Days of its incurrence;
(6) Indebtedness under negotiable instruments for deposit or
collection in the ordinary course;
(7) Acquired Indebtedness arising in connection with Permitted
Acquisitions and unsecured Indebtedness to sellers incurred in connection
with such Permitted Acquisitions in an amount not to exceed $10,000,000.00
in the aggregate at any one time outstanding during the term of this
Agreement;
(8) Indebtedness of the Parent, the Company and Subsidiaries of
the Company which are Guarantor Subsidiaries among themselves, subject, in
the case of
31
<PAGE>
Indebtedness of the Company to the Parent or any Guarantor Subsidiary, to
the provisions of the applicable Guarantor Subordination Agreements;
(9) Indebtedness of Subsidiaries of the Parent which are not
Guarantor Subsidiaries among themselves and to Persons other than the
Parent, the Company and the Guarantor Subsidiaries so long as the holders
of such Indebtedness have no recourse on account thereof or in connection
therewith to the Parent, the Company or any Guarantor Subsidiary, by way of
guaranty provided by such Person or on account of representations or
warranties made by such Person or otherwise;
(10) Indebtedness of Subsidiaries of the Parent which are not
Guarantor Subsidiaries to the Parent, the Company and other Guarantor
Subsidiaries; provided, however, that the aggregate amount of such
Indebtedness shall not exceed $10,000,000.00 and such Indebtedness shall be
evidenced in each case by a negotiable promissory note which promissory
note and any and all collateral security therefor shall be pledged to the
Administrative Agent for the benefit of the Lenders pursuant to the
Borrower Security Agreement or the Guarantor Security Agreement of the
lender of such Indebtedness, as applicable;
(11) Additional Indebtedness described on Schedule 7 attached
----------
hereto; and
(12) Indebtedness renewing, extending the maturity of or
refunding or refinancing in whole or in part Indebtedness otherwise
permitted hereunder; provided that: (i) the terms thereof, including,
without limitation, interest rate, events of default, remedies, term to
maturity, payment terms and covenants, are no less favorable than those of
the Indebtedness being so renewed, extended, refunded or refinanced, (ii)
the principal amount of such Indebtedness is not increased, and (iii) such
Indebtedness and the incurrence thereof does not conflict with any term or
provision of this Agreement or the other Loan Documents or result in the
occurrence of an Event of Default or Potential Default.
8(c) Consolidation and Merger. And shall not permit any
------------------------
Subsidiary to, liquidate or dissolve or enter into any consolidation, merger,
partnership, joint venture, syndicate or other combination, except that, and if,
but only if, immediately after the effectiveness of such transaction there shall
not have occurred and be continuing any Event of Default or Potential Default:
(i) any Subsidiary may be consolidated with or merged into the Company or a
Guarantor Subsidiary, (ii) other Persons may be consolidated with or merged into
the Company or any Subsidiary in connection with a Permitted Acquisition, and
(iii) any Subsidiary may be liquidated or dissolved if its business, assets and
property are transferred to the Parent, the Company or a Guarantor Subsidiary.
8(d) Acquisitions. And shall not permit any Subsidiary to,
------------
purchase or acquire or incur liability for the purchase or acquisition of any or
all of the assets or business of any person, firm or corporation (except in
connection with Capital Expenditures permitted under Paragraph 8(j) below)
--------------
without the prior written consent of not less than two Lenders holding fifty one
percent (51%) of the Consolidated Percentage Shares; provided, however, that
notwithstanding the foregoing: (1) from the period from the Effective Date to
and including December 31, 1999, the Parent, the Company and the other
Subsidiaries of the Parent may consummate Permitted Acquisitions for a total
aggregate purchase consideration (including, without limitation, Acquired
Indebtedness, unsecured Indebtedness to sellers and earn-out and non-competition
obligations) of $25,000,000.00 or less, and (2) during each calendar year
thereafter, the Parent, the Company and the other Subsidiaries of the
32
<PAGE>
Parent may consummate any single Permitted Acquisition for a total purchase
consideration (including, without limitation, Acquired Indebtedness, unsecured
Indebtedness to sellers and earn-out and non-competition obligations) of
$10,000,000.00 or less or Permitted Acquisitions for a total aggregate purchase
consideration (including, without limitation, Acquired Indebtedness, unsecured
Indebtedness to sellers and earn-out and non-competition obligations) of
$15,000,000.00 or less.
8(e) Payment of Dividends. Declare or pay any dividends upon
--------------------
its shares of stock now or hereafter outstanding or make any distribution of
assets to its stockholders as such, whether in cash, property or securities,
except, and if but only if at the date such dividends are declared and at the
date such dividends are to be paid there does not exist an Event of Default or
Potential Default, dividends and other distributions in a dollar amount
necessary to permit the Parent to:
(1) Pay management fees to Leonard Green & Partners, L.P. and its
Affiliates to the extent such management fees are permitted pursuant to
Paragraph 8(k) below;
(2) Pay taxes payable by the Parent on account of income derived
from operations of the Company and other Subsidiaries of the Parent;
(3) Redeem or otherwise repurchase stock, stock equivalents or
stock options issued by the Parent owned by former employees, former
directors or former officers of the Company and its Subsidiaries for an
aggregate purchase price for all such stock, stock equivalents and stock
options not to exceed $1,000,000.00 in any fiscal year or $3,000,000.00 in
the aggregate during the term of this Agreement, in each case plus the
----
aggregate amount of Net Cash Proceeds received by the Parent following the
Effective Date and consummation of the Recapitalization and Merger (as
defined in the Acquisition Agreement) from the issuance by the Parent of
equity securities to employees, directors or officers of the Company and
its Subsidiaries and minus the aggregate amount of repurchases made
-----
pursuant to this subparagraph (3) following the Effective Date; provided,
however, that in no event shall the aggregate dollar amount of all such
redemptions and repurchases exceed $5,000,000.00 during the term of this
Agreement, and, provided further, that notwithstanding the limitations
contained herein, the Parent may redeem and repurchase additional stock,
stock equivalents and stock options in any fiscal year in an additional
aggregate amount equal to key man life insurance proceeds which it receives
in such fiscal year;
(4) Pay overhead and operating expenses, provided that such
dividends shall be in an amount not to exceed $100,000.00 in fiscal year;
(5) Fund, from time to time after the Effective Date, costs and
expenses in an amount not to exceed $500,000.00 in the aggregate, incurred
in connection with the obligations of the Parent under that certain
Exchange and Registration Rights Agreement of even date herewith between
the Parent and the initial purchasers of the Parent's Senior Discount Notes
due 2006 and that certain Amended and Restated Stockholders Agreement of
even date herewith between the Parent and certain of the Parent's
shareholders as of the Effective Date; and
(6) Pay, commencing June 30, 2004, interest due and payable on the
Parent's Senior Discount Notes due 2006; provided, however, that as an
additional condition precedent to the right to pay any such dividend, the
Company shall be in compliance with the requirements of Paragraph 8(i)(2)
-----------------
below on the date of payment thereof (computed on a pro forma basis
including such interest in Debt Service in such calculation for the four
quarter
33
<PAGE>
period ended on the day the related interest payment is due, and further,
that for the purposes of the calculation at June 30, 2004, the amount
included in Debt Service shall be twice the amount of interest payable on
such date to reflect a full year's interest).
8(f) Purchase or Retirement of Stock. Except as permitted
-------------------------------
pursuant to Paragraph 8(e)(3) above, acquire, purchase, redeem or retire any
-----------------
shares of its capital stock now or hereafter outstanding, in one transaction or
a series of transactions.
8(g) Investments; Advances. And shall not permit any Subsidiary
---------------------
to, make or commit to make any advance, loan or extension of credit or capital
contribution to, or purchase any stock, bonds, notes, debentures or other
securities of, or make any other investment in, any Person, except:
(1) Investments in Cash Equivalents;
(2) Investments in Guarantor Subsidiaries;
(3) Investments in and advances to Subsidiaries formed following
the Effective Date and Subsidiaries acquired in a Permitted Acquisition
following the Effective Date which are not, in either such case, Guarantor
Subsidiaries; provided, however, that such investments and advances shall
not exceed $15,000,000.00 in the aggregate at any one time outstanding for
all such Subsidiaries;
(4) Loans and advances among the Parent, the Company and
Subsidiaries of the Company which are Guarantor Subsidiaries permitted
under Paragraph 8(b)(8) above;
-----------------
(5) Loans made in the ordinary course of business to officers and
employees of the Company and its Subsidiaries or to enable them to acquire
stock of the Parent in an aggregate amount not to exceed $3,000,000.00 at
any one time outstanding;
(6) Loans, advances and investments described on Schedule 8
----------
attached hereto; and
(7) Other loans and advances made by the Parent, the Company and
all Subsidiaries in an aggregate amount not to exceed $5,000,000.00 at any
one time outstanding, it being acknowledged and agreed by the Parent and
the Company that any and all liabilities, contingent or otherwise, of, or
recourse of any Person to, the Parent, the Company or any Subsidiary in
relation to, the "Cash Til Pay Day Loan Program" shall be included in the
dollar restriction against loans and advances under this subparagraph (7).
----------------
8(h) Sale of Assets. And shall not permit any Subsidiary to,
--------------
sell, lease, assign, transfer or otherwise dispose of any of its assets, whether
now owned or hereafter acquired, other than:
(1) Dispositions of personal property in the nature of furniture,
furnishings, equipment and supplies which are worn or obsolete or otherwise
not needed in the running of the business;
(2) The sales or other dispositions, whether in one transaction
or a series of related transactions, of assets of the Parent, the Company
or any Subsidiary with a fair
34
<PAGE>
market value not to exceed $2,500,000.00 in the aggregate during any
consecutive twelve (12)- month period;
(3) Liquidation of Cash Equivalents and other investments (other
than investments in fixed assets) permitted to be held by such Person
pursuant to Paragraph 8(g) above;
--------------
(4) Transfers of assets among the Company and Guarantor
Subsidiaries;
(5) Transfers of tangible personal property (excluding in any
event cash and cash equivalents as "tangible personal property") by the
Company and the Guarantor Subsidiaries to Subsidiaries which are not
Guarantor Subsidiaries, which assets are to be used by such Subsidiaries in
the ordinary course of their business operations and which assets have an
aggregate fair market value not to exceed $2,000,000.00 during the term of
this Agreement; and
(6) Other sales and dispositions of fixed assets of the Parent,
the Company or any Subsidiary; provided, however, that: (i) the
Administrative Agent and the Lenders shall have approved in writing in
advance any such disposition (which approval shall not be unreasonably
withheld), and (ii) there shall be delivered to the Administrative Agent
concurrent with the consummation of such disposition any mandatory
prepayment required pursuant to Paragraph 3(f)(6)(1) above.
--------------------
8(i) Financial Covenants. Permit as of the last day of any fiscal
-------------------
quarter, commencing December 31, 1998:
(1) The Company's consolidated ratio of: (i) Funded Debt, to
(ii) EBITDA as of the end of such fiscal quarter for such quarter and the
immediately preceding three fiscal quarters, to exceed:
As of Calendar
--------------
Quarters Ending Required Ratio
--------------- --------------
December 31, 1998 4.25:1.00
through
December 31, 1999
March 31, 2000 4.00:1.00
and
June 30, 2000
September 30, 2000 3.75:1.00
and
December 31,
2000
March 31, 2001 3.50:1.00
and
June 30, 2001
35
<PAGE>
September 30, 2001 3.25:1.00
and
December 31, 2001
March 31, 2002 3.00:1.00
and the last day of each
fiscal quarter thereafter
(2) The Company's consolidated ratio of: (i) EBITDA as of the
end of such fiscal quarter for such quarter and the immediately preceding
three fiscal quarters, less Capital Expenditures and plus Rental Expense
for such fiscal period, to (ii) Debt Service for such period, to be less
than:
As of Calendar
--------------
Quarters Ending Required Ratio
--------------- --------------
December 31, 1998 1.40:1.00
through
March 31, 1999
June 30, 1999 1.50:1.00
and the last day of each
fiscal quarter thereafter
(3) The Company's consolidated EBITDA as of the end of such fiscal
quarter for such quarter and the immediately preceding three fiscal
quarters to be less than:
As of Calendar
--------------
Quarters Ending Required EBITDA
--------------- ---------------
December 31, 1998 $31,000,000
through
September 31, 1999
December 31, 1999 $32,000,000
and
March 31, 2000
June 30, 2000 $33,000,000
and
September 30, 2000
December 31, 2000 $34,000,000
March 31, 2001 $35,000,000
June 30, 2001 $36,000,000
September 30, 2001 $37,000,000
December 31, 2001 $38,000,000
36
<PAGE>
March 31, 2002 $39,000,000
June 30, 2002 $40,000,000
September 30, 2002 $41,000,000
December 31, 2002 $42,000,000
March 31, 2003 $43,000,000
and
June 30, 2003
September 30, 2003 $44,000,000
December 31, 2003 $45,000,000
and the last day of each
fiscal quarter thereafter
8(j) Capital Expenditures. And shall not permit any Subsidiary to,
--------------------
make or commit to make (by way of acquisition of the securities of any Person or
otherwise), Capital Expenditures, taken in the aggregate for the Parent, the
Company and the other Subsidiaries of the Parent, in excess of: (1) during
fiscal year 1999, $7,500,000.00, and (2) during each fiscal year thereafter,
twenty percent (20%) of EBITDA of the Parent and its consolidated Subsidiaries
for the immediately preceding fiscal year; provided, however, that prior to the
delivery of the annual audited financial statements for the immediately
preceding fiscal year required pursuant to Paragraph 7(a) above, Capital
Expenditures of the Parent and its consolidated Subsidiaries shall not exceed a
dollar amount equal to thirty percent (30%) of the maximum limitation on Capital
Expenditures during the immediately preceding fiscal year.
8(k) Limitation on Transactions with Affiliates. And shall
not permit any Subsidiary to, enter into any transaction (including, without
limitation, the purchase or sale of any Property or service) with, or make any
payment or transfer to, any Affiliate except in the ordinary course of business
and pursuant to the reasonable requirements of the Parent's, the Company's or
such Subsidiary's business and upon fair and reasonable terms no less favorable
to the Parent, the Company or such Subsidiary than such Person would obtain in a
comparable arms-length transaction; provided, however, that nothing contained
herein shall restrict the following: (1) transactions between or among the
Parent, the Company and/or the Subsidiaries and any of their Affiliates
otherwise expressly permitted pursuant to Paragraphs 8(a) through 8(o) of this
Credit Agreement, (2) retention of Goldman Sachs & Co. or its Affiliates by the
Parent, the Company and/or the Subsidiaries for investment banking or financial
advisory services as approved by a majority of the Board of Directors of the
Parent, (3) actions taken and transactions entered into by the Parent, the
Company and/or the Subsidiaries in connection with registration rights
agreements, and (4) payments by the Parent, the Company and/or the subsidiaries
of transactional and management and similar fees and reimbursements of expenses
to Leonard Green & Partners, L.P. or any Affiliate thereof, provided that in no
event shall the Parent, the Company and/or the Subsidiaries pay management or
similar fees to Leonard Green & Partners, L.P. or any Affiliate thereof: (i) at
any date on which there shall exist an Event of Default or Potential Default, or
(ii) in an aggregate amount during any consecutive twelve month period in excess
for all such Persons 1.60% of (y) the original equity investment of Green Equity
Investors, II, L.P. in the Parent, plus (z) the value of any additional capital
contributions to the Parent made, directly or indirectly, by any Affiliate of
Leonard Green & Partners, L.P. (it being agreed and understood by the
37
<PAGE>
Administrative Agent and the Lenders that the restriction set forth in
subparagraph (ii) above shall not apply to payments on account of significant
services provided by Leonard Green & Partners, L.P. and its Affiliates in
connection with a specific transaction, as to which such Person may receive a
reasonable and customary one-time fee for such services); and, provided further,
that nothing contained herein shall restrict the right of the Parent and the
Company to pay the Approved Transactional Expenses and Payments or to make the
loans to be made to members of management of the Company on the Effective Date
required to be made pursuant to that certain Memorandum to Management
Stockholders of DFG Holdings, Inc. dated November 13, 1998 and that certain
Employment Agreement dated as of November 13, 1998 by and among Jeff Weiss, the
Parent and the Company.
8(l) Change in Business. And shall not permit any Subsidiary to,
------------------
engage in any material line of business substantially different from those lines
of business carried on by it on the Effective Date hereof.
8(m) Change in Structure. And shall not permit any Subsidiary to,
-------------------
make any changes in its equity capital structure (including, in the terms of its
outstanding stock), or amend its certificate of incorporation or by-laws in any
material respect.
8(n) Accounting Changes. And shall not permit any Subsidiary to,
------------------
make any significant change in accounting treatment or reporting practices,
except as required by GAAP, or change the fiscal year of the Parent, the Company
or of any of its Subsidiaries.
8(o) Restriction on Negative Pledges. And shall not permit any
-------------------------------
Subsidiary to enter into, assume or become subject to any agreement prohibiting
or otherwise restricting the creation or assumption of any Lien upon its
properties or assets, whether now owned or hereafter acquired, or requiring the
grant of any security for such obligations if security is given for some other
obligation, except pursuant to this Credit Agreement and the other Loan
Documents.
9. Events of Default. Upon the occurrence of any of the following
-----------------
events (an "Event of Default"):
9(a) The Company shall fail to pay any principal or interest on
any Loan on the date when due or shall fail to pay any other Obligation within
five days of the date when due; or
9(b) Any representation or warranty made by the Parent or the
Company in any Loan Document or in connection with any Loan Document shall be
inaccurate or incomplete in any material respect on or as of the date made or
deemed made; or
9(c) The Parent or the Company shall default in the observance
or performance of any covenant or agreement contained in Paragraphs 7(d) or 7(k)
--------------- ----
above, Paragraph 8 above or the Company shall default in the observance or
-----------
performance of any covenant or agreement contained in the Borrower Security
Agreement; or
9(d) The Parent or the Company shall fail to observe or perform
any other term or provision contained in the Loan Documents and such failure
shall continue for thirty (30) days following the date the Parent or the Company
knew or, in the orderly conduct of its business, should have known of such
failure; or
9(e) The Company shall default in any payment of principal of
or interest on any Indebtedness (other than the Obligations) in an aggregate
amount in excess of $2,000,000.00, the effect
38
<PAGE>
of which is to permit such Indebtedness to be declared or otherwise to become
due prior to its stated maturity; or
9(f) (1) The Parent, the Company or any other Subsidiary of the
Parent, shall commence any case, proceeding or other action (i) 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 (ii) seeking appointment of a receiver, trustee,
custodian or other similar official for it or for all or any substantial part of
its assets, or the Parent, the Company or any other Subsidiary of the Parent
shall make a general assignment for the benefit of its creditors; or (2) there
shall be commenced against the Parent, the Company or any other Subsidiary of
the Parent, any case, proceeding or other action of a nature referred to in
clause (1) above which (i) results in the entry of an order for relief or any
such adjudication or appointment, or (ii) remains undismissed, undischarged or
unbonded for a period of sixty (60) days; or (3) there shall be commenced
against the Parent, the Company or any other Subsidiary of the Parent, any case,
proceeding or other action seeking issuance of a warrant of attachment,
execution, distraint or similar process against all or substantially all of its
assets which results in the entry of an order for any such relief which shall
not have been vacated, discharged, stayed, satisfied or bonded pending appeal
within sixty (60) days from the entry thereof; or (4) the Parent, the Company or
any other Subsidiary of the Parent, shall take any action in furtherance of, or
indicating its consent to, approval of, or acquiescence in (other than in
connection with a final settlement), any of the acts set forth in clause (1),
(2) or (3) above; or (5) the Parent, the Company or any other Subsidiary of the
Parent, shall generally not, or shall be unable to, or shall admit in writing
its inability to pay its debts as they become due; or
9(g) (1) An ERISA Event shall occur with respect to a Pension Plan or
Multiemployer Plan which has resulted or could reasonably expected to result in
liability of the Company under Title IV of ERISA to the Pension Plan,
Multiemployer Plan or the PBGC in an aggregate amount in excess of $500,000.00;
(2) the commencement or increase of contributions to, or the adoption of or the
amendment of a Pension Plan by the Company or an ERISA Affiliate which has
result or could reasonably be expected to result in an increase in Unfunded
Pension Liability among all Pension Plans in an aggregate amount in excess of
$500,000.00; or (3) the Company or an ERISA Affiliate shall fail to pay when
due, after the expiration of any applicable grace period, any installment
payment with respect to its withdrawal liability under Section 4201 of ERISA
under a Multiemployer Plan, which has resulted or could reasonably be expected
to result in a Material Adverse Effect; or
9(h) One or more judgments or decrees in an aggregate amount in
excess of $2,000,000.00 (excluding judgments and decrees covered by insurance,
without giving effect to self-insurance or deductibles) shall be entered and be
outstanding at any date against the Company or any of its Subsidiaries and all
such judgments or decrees shall not have been vacated, discharged, stayed,
satisfied or bonded pending appeal within sixty (60) days from the entry thereof
or in any event later than five days prior to the date of any proposed sale
thereunder; or
9(i) The Parent or any Guarantor Subsidiary shall attempt to rescind
or revoke its Guaranty, with respect to future transactions or otherwise, or
shall fail to observe or perform any term or provision of its Guaranty,
Guarantor Security Agreement or Guarantor Subordination Agreement; or
9(j) There shall occur a Change of Control;
39
<PAGE>
THEN, automatically upon the occurrence of an Event of Default under
Paragraph 9(f) above, at the option of any Lender upon the occurrence of an
- --------------
Event of Default under Paragraph 9(a) above and, in all other cases, at the
--------------
option of the Required Lenders, each Lender's obligation to make Loans shall
terminate and the principal balance of outstanding Loans and interest accrued
but unpaid thereon and all other Obligations shall become immediately due and
payable, without demand upon or presentment to the Company, which are expressly
waived by the Company, and the Administrative Agent and the Lenders may
immediately exercise all rights, powers and remedies available to them at law,
in equity or otherwise, including, without limitation, under the Loan Documents,
all of which rights, powers and remedies are cumulative and not exclusive.
10. The Administrative Agent.
------------------------
10(a) Appointment. Each Lender hereby irrevocably designates
-----------
and appoints the Administrative Agent as the agent of such Lender under the Loan
Documents and each such Lender hereby irrevocably authorizes the Administrative
Agent, as the agent for such Lender, to take such action on its behalf under the
provisions of the Loan Documents and to exercise such powers and perform such
duties as are expressly delegated to the Administrative Agent by the terms of
the Loan Documents, together with such other powers as are reasonably incidental
thereto. Notwithstanding any provision to the contrary elsewhere in the Loan
Documents, the Administrative Agent shall not have any duties or
responsibilities, except those expressly set forth herein or therein, or any
fiduciary relationship with any Lender, and no implied covenants, functions,
responsibilities, duties, obligations or liabilities shall be read into the Loan
Documents or otherwise exist against the Administrative Agent.
10(b) Delegation of Duties. The Administrative Agent may
--------------------
execute any of its duties under the Loan Documents by or through agents or
attorneys-in-fact and shall be entitled to advice of counsel concerning all
matters pertaining to such duties. The Administrative Agent shall not be
responsible for the negligence or misconduct of any agents or attorneys-in-fact
selected by it with reasonable care.
10(c) Exculpatory Provisions. Neither the Administrative Agent
----------------------
nor any of its officers, directors, employees, agents, attorneys-in-fact or
affiliates shall be (1) liable for any action lawfully taken or omitted to be
taken by it or such Person under or in connection with the Loan Documents
(except for its or such Person's own gross negligence or willful misconduct), or
(2) responsible in any manner to any of the Lenders for any recitals,
statements, representations or warranties made by the Company or any officer
thereof contained in the Loan Documents or in any certificate, report, statement
or other document referred to or provided for in, or received by the
Administrative Agent under or in connection with the Loan Documents or for the
value, validity, effectiveness, genuineness, enforceability or sufficiency of
the Loan Documents or for any failure of the Company to perform its obligations
hereunder. The Administrative Agent shall not be under any obligation to any
Lender to ascertain or to inquire as to the observance or performance of any of
the agreements contained in, or conditions of, the Loan Documents or to inspect
the properties, books or records of the Company.
10(d) Reliance by Administrative Agent. The Administrative
--------------------------------
Agent shall be entitled to rely, and shall be fully protected in relying, upon
any note, writing, resolution, notice, consent, certification, affidavit,
letter, cablegram, telegram, telecopy, telex or teletype message, statement,
order or other document or conversation reasonably believed by it to be genuine
and correct and to have been signed, sent or made by the proper Person or
Persons and upon advice and statements of legal counsel (including, without
limitation, counsel to the Company), independent accountants and other experts
selected by the Administrative Agent. Without limiting the generality of the
foregoing, it
40
<PAGE>
is expressly acknowledged and agreed by the Company and the Lenders that any
determination by the Administrative Agent as to the Collateral Value of the
Borrowing Base shall be based, without independent investigation of the legal or
factual contents thereof, upon the most recent Borrowing Base Report provided by
the Company to the Administrative Agent pursuant to Paragraph 7(b)(1)(i) above
--------------------
or such more recent Borrowing Base Report provided to the Administrative Agent.
The Administrative Agent may deem and treat the payee of any note as the owner
thereof for all purposes. As to the Lenders: (1) the Administrative Agent shall
be fully justified in failing or refusing to take any action under the Loan
Documents unless it shall first receive such advice or concurrence of one
hundred percent (100%) of the Lenders or it shall first be indemnified to its
satisfaction by the Lenders ratably in accordance with their respective
Consolidated Percentage Shares against any and all liability and expense which
may be incurred by it by reason of taking or continuing to take any action
(except for liabilities and expenses resulting from the Administrative Agent's
gross negligence or willful misconduct), and (2) the Administrative Agent shall
in all cases be fully protected in acting, or in refraining from acting, under
the Loan Documents in accordance with a request of one hundred percent (100%) of
the Lenders, as appropriate, and such request and any action taken or failure to
act pursuant thereto shall be binding upon all the Lenders.
10(e) Notice of Default. The Administrative Agent shall not be
-----------------
deemed to have knowledge or notice of the occurrence of any Potential Default or
Event of Default hereunder unless the Administrative Agent has received notice
from a Lender or the Company referring to the Loan Documents, describing such
Potential Default or Event of Default and stating that such notice is a "notice
of default." In the event that the Administrative Agent receives such a notice,
the Administrative Agent shall promptly give notice thereof to the Lenders. The
Administrative Agent shall take such action with respect to such Potential
Default or Event of Default as shall be reasonably directed by all of the
Lenders (or any Lender with respect to an Event of Default under Paragraph 9(a)
--------------
above); provided that, unless and until the Administrative Agent shall have
received such directions, the Administrative Agent may (but shall not be
obligated to) take such action, or refrain from taking such action, with respect
to such Default or Event of Default as it shall deem advisable in the best
interest of the Lenders (except to the extent that this Credit Agreement
expressly requires that such action be taken or not taken by the Administrative
Agent with the consent or upon the authorization of the Required Lenders, in
which case such action will be taken or not taken as directed by the Required
Lenders).
10(f) Non-Reliance on Administrative Agent and Other Lenders.
------------------------------------------------------
Each Lender expressly acknowledges that neither the Administrative Agent nor any
of its officers, directors, employees, agents, attorneys-in-fact or affiliates
has made any representations or warranties to it and that no act by the
Administrative Agent hereinafter taken, including any review of the affairs of
the Company, shall be deemed to constitute any representation or warranty by the
Administrative Agent to any Lender. Each Lender represents to the
Administrative Agent that it has, independently and without reliance upon the
Administrative Agent or any other Lender, 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 Company and made its own decision to make
its loans hereunder and enter into this Credit Agreement. Each Lender also
represents that it will, independently and without reliance upon the
Administrative Agent or any other Lender, and based on such documents and
information as it shall deem appropriate at the time, continue to make its own
credit analysis, appraisals and decisions in taking or not taking action under
this Credit Agreement, 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 Company. Except for notices, reports and
other documents expressly required to be furnished to the Lenders by the
Administrative Agent hereunder, the Administrative Agent shall not have any duty
or responsibility to provide any Lender with any credit or other information
concerning the business, operations, property,
41
<PAGE>
financial and other condition or creditworthiness of the Company which may come
into the possession of the Administrative Agent or any of its officers,
directors, employees, agents, attorneys-in-fact or affiliates.
10(g) Indemnification. The Lenders agree to indemnify the
---------------
Administrative Agent in its capacity as such (to the extent not reimbursed by
the Company and without limiting the obligation of the Company to do so),
ratably according to the respective amounts of their Percentage Shares, 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 Obligations) be imposed on, incurred by or asserted
against the Administrative Agent in any way relating to or arising out of the
Loan Documents or any documents contemplated by or referred to herein or the
transactions contemplated hereby or any action taken or omitted by the
Administrative Agent under or in connection with any of the foregoing; provided
that no Lender shall be liable for the payment of any portion of such
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements resulting from the Administrative Agent's gross
negligence or willful misconduct. The provisions of this Paragraph 10(g) shall
---------------
survive the payment of the Obligations and the termination of this Credit
Agreement.
10(h) Administrative Agent in Its Individual Capacity. The
-----------------------------------------------
Administrative Agent and its affiliates may make loans to, accept deposits from
and generally engage in any kind of business with the Parent, the Company and
the other Subsidiaries of the Company as though the Administrative Agent were
not the Administrative Agent hereunder. With respect to such loans made or
renewed by them and any Note issued to them, the Administrative Agent shall have
the same rights and powers under the Loan Documents as any Lender and may
exercise the same as though it were not the Administrative Agent, and the terms
"Lender" and "Lenders" shall include the Administrative Agent in its individual
capacity.
10(i) Successor Administrative Agent. The Administrative Agent
------------------------------
may resign as Administrative Agent under the Loan Documents upon thirty (30)
days' notice to the Lenders and agrees that it will so resign in the event it
ceases to hold any Percentage Share of the Obligations. If the Administrative
Agent shall resign, then the Lenders (other than the Lender resigning as
Administrative Agent) shall (with, so long as there shall not exist an Event of
Default, the consent of the Company, such consent not to be unreasonably
withheld) appoint a successor agent or, if the Lenders are unable to agree on
the appointment of a successor agent, the Administrative Agent shall appoint a
successor agent for the Lenders whereupon such successor agent shall succeed to
the rights, powers and duties of the Administrative Agent, and the term
"Administrative Agent" shall mean such successor agent effective upon its
appointment, and the former Administrative Agent's rights, powers and duties as
Administrative Agent shall be terminated, without any other or further act or
deed on the part of such former Administrative Agent or any of the parties to
this Credit Agreement or any of the Loan Documents or successors thereto. After
any retiring Administrative Agent's resignation hereunder as Administrative
Agent, the provisions of the Loan Documents shall inure to its benefit as to any
actions taken or omitted to be taken by it while it was Administrative Agent
under the Loan Documents.
11. Miscellaneous Provisions.
--- ------------------------
11(a) No Assignment. Neither the Parent nor the Company may
-------------
assign its rights or obligations under this Credit Agreement or the other Loan
Documents without the prior written consent of one hundred percent (100%) of the
Administrative Agent and the Lenders. Subject
42
<PAGE>
to the foregoing, all provisions contained in this Credit Agreement or any
document or agreement referred to herein or relating hereto shall inure to the
benefit of each Lender, its successors and assigns, and shall be binding upon
each of the Parent, the Company, and such Person's successors and assigns.
11(b) Amendment. Neither this Credit Agreement nor any other Loan
---------
Document may be amended, renewed or terms or provisions hereof waived unless
such amendment or waiver is in writing and signed by the Administrative Agent,
Required Lenders, the Parent and the Company: provided, however, no such
amendment or waiver shall, without the prior written consent of one hundred
percent (100%) of the Lenders: (1) reduce the principal of, or rate of interest
on, the Loans or fees payable hereunder, (2) except as expressly contemplated by
Paragraphs 11(h) below, modify the Revolving Facility Percentage Share, the Term
Loan A Percentage Share or the Term Loan B Percentage Share of any Lender, (3)
modify the Revolving Facility Commitment, the Term Loan A Commitment or the Term
Loan B Commitment of any Lender, (4) modify the definition of "Required
Lenders", (5) extend or waive any scheduled payment date for any principal,
interest or fees, or the Revolving Facility Maturity Date or the Conversion
Date, (6) release the Parent or any Guarantor Subsidiary from its obligations
under its Guaranty, Guarantor Security Agreement or Guarantor Subordination
Agreement, (7) amend the definition of "Collateral Value of the Borrowing Base,"
(8) amend this Paragraph 11(b), or (9) amend any provision of the Loan Documents
---------------
which by its terms requires the consent or approval of one hundred percent
(100%) of the Lenders. It is expressly agreed and understood that the failure by
the required Lenders to elect to accelerate amounts outstanding hereunder and/or
to terminate the obligation of the Lenders to make Loans hereunder shall not
constitute an amendment or waiver of any term or provision of this Credit
Agreement. No amendment of any provision of the Loan Documents relating to the
Administrative Agent shall be effective without the written consent of the
Administrative Agent.
11(c) Cumulative Rights; No Waiver. The rights, powers and remedies
----------------------------
of the Lenders hereunder and under the other Loan Documents are cumulative and
in addition to all rights, power and remedies provided under any and all
agreements among the Parent, the Company and the Lenders relating hereto, at
law, in equity or otherwise. Any delay or failure by the Lenders to exercise any
right, power or remedy shall not constitute a waiver thereof by the Lenders, and
no single or partial exercise by the Lenders of any right, power or remedy shall
preclude other or further exercise thereof or any exercise of any other rights,
powers or remedies.
11(d) Entire Credit Agreement. This Credit Agreement, the other
-----------------------
Loan Documents and the schedules, appendices, documents and agreements referred
to herein and therein embody the entire agreement and understanding between the
parties hereto and supersede all prior agreements and understandings relating to
the subject matter hereof and thereof.
11(e) Survival. All representations, warranties, covenants and
--------
agreements contained in this Credit Agreement and the other Loan Documents on
the part of the Company shall survive the termination of this Credit Agreement
and shall be effective until the Obligations are paid and performed in full or
longer as expressly provided herein.
11(f) Notices. All notices given by any party to the others under
-------
this Credit Agreement and the other Loan Documents shall be in writing unless
otherwise provided for herein, delivered personally, by telefacsimile or by
depositing the same in the United States mail, registered, with postage prepaid,
addressed to the party at the address set forth on Annex II attached hereto. Any
party may change the address to which notices are to be sent by notice of such
change to each other party given as provided herein. Such notices shall be
effective on the date received or, if mailed, on the third Business Day
following the date mailed.
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<PAGE>
11(g) Governing Law. This Credit Agreement and the other Loan
-------------
Documents shall be governed by and construed in accordance with the laws of the
State of California without giving effect to its choice of law rules.
11(h) Assignments, Participations, Etc.
--------------------------------
(1) With the prior written consent of the Administrative Agent
and, but only if there has not occurred and is continuing an Event of
Default or Potential Default, the Company, such consents not to be
unreasonably withheld, any Lender may at any time assign and delegate to
one or more Eligible Assignees (provided that no written consent of the
Company or the Administrative Agent shall be required in connection with
any assignment and delegation by a Lender to an Affiliate of such Lender)
(each an "Assignee") all or any part of such Lender's Revolving Facility
Commitment, Term Loan A Commitment and/or Term Loan B Commitment and Loans
and the other rights and obligations of such Lender hereunder, in a minimum
amount of $5,000,000.00 (or if such Lender's Revolving Credit Commitment,
Term Loan A Commitment or Term Loan B Commitment is less than
$5,000,000.00, one hundred percent (100%) thereof); provided, however, that
the Company and the Administrative Agent may continue to deal solely and
directly with such Lender in connection with the interest so assigned to an
Assignee until (i) written notice of such assignment, together with payment
instructions, addresses and related information with respect to the
Assignee, shall have been given to the Company and the Administrative Agent
by such Lender and the Assignee; (ii) such Lender and its Assignee shall
have delivered to the Company and the Administrative Agent an Assignment
and Acceptance Agreement and (iii) the Assignee has paid to the
Administrative Agent a processing fee in the amount of $3,500.00.
(2) From and after the date that the Administrative Agent
notifies the assignor Lender that it has received an executed Assignment
and Acceptance and payment of the above-referenced processing fee: (i) the
Assignee thereunder shall be a party hereto and, to the extent that rights
and obligations hereunder and under the other Loan Documents have been
assigned to it pursuant to such Assignment and Acceptance Agreement, shall
have the rights and obligations of a Lender under the Loan Documents, and
(ii) the assignor Lender shall, to the extent that rights and obligations
hereunder and under the other Loan Documents have been assigned by it
pursuant to such Assignment and Acceptance Agreement, relinquish its rights
and be released from its obligations under the Loan Documents.
(3) Within five Business Days after its receipt of notice by the
Administrative Agent that it has received an executed Assignment and
Acceptance Agreement, which notice shall also be sent by the Administrative
Agent to each Lender, and payment of the processing fee, the Company shall,
if requested by the Assignee, execute and deliver to the Administrative
Agent, new Notes evidencing such Assignee's assigned Loans and Loan funding
commitment. Immediately upon each Assignee's making its processing fee
payment under the Assignment and Acceptance Agreement, this Credit
Agreement shall be deemed to be amended to the extent, but only to the
extent, necessary to reflect the addition of the Assignee and the resulting
adjustment of the Percentage Shares resulting therefrom and the
Administrative Agent shall deliver to the Company a revised Commitment
Schedule reflecting such adjustment.
(4) Any Lender may at any time sell to one or more commercial
banks or other Persons not Affiliates of the Company (a "Participant")
participating interests in any Loans, the funding commitment of that Lender
and the other interests of that Lender (the "originating Lender") hereunder
and under the other Loan Documents; provided, however, that
44
<PAGE>
(i) the originating Lender's obligations under this Credit Agreement shall
remain unchanged, (ii) the originating Lender shall remain solely
responsible for the performance of such obligations, (iii) the Company and
the Administrative Agent shall continue to deal solely and directly with
the originating Lender in connection with the originating Lender's rights
and obligations under this Credit Agreement and the other Loan Documents.
In the case of any such participation, the Participant shall be entitled to
the benefit of Paragraphs 2(e), 2(f) and 2(g) (and subject to the burdens
--------------- --- ----
of Paragraphs 2(h) and 11(h) above) as though it were also a Lender
--------------- -----
thereunder, and if amounts outstanding under this Credit Agreement are due
and 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 Credit Agreement to the same extent as
if the amount of its participating interest were owing directly to it as a
Lender under this Credit Agreement, and Paragraph 11(j) of this Credit
---------------
Agreement shall apply to such Participant as if it were a Lender party
hereto.
(5) Notwithstanding any other provision contained in this Credit
Agreement or any other Loan Document to the contrary, any Lender may assign
all or any portion of the Loans or Notes held by it to any Federal Reserve
Lender or the United States Treasury as collateral security pursuant to
Regulation A of the Board of Governors of the Federal Reserve System and
any Operating Circular issued by such Federal Reserve Lender, provided that
any payment in respect of such assigned Loans or Notes made by the Company
to or for the account of the assigning and/or pledging Lender in accordance
with the terms of this Credit Agreement shall satisfy the Company's
obligations hereunder in respect to such assigned Loans or Notes to the
extent of such payment. No such assignment shall release the assigning
Lender from its obligations hereunder.
11(i) Counterparts. This Credit Agreement and the other Loan
------------
Documents may be executed in any number of counterparts, all of which together
shall constitute one agreement.
11(j) Sharing of Payments. If any Lender shall receive and retain
-------------------
any payment, whether by setoff, application of deposit balance or security, or
otherwise, in respect of the Obligations in excess of such Lender's Percentage
Share thereof, then such Lender shall purchase from the other Lenders for cash
and at face value and without recourse, such participation in the Obligations
held by them as shall be necessary to cause such excess payment to be shared
ratably as aforesaid with each of them; provided, that if such excess payment or
part thereof is thereafter recovered from such purchasing Lender, the related
purchases from the other Lenders shall be rescinded ratably and the purchase
price restored as to the portion of such excess payment so recovered, but
without interest. Each Lender is hereby authorized by the Company to exercise
any and all rights of setoff, counterclaim or bankers' lien against the full
amount of the Obligations, whether or not held by such Lender. Each Lender
hereby agrees to exercise any such rights first against the Obligations and only
then to any other Indebtedness of the Company to such Lender.
11(k) Confidentiality. Each Lender agrees to take normal and
---------------
reasonable precautions and exercise due care to maintain the confidentiality of
all information provided to it by the Parent, the Company or any other
Subsidiary of the Company or by the Administrative Agent on the Parent's, the
Company's or any other Subsidiary of the Parent's behalf, in connection with
this Credit Agreement or any other Loan Document, and neither it nor any of its
Affiliates shall use any such information for any purpose or in any manner other
than pursuant to the terms contemplated by this Credit Agreement, except to the
extent such information: (1) was or becomes generally available to the public
other than as a result of a disclosure by any Lender or
45
<PAGE>
Participant or any prospective Lender or Participant, or (2) was or becomes
available on a non-confidential basis from a source other than the Company,
provided that such source is not bound by a confidentiality agreement with the
Company known to the Lender. Nothing contained herein shall restrict any Lender
from disclosing such information (i) at the request or pursuant to any
requirement of any Governmental Authority; (ii) pursuant to subpoena or other
court process; (iii) when required to do so in accordance with the provisions of
any applicable Requirement of Law; (iv) to the extent reasonably required in
connection with any litigation or proceeding to which the Administrative Agent,
any Lender or their respective Affiliates may be party; (v) to the extent
reasonably required in connection with the exercise of any remedy hereunder or
under any other Loan Document; (vi) to such Lender's independent auditors and
other professional advisors; and (vii) to any Participant or Assignee and to any
prospective Participant or Assignee, provided that each Participant and Assignee
or prospective Participant or Assignee first agrees to be bound by the
provisions of this Paragraph 11(k).
---------------
11(l) Consent to Jurisdiction. ANY LEGAL ACTION OR PROCEEDING WITH
-----------------------
RESPECT TO THIS CREDIT AGREEMENT OR ANY OTHER LOAN DOCUMENT MAY BE BROUGHT IN
THE COURTS OF THE STATE OF CALIFORNIA OR OF THE UNITED STATES FOR THE CENTRAL
DISTRICT OF CALIFORNIA, AND BY EXECUTION AND DELIVERY OF THIS CREDIT AGREEMENT,
EACH OF THE PARENT, THE COMPANY, THE ADMINISTRATIVE AGENT, THE ARRANGERS, THE
SYNDICATION AGENT AND THE LENDERS CONSENTS, FOR ITSELF AND IN RESPECT OF ITS
PROPERTY, TO THE NON-EXCLUSIVE JURISDICTION OF THOSE COURTS. EACH OF THE PARENT,
THE COMPANY, THE ADMINISTRATIVE AGENT, THE ARRANGERS, THE SYNDICATION AGENT AND
THE LENDERS IRREVOCABLY WAIVES ANY OBJECTION, INCLUDING ANY OBJECTION TO THE
LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS, WHICH IT MAY
--------------------
NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY ACTION OR PROCEEDING IN SUCH
JURISDICTION IN RESPECT OF THIS CREDIT AGREEMENT OR ANY DOCUMENT RELATED HERETO.
THE PARENT, THE COMPANY, THE ADMINISTRATIVE AGENT, THE ARRANGERS, THE
SYNDICATION AGENT AND THE LENDERS EACH WAIVE PERSONAL SERVICE OF ANY SUMMONS,
COMPLAINT OR OTHER PROCESS, WHICH MAY BE MADE BY ANY OTHER MEANS PERMITTED BY
CALIFORNIA LAW.
11(m) Waiver of Jury Trial. THE PARENT, THE COMPANY, THE
--------------------
ADMINISTRATIVE AGENT, THE ARRANGERS, THE SYNDICATION AGENT AND THE LENDERS EACH
WAIVE THEIR RESPECTIVE RIGHTS TO A TRIAL BY JURY OF ANY CLAIM OR CAUSE OF ACTION
BASED UPON OR ARISING OUT OF OR RELATED TO THIS CREDIT AGREEMENT, THE OTHER LOAN
DOCUMENTS, OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY, IN ANY ACTION,
PROCEEDING OR OTHER LITIGATION OF ANY TYPE BROUGHT BY ANY OF THE PARTIES AGAINST
ANY OTHER PARTY OR ANY PARTICIPANT OR ASSIGNEE, WHETHER WITH RESPECT TO CONTRACT
CLAIMS, TORT CLAIMS, OR OTHERWISE. THE PARENT, THE COMPANY, THE ADMINISTRATIVE
AGENT, THE ARRANGERS, THE SYNDICATION AGENT AND THE LENDERS EACH AGREE THAT ANY
SUCH CLAIM OR CAUSE OF ACTION SHALL BE TRIED BY A COURT TRIAL WITHOUT A JURY.
WITHOUT LIMITING THE FOREGOING, THE PARTIES FURTHER AGREE THAT THEIR RESPECTIVE
RIGHT TO A TRIAL BY JURY IS WAIVED BY OPERATION OF THIS SECTION AS TO ANY
ACTION, COUNTERCLAIM OR OTHER PROCEEDING WHICH SEEKS, IN WHOLE OR IN PART, TO
CHALLENGE THE VALIDITY OR ENFORCEABILITY OF THIS CREDIT AGREEMENT OR THE OTHER
LOAN DOCUMENTS OR ANY PROVISION HEREOF OR THEREOF. THIS WAIVER SHALL APPLY
46
<PAGE>
TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS
CREDIT AGREEMENT AND THE OTHER LOAN DOCUMENTS.
11(n) Indemnity. Whether or not the transactions contemplated
---------
hereby are consummated, the Company shall indemnify and hold the Administrative
Agent, the Arrangers, the Syndication Agent and each Lender and each of their
respective officers, directors, employees, counsel, agents and attorneys-in-fact
(each, an "Indemnified Person") harmless from and against any and all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, charges, expenses and disbursements (including reasonable and documented
attorney's fees and expenses, including the allocated cost of internal counsel)
of any kind or nature whatsoever which may at any time (including at any time
following repayment of the Loans and the termination, resignation or replacement
of the Administrative Agent or replacement of any Lender) be imposed on,
incurred by or asserted against any such Person in any way relating to or
arising out of this Credit Agreement or any document contemplated by or referred
to herein, or the transactions contemplated hereby, or any action taken or
omitted by any such Person under or in connection with any of the foregoing,
including with respect to any investigation, litigation or proceeding (including
any insolvency proceeding or appellate proceeding) related to or arising out of
this Credit Agreement or the Loans or the use of the proceeds thereof, whether
or not any Indemnified Person is a party thereto (all the foregoing,
collectively, the "Indemnified Liabilities"); provided, however, that the
Company shall have no obligation hereunder to any Indemnified Person with
respect to Indemnified Liabilities resulting solely from the gross negligence or
willful misconduct of such Indemnified Person. The agreements in this Paragraph
---------
11(n) shall survive payment of all other Obligations.
- -----
11(o) Telephonic Instruction. Any agreement of the Administrative
----------------------
Agent and the Lenders herein to receive certain notices by telephone or
facsimile is solely for the convenience and at the request of the Company. The
Administrative Agent and the Lenders shall be entitled to rely on the authority
of any Person purporting to be a Person authorized by the Company to give such
notice and the Administrative Agent and the Lenders shall not have any liability
to the Company or other Person on account of any action taken or not taken by
the Administrative Agent or the Lenders in reliance upon such telephonic or
facsimile notice. The obligation of the Company to repay the Loans shall not be
affected in any way or to any extent by any failure by the Administrative Agent
and the Lenders to receive written confirmation of any telephonic or facsimile
notice or the receipt by the Administrative Agent and the Lenders of a
confirmation which is at variance with the terms understood by the
Administrative Agent and the Lenders to be contained in the telephonic or
facsimile notice.
11(p) Marshalling; Payments Set Aside. Neither the
-------------------------------
Administrative Agent nor the Lenders shall be under any obligation to marshall
any assets in favor of the Parent, the Company or any other Person or against or
in payment of any or all of the Obligations. To the extent that the Company
makes a payment or payments to the Administrative Agent or the Lenders, or the
Administrative Agent or the Lenders enforce their Liens or exercise their rights
of set-off, and such payment or payments or the proceeds of such enforcement or
set-off or any part thereof are subsequently invalidated, declared to be
fraudulent or preferential, set aside or required (including pursuant to any
settlement entered into by the Administrative Agent in its discretion) to be
repaid to a trustee, receiver or any other party in connection with any
insolvency proceeding, or otherwise, then (1) to the extent of such recovery the
obligation or part thereof originally intended to be satisfied shall be revived
and continued in full force and effect as if such payment had not been made or
such enforcement or set-off had not occurred, and (2) each Lender severally
agrees to pay to the Administrative Agent upon demand its ratable share of the
total amount so recovered from or repaid by the Administrative Agent.
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11(q) Set-off. In addition to any rights and remedies of the
-------
Lenders provided by law, if an Event of Default exists, each Lender is
authorized at any time and from time to time, without prior notice to the
Company, any such notice being waived by the Company to the fullest extent
permitted by law, to set off and apply any and all deposits (general or special,
time or demand, provisional or final) at any time held by, and other
indebtedness at any time owing to, such Lender to or for the credit or the
account of the Company against any and all Obligations owing to such Lender, now
or hereafter existing, irrespective of whether or not the Administrative Agent
or such Lender shall have made demand under this Credit Agreement or any Loan
Document and although such Obligations may be contingent or unmatured. Each
Lender agrees promptly to notify the Company and the Administrative Agent after
any such set-off and application made by such Lender; provided, however, that
the failure to give such notice shall not affect the validity of such set-off
and application.
11(r) Severability. The illegality or unenforceability of any
------------
provision of this Credit Agreement or any other Loan Document or any instrument
or agreement required hereunder or thereunder shall not in any way affect or
impair the legality or enforceability of the remaining provisions hereof or
thereof.
11(s) No Third Parties Benefited. This Credit Agreement and the
--------------------------
other Loan Documents are made and entered into for the sole protection and legal
benefit of the Parent, the Company, the Lenders and the Administrative Agent,
and their permitted successors and assigns, and no other Person shall be a
direct or indirect legal beneficiary of, or have any direct or indirect cause of
action or claim in connection with, this Credit Agreement or any of the other
Loan Documents.
11(t) Time. Time is of the essence as to each term or provision
----
of this Credit Agreement and each of the other Loan Documents.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Credit
Agreement to be executed as of the day and year first above written.
DOLLAR FINANCIAL GROUP, INC.,
a New York corporation
By: _______________________________
Name: _____________________________
Title: ______________________________
DFG HOLDINGS, INC., a Delaware corporation
By: _______________________________
Name: _____________________________
Title: ______________________________
WELLS FARGO BANK, NATIONAL ASSOCIATION,
as Administrative Agent, an Arranger and a Lender
By: ________________________________
Luann Bangsund, Senior Vice President
FIRST UNION CAPITAL MARKETS,
as an Arranger
By: _______________________________
Name: _____________________________
Title: ______________________________
FIRST UNION NATIONAL BANK,
as the Syndication Agent and a Lender
By: _______________________________
Name: _____________________________
Title: ______________________________
U.S. BANK NATIONAL ASSOCIATION,
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<PAGE>
as Documentation Agent and a Lender
By: _______________________________
Name: _____________________________
Title: ______________________________
50
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SCHEDULE OF EXHIBITS
--------------------
ANNEXES
Annex I Glossary
Annex II Addresses for Notice Purposes
SCHEDULES:
Schedule 1 Additional Conditions to Initial Funding
[Paragraph 5(a)(1)(xxvii)]
Schedule 2 Material Litigation
[Paragraph 6(f)]
Schedule 3 Subsidiaries Existing at Effective Date
[Paragraph 6(i)]
Schedule 4 ERISA Disclosures
[Paragraph 6(k)]
Schedule 5 Hazardous Materials/Environmental Disclosures
[Paragraph 6(o)]
Schedule 6 Additional Permitted Liens
[Paragraph 8(a)(8)]
Schedule 7 Additional Permitted Indebtedness
[Paragraph 8(b)(11)]
Schedule 8 Additional Permitted Loans, Advances and Investments
[Paragraph 8(g)(6)]
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EXHIBIT 10.17
PLEDGE AND SECURITY AGREEMENT
(Borrower)
THIS PLEDGE AND SECURITY AGREEMENT (the "Borrower Security Agreement")
is made and dated as of December 18, 1998 by and between DOLLAR FINANCIAL GROUP,
INC., a New York corporation ("Borrower"), and WELLS FARGO BANK, NATIONAL
ASSOCIATION, a national banking association, as administrative agent (in such
capacity, the "Administrative Agent") for itself and the Lenders under (and as
that term and capitalized terms not otherwise defined herein are defined in)
that certain Credit Agreement dated of even date herewith by and among Borrower,
the Parent, the Administrative Agent, the Arrangers, the Syndication Agent and
the Lenders from time to time party thereto (as amended, extended and replaced
from time to time, the "Credit Agreement").
RECITALS
A. Pursuant to the Credit Agreement the Lenders have agreed to extend
credit to the Borrower from time to time.
B. As a condition precedent to the Lenders' obligation to extend
credit under the Credit Agreement and as security for the payment and
performance of the Obligations, Borrower is required to execute and deliver this
Borrower Security Agreement, and to pledge and to grant to the Administrative
Agent on behalf of itself and the Lenders (collectively, the "Secured Parties")
and to create a security interest in certain property of Borrower, as
hereinafter provided.
NOW, THEREFORE, in consideration of the above Recitals and for other
good and valuable consideration, the receipt and adequacy of which are hereby
acknowledged, the parties hereto hereby agree as follows:
AGREEMENT
1. Appointment of Administrative Agent. Pursuant to Paragraph 10(a)
-----------------------------------
of the Credit Agreement, each Lender has appointed the Administrative Agent as
its agent hereunder. The Administrative Agent shall act as secured party,
agent, bailee and custodian for the exclusive benefit of the Secured Parties
with respect to the Borrower Collateral (as defined below). The Administrative
Agent hereby accepts such appointment and agrees that the Administrative Agent
will act with respect to the Borrower Collateral for the exclusive benefit of
the Secured Parties and is not, and shall not at any time in the future be,
subject with respect to the Borrower Collateral, in any manner or to any extent,
to the direction or control of the Borrower except as expressly permitted
hereunder, under the other Loan Documents or as required by law. The
Administrative Agent shall act in accordance with this Borrower Security
Agreement and in accordance with any written instructions properly delivered
pursuant hereto.
2. Grant of Security Interest. Borrower hereby pledges, assigns and
--------------------------
grants to the Administrative Agent, for the pro rata, pari passu benefit of the
Lenders in accordance with the outstanding Obligations from time to time owing
to them respectively, a security interest in the property described in Paragraph
3 below (collectively and severally, the "Borrower
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Collateral") to secure payment and performance of the obligations of Borrower
described in Paragraph 5 below (collectively and severally, the "Borrower
Obligations").
3. Borrower Collateral. The Borrower Collateral shall consist of all
-------------------
right, title and interest of Borrower in and to the following:
(a) All shares of capital stock of each now existing and hereafter
formed or acquired Subsidiary of Borrower, now owned and hereafter acquired by
Borrower, together with all new, substituted and additional securities at any
time issued with respect thereto (collectively and severally, the "Pledged
Shares", with all the Pledged Shares in existence as of the date hereof being
listed and described on Schedule 1 hereto) and all voting or other rights now
----------
or hereafter exercisable and all cash and noncash dividends and all other
property now or hereafter receivable with respect to any of the foregoing;
provided, however, that with respect to each Subsidiary of Borrower which is a
Foreign Subsidiary, the Pledged Shares shall include shares which may constitute
less than one hundred percent (100%) but no less than sixty-five percent (65%)
of the voting capital stock of such Subsidiary;
(b) All now existing and hereafter arising rights of the holder of
Pledged Shares with respect thereto, including, without limitation, all voting
rights and all rights to cash and noncash dividends and other distributions on
account thereof;
(c) All of Borrower's right, title and interest in and to (but not
Borrower's obligations under) all now existing and hereafter arising contracts
and agreements to which Borrower is party, including, without limitation, each
of the agreements listed on Schedule 2 hereto, in each case as such agreements
----------
may be amended, supplemented or otherwise modified from time to time (such
agreements, as so amended, supplemented or modified, individually, an "Assigned
Agreement", and collectively, the "Assigned Agreements"), including, without
limitation, all rights of Borrower to receive moneys due and to become due under
or pursuant to the Assigned Agreements, all rights of Borrower to receive
proceeds of any insurance, indemnity, warranty or guaranty with respect to the
Assigned Agreements, all claims of Borrower for damages arising out of or for
breach of or default under the Assigned Agreements, and all rights of Borrower
to terminate, amend, supplement or modify the Assigned Agreements, to perform
thereunder and to compel performance and otherwise exercise all remedies
thereunder; provided, however, that with respect to any such contract or
agreement where the grant of a security interest in Borrower's right, title and
interest therein is prohibited by the terms thereof, or would give any other
party the right to terminate its obligations thereunder, or is not permitted
because any necessary consent to such grant has not been obtained, the
Collateral shall include only the rights of Borrower to receive moneys due and
to become due, if any, under or pursuant to such contract or agreement;
(d) All now existing and hereafter arising receivables, accounts,
contracts, contract rights, chattel paper, documents, instruments and general
intangibles of Borrower, whether or not arising out of or in connection with the
sale or lease of goods or the rendering of services, and all rights of Borrower
now or hereafter arising in and to all security agreements, guaranties, leases
and other contracts securing or otherwise relating to any such receivables,
contracts, contract rights, chattel paper, documents, instruments and general
intangibles, including each note receivable referred to in Schedule 3 attached
----------
hereto (any and all such receivables, contracts, contract rights, chattel paper,
documents and instruments being the "Receivables", and any and all such security
agreements, guaranties, leases and other contracts being the "Related
Contracts");
2
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(e) All inventory of Borrower, now owned and hereafter acquired,
wherever located, including, without limitation, all merchandise, goods and
other personal property which are held for sale or lease, all raw materials,
work in process, materials used or consumed in Borrower's business and finished
goods, all goods in which Borrower has an interest in mass or a joint or other
interest or gifts of any kind (including goods in which Borrower has an interest
or right as consignee), and all goods which are returned to or repossessed by
Borrower, together with all additions and accessions thereto and replacements
therefor and products thereof and documents therefor (any and all of the
foregoing being the "Inventory");
(f) All equipment of Borrower, now owned and hereafter acquired,
wherever located, and all parts thereof and all accessions, additions,
attachments, improvements, substitutions and replacements thereto and therefor,
including, without limitation, all machinery, tools, dies, blueprints,
catalogues, computer hardware and software, furniture, furnishings and fixtures
(any and all of the foregoing being the "Equipment");
(g) All now existing and hereafter acquired Intellectual Property
Collateral owned by Borrower or used in Borrower's business; provided, however,
-------- -------
that with respect to any Computer Hardware and Software Collateral where the
grant of a security interest in Borrower's right, title and interest therein is
prohibited by the terms thereof, or would give any other party the right to
terminate its obligations thereunder, or is not permitted because any necessary
consent to such grant has not been obtained, the Collateral shall include only
the rights of Borrower to receive moneys due and to become due, if any, under or
pursuant to such Computer Hardware and Software Collateral;
(h) All deposit accounts, now existing and hereafter arising or
established, maintained in Borrower's name with any financial institution,
including, without limitation, those accounts described more particularly on
Schedule 4 attached hereto, and any and all funds at any time held therein and
- ----------
all certificates and instruments, if any, from time to time representing,
evidencing or deposited into such accounts, and all interest, dividends, cash,
instruments and other property from time to time received, receivable or
otherwise distributed in respect of or in exchange for any or all of the
foregoing;
(i) All now existing and hereafter acquired books, records, writings,
data bases, information and other property relating to, used or useful in
connection with, embodying, incorporating or referring to, any of the foregoing
Borrower Collateral;
(j) All other property of Borrower now or hereafter in the possession,
custody or control of the Administrative Agent, and all property of Borrower in
which the Administrative Agent now has or hereafter acquires a security
interest;
(k) All now existing and hereafter acquired cash and cash equivalents
held by Borrower not otherwise included in the foregoing Collateral; and
(l) All products and proceeds of the foregoing Borrower Collateral.
For purposes of this Borrower Security Agreement, the term "proceeds" includes
whatever is receivable or received when Borrower Collateral or proceeds thereof
is sold, collected, exchanged or otherwise disposed of, whether such disposition
is voluntary or involuntary, and includes, without limitation, all rights to
payment, including return premiums, with respect to any insurance relating
thereto. Notwithstanding the foregoing, the Borrower Collateral shall
3
<PAGE>
not include the leasehold interest in any equipment, nor any equipment acquired
under purchase money financing permitted under the Credit Agreement, if the
granting of a security interest therein would violate the terms of the lease or
financing documents.
4. Intellectual Property Collateral. For purposes of this Borrower
--------------------------------
Security Agreement, the terms set forth below shall have the following meanings:
"Computer Hardware and Software Collateral" means:
-----------------------------------------
(a) All of Borrower's computer and other electronic data processing
hardware, integrated computer systems, central processing units, memory units,
display terminals, printers, features, computer elements, card readers, tape
drives, hard and soft disk drives, cables, electrical supply hardware,
generators, power equalizers, accessories and all peripheral devices and other
related computer hardware;
(b) All of Borrower's software programs (including both source code,
object code and all related applications and data files), whether now owned,
licensed or leased or hereafter acquired by Borrower, designed for use on the
computers and electronic data processing hardware described in clause (a) above;
----------
(c) All firmware associated therewith;
(d) All documentation (including flow charts, logic diagrams, manuals,
guides and specifications) with respect to such hardware, software and firmware
described in the preceding clauses (a) through (c); and
----------- ---
(e) All rights with respect to all of the foregoing, including,
without limitation, any and all of Borrower's copyrights, licenses, options,
warranties, service contracts, program services, test rights, renewal rights and
indemnifications and any substitutions, replacements, additions or model
conversions of any of the foregoing.
"Copyright Collateral" means all copyrights and all semi-conductor chip
--------------------
product mask works of Borrower, whether statutory or common law, registered or
unregistered, now or hereafter in force throughout the world including, without
limitation, all of Borrower's right, title and interest in and to all copyrights
and mask works registered in the United States Copyright Office or anywhere else
in the world and also including, without limitation, the copyrights and mask
works (if any) referred to in Schedule 5 attached hereto, and all applications
----------
for registration thereof, whether pending or in preparation, all copyright and
mask work licenses, including, without limitation, each copyright and mask work
license referred to in Schedule 5 attached hereto, the right of Borrower to sue
----------
for past, present and future infringements of any thereof, all rights of
Borrower corresponding thereto throughout the world, all extensions and renewals
of any thereof and all proceeds of the foregoing, including, without
limitation, licenses, royalties, income, payments, claims damages and proceeds
of suit.
"Intellectual Property Collateral" means, collectively, the Computer
--------------------------------
Hardware and Software Collateral, the Copyright Collateral, the Patent
Collateral, the Trademark Collateral and the Trade Secrets Collateral.
"Patent Collateral" means:
-----------------
4
<PAGE>
(a) All of Borrower's letters patent and applications for letters
patent throughout the world, including all of Borrower's patent applications in
preparation for filing anywhere in the world and with the United States Patent
and Trademark Office and including, without limitation, each patent and patent
appellation referred to in Schedule 6 attached hereto;
----------
(b) All of Borrower's patent licenses, including, without limitation,
each patent license referred to in Schedule 6 attached hereto;
----------
(c) All reissues, divisions, continuations, continuations-in-part,
extensions, renewals and reexaminations of any of the items described in clauses
-------
(a) and (b); and
- --- ---
(d) All proceeds of, and rights associated with, the foregoing
(including license royalties and proceeds of infringements suits), the right of
Borrower to sue third parties for past, present or future infringements of any
patent or patent application of Borrower, including any patent or patent
applications referred to in Schedule 6 attached hereto, and for breach of
----------
enforcement of any patent license, including any patent, license referred to in
Schedule 6 attached hereto, and all rights corresponding thereto throughout
- ----------
the world.
"Trademark Collateral" means:
--------------------
(a) All of Borrower's trademarks, trade names, corporate names,
business names, fictitious business names, trade styles, service marks,
certification makers, collective marks, logos, other source of business
identifiers, prints and labels on which any of the foregoing have appeared or
appear, designs and general intangibles of a like nature (all of the foregoing
items in this clause (a) being collectively called a "Trademark"), now existing
anywhere in the world or hereafter adopted or acquired, whether currently in use
or not, all registrations and recordings thereof and all applications in
connection therewith, whether pending or in preparation for filing, including
registrations, recordings and applications in the United States Patent and
Trademark Office or in any office or agency of the United States of America or
any State thereof or any foreign country, including, without limitation, those
Trademarks (if any) referred to in Schedule 7 attached hereto;
----------
(b) All of Borrower's Trademark licenses, including, without
limitation, each Trademark license (if any) referred to in Schedule 7 attached
----------
hereto;
(c) All reissues, extensions or renewals of any of the items described
in clauses (a) and (b);
----------- ---
(d) All of the goodwill of the business of Borrower connected with the
use of, and symbolized by the items described in, clauses (a) and (b), and
----------- ---
(e) All proceeds of, and rights of Borrower associated with, the
foregoing, including any claim by Borrower against third parties for past,
present or future infringement or dilution of any Trademark, Trademark
registration or Trademark license, including any Trademark, Trademark
registration or Trademark license referred to in Schedule 7 attached hereto, or
----------
for any injury to the goodwill associated with the use of any such Trademark or
for breach or enforcement of any Trademark license.
"Trade Secrets Collateral" means common law and statutory trade secrets and
------------------------
all other confidential or proprietary or useful information and all know-how
obtained by or used in or
5
<PAGE>
contemplated at any time for use in the business of Borrower (all of the
foregoing being collectively called a "Trade Secret"), whether or not such Trade
Secret has been reduced to a writing or other tangible form including all
documents and things embodying, incorporating or referring in any way to such
Trade Secret, all Trade Secret license, including each Trade Secret license
referred to in Schedule 8 attached hereto, and including the right to sue for
----------
and to enjoin and to collect damages for the actual or threatened
misappropriation of any Trade Secret and for the breach or enforcement of any
such Trade Secret license.
5. Borrower Obligations. The Borrower Obligations secured by this
--------------------
Borrower Security Agreement shall consist of all Obligations of Borrower under
the Credit Agreement and each other Loan Document to which Borrower is party,
whether now existing or hereafter arising, voluntary or involuntary, whether or
not jointly owed with others, direct or indirect, absolute or contingent,
liquidated or unliquidated, and whether or not from time to time decreased or
extinguished and later increased, created or incurred.
6. Indemnification. Borrower shall indemnify the Administrative
---------------
Agent and its agents, officers and employees and hold the Administrative Agent
and its agents, officers and employees harmless from and against any and all
claims, losses, liabilities, penalties, actions, suits, judgments, costs,
expenses and/or damages (including, without limitation, reasonable and
documented attorneys' fees and disbursements and special or consequential
damages) of any kind whatsoever which may at any time be imposed on, assessed
against or incurred by the Administrative Agent or its agents, officers and
employees: (1) in any way relating to or arising out of the Loan Documents to
which Borrower is party or any documents contemplated by or referred to therein
to which Borrower is party or the transactions contemplated thereby or any
action taken or omitted to be taken by the Administrative Agent or its agents,
officers and employees with respect to the foregoing; or (2) in any manner
resulting from any action taken or omitted to be taken by the Administrative
Agent or its agents, officers and employees with respect to the Borrower
Collateral in accordance with written instructions given pursuant to the terms
and provisions of this Borrower Security Agreement; provided, however, that
under no circumstance shall Borrower be liable for any portion of any amount
described in clause (1) or (2) above arising out of or resulting from the gross
negligence or willful misconduct of the Administrative Agent. The
indemnification obligations of Borrower under this subparagraph (b) shall
survive termination of this Borrower Security Agreement and payment in full of
the Obligations. Attorneys fees and disbursements incurred in enforcing, or on
appeal from, a judgment pursuant hereto shall be recoverable separately from and
in addition to any other amount included in such judgment, and this clause is
intended to be severable from the other provisions of this Borrower Security
Agreement and to survive and not be merged into such judgment.
7. Borrower Remains Liable. Anything herein to the contrary
-----------------------
notwithstanding,
(a) Borrower shall remain liable under the contracts and agreements
included in the Borrower Collateral to the extent set forth therein, and shall
perform all of its duties and obligations under such contracts and agreements to
the same extent as if this Borrower Security Agreement had not been executed;
(b) The exercise by the Administrative Agent of any of its rights
hereunder shall not release Borrower from any of Borrower's duties or
obligations under any such contracts or agreements included in the Borrower
Collateral; and
6
<PAGE>
(c) Neither the Administrative Agent nor any Lender shall have any
obligation or liability under any such contracts or agreements included in the
Borrower Collateral by reason of this Borrower Security Agreement, nor shall the
Administrative Agent or any Lender be obligated to perform any of the
obligations or duties of Borrower thereunder or to take action to collect or
enforce any claims for payment assigned hereunder.
8. Duties and Obligations of Borrower.
----------------------------------
(a) Borrower shall defend at its own costs:
(i) Its rights in the Borrower Collateral, and
(ii) The security interests of the Administrative Agent in and to
the Borrower Collateral pursuant to this Borrower Security Agreement as a valid,
perfected lien upon the Borrower Collateral. Borrower covenants and agrees that
it will have title to and right to pledge any other property at any time
hereafter pledged to the Administrative Agent as Borrower Collateral under this
Borrower Security Agreement.
(b) Borrower will promptly notify the Administrative Agent of any
attachment or other legal process levied against any of the Borrower Collateral
and any information received by Borrower relating to the Borrower Collateral
which could reasonably be expected to have a material adverse effect on the
value of the Borrower Collateral or the rights and remedies of the
Administrative Agent with respect thereto.
9. Representations and Warranties of Borrower. Borrower hereby
------------------------------------------
represents and warrants to the Secured Parties as follows:
(a) Location of Borrower Collateral, etc.. All of the Equipment,
-------------------------------------
Inventory and lock boxes of Borrower are located at the places specified in
Schedule 9 hereto. None of the Equipment and Inventory of Borrower has, within
- ----------
the four months preceding the date of this Borrower Security Agreement, been
located at any place other than the places specified in Schedule 9 hereto.
----------
The place(s) of business and the chief executive office of Borrower and the
office(s) where Borrower keeps its books and records (including, without
limitation, those concerning the Receivables) and all original copies of its
Assigned Agreements are located at the address or addresses specified in
Schedule 9 hereto. All payments due or to become due under or in connection
- ----------
with any Assigned Agreement shall be made directly to Borrower and shall be
forthwith deposited by such Borrower into an account of Borrower listed on
Schedule 4 hereto. In the event any Receivables and rights to payment under
- ----------
Assigned Agreements are evidenced by a promissory note or other instrument, the
same have been delivered to the Administrative Agent upon request or as
otherwise required pursuant to the Loan Documents. Except for the trade names
listed on Schedule 7 hereto, Borrower has not used any other trade names.
----------
Borrower has not been known by any legal name different from the one set forth
on the signature page hereto, nor has Borrower been the subject of any merger or
corporate reorganization (other than the merger pursuant to the Acquisition
Agreement). If the Borrower Collateral includes any Inventory located in the
State of California, Borrower is not a "retail merchant" within the meaning of
Section 9102 of the Uniform Commercial Code - Secured Transactions of the State
of California. If Borrower is a party to any Federal, state or local government
contract, Borrower shall duly comply with the terms of the Federal Assignment of
Claims Act, to the extent required to perfect the first priority security
interest in favor of the Administrative Agent.
7
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(b) Ownership, No Liens, etc. Borrower owns the Borrower Collateral
-------------------------
free and clear of any Lien, except for the security interest created by this
Borrower Security Agreement and except as permitted by the Credit Agreement. No
effective financing statement or other instrument similar in effect covering all
or any part of the Borrower Collateral is on file in any recording office,
except such as may have been filed in favor of the Administrative Agent relating
to this Borrower Security Agreement.
(c) Possession and Control. Borrower has exclusive possession and
----------------------
control of all of its Equipment and Inventory.
(d) Intellectual Property Collateral. With respect to any
--------------------------------
Intellectual Property Collateral the loss, impairment or infringement of which
is reasonably likely to result in a Material Adverse Effect: (i) such
Intellectual Property Collateral is subsisting and has not been adjudged invalid
or unenforceable, in whole or in part; (ii) such Intellectual Property
Collateral is valid and enforceable; (iii) Borrower has made all necessary
filings and recordations to protect its interest in such Intellectual Property
Collateral, including, without limitation, recordations of all of its interests
in the Patent Collateral and Trademark Collateral in the United States Patent
and Trademark Office and in corresponding offices throughout the world and its
claims to the Copyright Collateral in the United States Copyright Office and in
corresponding offices throughout the world; (iv) Borrower is the exclusive owner
of the entire and unencumbered right, title and interest in and to such
Intellectual Property Collateral and no claim has been made that the use of such
Intellectual Property Collateral does or may violate the asserted rights of any
third party; and (v) Borrower has performed and will continue to perform all
acts and has paid and will continue to pay all required fees and taxes to
maintain each and every item of Intellectual Property Collateral in full force
and effect throughout the world, as applicable. Borrower owns directly or is
entitled to use by license or otherwise, all patents, Trademarks, Trade Secrets,
copyrights, mask works, licenses, technology, know-how, processes and rights
with respect to any of the foregoing used in, necessary for or of importance to
the conduct of Borrower's business in any material respect.
(e) Validity, etc. This Borrower Security Agreement creates a valid
-------------
first priority security interest in the Borrower Collateral, securing the
payment of the Borrower Obligations, and all filings and other actions necessary
or desirable to perfect and protect such security interest have been duly taken.
(f) Pledged Shares. Borrower is (or, in the case of after-acquired
--------------
Pledged Shares, at the time Borrower acquires rights therein, will be) the
record and beneficial owner of, and has good and marketable title to the Pledged
Shares. The Pledged Shares constitute (or, in the case of after-acquired
Pledged Shares, at the time Borrower acquires rights therein, will constitute)
one hundred percent (100%) of the issued and outstanding shares of capital stock
of all direct Subsidiaries of Borrower, which Subsidiaries are accurately and
completely listed on Schedule 1 attached hereto, and there are no outstanding
----------
options, warrants or other agreements with respect to such Pledged Shares except
as provided in the Loan Documents. The Pledged Shares owned by the Borrower on
the date hereof have been validly issued and are fully paid and nonassessable.
10. Certain Covenants. Borrower covenants and agrees that, so long
-----------------
As anyportion of the Borrower Obligations shall remain unpaid or any Lender
shall have any obligation to extend
8
<PAGE>
credit under the Credit Agreement, Borrower will, unless the Administrative
Agent shall otherwise consent in writing, perform the following obligations:
(a) As to the Assigned Agreements. Borrower shall, at its expense,
-----------------------------
(i) perform and observe all the terms and provisions of the Assigned Agreements
to be performed or observed by it, maintain the Assigned Agreements pledged or
assigned by it hereunder in full force and effect, enforce such Assigned
Agreements in accordance with their terms and take all such action to such end
as may be from time to time reasonably requested by the Administrative Agent
except where failure to so act is not reasonably likely to result in a Material
Adverse Effect; and (ii) furnish to the Administrative Agent promptly upon
receipt thereof copies of all notices, request and other documents received by
Borrower under or pursuant to the Assigned Agreements which are likely to have a
material adverse effect on Borrower's rights under any such Assigned Agreement,
and from time to time (A) furnish to the Administrative Agent such information
and reports regarding the Borrower Collateral pledged or assigned by it
hereunder as the Administrative Agent may reasonably request and (B) upon
reasonable request of the Administrative Agent make to each other party to any
Assigned Agreement such demand and requests for information and reports or for
action as Borrower is entitled to make thereunder. In addition, if such action
is reasonably likely to result in a Material Adverse Effect, Borrower shall not:
(i) cancel or terminate any Assigned Agreement or consent to or accept any
cancellation or termination thereof; (ii) give any consent, waiver or approval
under any Assigned Agreement; (iii) waive any default under or breach of any
Assigned Agreement; (iv) amend or otherwise modify any Assigned Agreement
involving aggregate consideration of $100,000.00 or more; (v) consent to or
permit or accept any prepayment in excess of $25,000.00 of amounts to become due
under or in connection with any Assigned Agreement, except as expressly provided
therein; or (vi) take any other action in connection with any Assigned
Agreement. Borrower agrees, and has effectively so instructed each other party
to each Assigned Agreement pledged or assigned by it hereunder, that all
payments due or to become due under or in connection with such Assigned
Agreement shall be made directly to Borrower and Borrower agrees that all
payments shall be forthwith deposited by Borrower into a deposit account of
Borrower listed on Schedule 4 hereto.
----------
(b) As to Equipment and Inventory. Borrower hereby agrees that it
-----------------------------
shall: (i) keep all the Equipment and Inventory (other than Inventory sold in
the ordinary course of business) at the places therefore specified in Paragraph
9(a) above or, upon 30 days' prior written notice to the Administrative Agent,
at such other places in a jurisdiction where all representations and warranties
set forth in Paragraph 9 (including Paragraph 9(f)) shall be true and correct,
and all action required pursuant to the first sentence of Paragraph 10(h) below
shall have been taken with respect to the Equipment and Inventory; (ii) cause
the Equipment to be maintained and preserved in the same condition, repair and
working as when new, ordinary wear and tear excepted, and in accordance with any
manufacturer's manual; and forthwith, or in the case of any loss or damage to
any of the Equipment, as quickly as practicable after the occurrence thereof,
make or cause to be made all repairs, replacements, and other improvements in
connection therewith which are necessary or desirable to such end; and promptly
furnish to the Administrative Agent a statement respecting any loss or damage to
any of the Equipment; and (iii) promptly pay when due all property and other
taxes, assessments and governmental charges or levies imposed upon, and all
claims (including claims for labor, materials and supplies) against, the
Equipment and Inventory, except to the extent the validity thereof is being
contested in good faith by appropriate proceedings and for which adequate
reserves in accordance with GAAP have been set aside.
9
<PAGE>
(c) As to Receivables. Borrower shall keep its place(s) of business
-----------------
and its chief executive office and the office(s) where it keeps its books and
records (including those concerning the Receivables) and all original copies of
its Assigned Agreements located, in each case, at its address specified in
Paragraph 9(a) above, or, upon 30 days' prior written notice to the
Administrative Agent, at such other locations in a jurisdiction where all
actions required by the first sentence of Paragraph 10(h) shall have been taken
with respect to the Receivables and the Assigned Agreements; not change its name
except upon 30 days' prior written notice to the Administrative Agent; hold and
preserve such records and chattel paper; and permit representatives of the
Administrative Agent at any time during normal business hours to inspect and
make abstracts from such records and chattel paper. Until such time as the
Administrative Agent shall notify Borrower that an Event of Default has occurred
and is continuing Borrower shall, in accordance with its customary business
practices, continue to collect, at its own expense, all amounts due or to become
due to it under the Receivables; provided, however, that the Administrative
Agent shall have the right, at any time after notice to Borrower from the
Administrative Agent that an Event of Default has occurred and is continuing, to
notify the account debtors or obligors under any Receivables of the assignment
of such Receivables to the Administrative Agent and to direct such account
debtors or obligors to make payment of all amounts due or to become due to
Borrower thereunder directly to the Administrative Agent and, upon such
notification and at the expense of Borrower, to enforce collection of any such
Receivables, and to adjust, settle or compromise the amount or payment thereof,
in the same manner and to the same extent as Borrower might have done. After
delivery to Borrower of the notice from the Administrative Agent referred to
above: (i) all amounts and proceeds (including Instruments) received by Borrower
in respect of any Receivables shall be received in trust for the benefit of the
Administrative Agent hereunder, shall be segregated from other funds of
Borrower, and shall be forthwith paid over to the Administrative Agent in the
same form as so received (with any necessary endorsements) to be held as cash
collateral and applied as provided by this Borrower Security Agreement; and (ii)
Borrower shall not, without the consent of the Administrative Agent, adjust,
settle, or compromise the amount or payment of any Receivable, or release wholly
or partly any account debtor or obligor thereof, or allow any credit or discount
thereon. After the occurrence and during the continuance of an Event of
Default, and at other times with the consent of Borrower (not to be unreasonably
withheld), (A) the Administrative Agent may in its own name or in the name of
others communicate with account debtors in order to verify with them to the
Administrative Agent's satisfaction the existence, amount and terms of any
Receivables and (B) the Administrative Agent shall have the right, at Borrower's
expense, to make test verifications of the Receivables in any manner and through
any medium that it considers advisable, and Borrower agrees to furnish all such
assistance.
(d) As to Collateral. Until such time as the Administrative Agent
----------------
shall notify Borrower of the revocation of such power and authority, which
notice may be given by the Administrative Agent at any time if an Event of
Default has occurred and is continuing, Borrower (i) will, at its own expense,
endeavor to collect, as and when due in accordance with its customary practices,
all amounts due with respect to any of the Borrower Collateral, including the
taking of such action with respect to such collection as the Administrative
Agent may reasonably request or, in the absence of such request, as Borrower may
deem advisable, and (ii) may grant, in the ordinary course of business, to any
party obligated on any of the Borrower Collateral, any rebate, refund or
allowance to which such party may be lawfully entitled, may accept, in
connection therewith, the return of goods, the sale or lease of which shall have
given rise to such Borrower Collateral and may extend or otherwise modify any
Receivable. The Administrative Agent, however, may, at any time, after an Event
of Default
10
<PAGE>
has occurred and is continuing, notify any parties obligated on any of the
Borrower Collateral to make payment to the Administrative Agent of any amounts
due or to become due thereunder and enforce collection of any of the Borrower
Collateral by suit or otherwise and surrender, release, or exchange all or any
part thereof, or compromise or extend or renew for any period (whether or not
longer than the original period) any indebtedness thereunder or evidenced
thereby. Upon request of the Administrative Agent, Borrower will, at its own
expense, notify any parties obligated on any of the Borrower Collateral to make
payment to the Administrative Agent of any amounts due or to become due
thereunder. The Administrative Agent is authorized to endorse, in the name of
Borrower, any item, howsoever received by the Administrative Agent, representing
any payment on or other proceeds of any of the Borrower Collateral.
(e) As to Intellectual Property Collateral. Borrower shall not,
--------------------------------------
unless Borrower shall either (i) reasonably and in good faith determine (and
notice of such determination shall have been delivered to the Administrative
Agent) that any of the Patent Collateral is of negligible economic value to
Borrower, or (ii) have a valid business purpose to do otherwise, do any act, or
omit to do any act, whereby any of the Patent Collateral may lapse or become
abandoned or dedicated to the public or unenforceable. Borrower shall not, and
Borrower shall not permit any of its licensees to, unless Borrower shall either
(i) reasonably and in good faith determine (and notice of such determination
shall have been delivered to the Administrative Agent) that any of the Trademark
Collateral is of negligible economic value to Borrower, or (ii) have a valid
business purpose to do otherwise, (A) fail to continue to use any of the
Trademark Collateral in order to maintain all of the Trademark Collateral in
full force free from any claim of abandonment for non-use, (B) fail to maintain
as in the past the quality of products and services offered under all of the
Trademark Collateral, (C) fail to employ all of the Trademark Collateral
registered with any Federal or state or foreign authority with an appropriate
notice of such registration, (D) adopt or use any other Trademark which is
confusingly similar or a colorable imitation of any of the Trademark Collateral,
(E) use any of the Trademark Collateral registered with any Federal or state or
foreign authority except for the uses for which registration or application for
registration of all of the Trademark Collateral has been made, and (F) do or
permit any act or knowingly omit to do any act whereby any of the Trademark
Collateral may lapse or become invalid or unenforceable. Borrower shall not,
unless Borrower shall either reasonably and in good faith determine (and notice
of such determination shall have been delivered to the Administrative Agent)
that any of the Copyright Collateral or any of the Trade Secrets Collateral is
of negligible economic value to Borrower, or have a valid business purpose to do
otherwise, do or permit any act or knowingly omit to do any act whereby any of
the Copyright Collateral or any of the Trade Secrets Collateral may lapse or
become invalid or unenforceable or placed in the public domain except upon
expiration of the end of an unrenewable term of a registration thereof. Borrower
shall notify the Administrative Agent immediately if it knows, or has reason to
know, that any application or registration relating to any material item of the
Intellectual Property Collateral may become abandoned or dedicated to the public
or placed in the public domain or invalid or unenforceable, or of any adverse
determination or development (including the institution of, or any such
determination or development in, any proceeding in the United States Patent and
Trademark Office, the United States Copyright Office or any foreign counterpart
thereof or any court) regarding Borrower's ownership of any of the Intellectual
Property Collateral, its right to register the same or to keep and maintain and
enforce the same. In no event shall Borrower or any of its agents, employees,
designees or licensees file an application for the registration of any
Intellectual Property Collateral with the United States Patent and Trademark
Office, the United States Copyright Office or any similar office or agency in
any other country or any. political subdivision thereof, unless it promptly
informs the Administrative Agent, and upon request of the Administrative Agent,
executes and delivers any and all agreements, instruments, documents and papers
as the Administrative Agent may reasonably request to evidence the
Administrative Agent's security interest in such Intellectual Property
Collateral and the goodwill and general intangibles of Borrower relating thereto
or represented thereby. Borrower shall take all necessary steps, including in
any proceeding before the United States Patent and Trademark office, the United
States Copyright Office or any similar office or agency in any other country or
any political
11
<PAGE>
subdivision thereof, to maintain and pursue any application (and to obtain the
relevant registration) filed with respect to, and to maintain any registration
of, the Intellectual Property Collateral, including the filing of applications
for renewal, affidavits of use, affidavits of incontestability and opposition,
interference and cancellation proceedings and the payment of fees and taxes
(except to the extent that dedication, abandonment or invalidation thereof is a
result of either (i) a reasonable and good faith determination by Borrower that
the same is of negligible economic value to Borrower or (ii) a valid business
purpose. Borrower shall, contemporaneously herewith, execute and deliver to the
Administrative Agent agreements in the forms of Exhibit A, Exhibit B and
--------- ---------
Exhibit C hereto, and shall execute and deliver to the Administrative Agent
- ---------
any other document required to acknowledge or register or perfect the
Administrative Agent's interest in any part of the Intellectual Property
Collateral.
(f) Insurance. Borrower will maintain or cause to be maintained
---------
insurance of the type, in the amounts and with such insurance companies as
required under the Credit Agreement. If an Event of Default has occurred and is
continuing, all proceeds of all insurance maintained by Borrower and covering
the Borrower Collateral shall be paid to the Administrative Agent for
application to the payment in full of all outstanding Borrower Obligations.
(g) Transfers and Other Liens. Borrower shall not: (i) sell, assign
-------------------------
(by operation of law or otherwise) or otherwise dispose of any of the Borrower
Collateral, except Inventory in the ordinary course of business or as permitted
by the Credit Agreement; or create or suffer to exist any Lien or other charge
or encumbrance upon or with respect to any of the Borrower Collateral to secure
Indebtedness of any Person or entity, except for the security interest created
by this Borrower Security Agreement and except as permitted by the Credit
Agreement.
(h) Further Assurances, etc. Borrower agrees that, from time to
-----------------------
time at its own expense, Borrower will promptly execute and deliver all further
instruments and documents, and take all further action, that may be necessary or
desirable, or that the Administrative Agent may reasonably request, in order to
perfect, preserve and protect any security interest granted or purported to be
granted hereby or to enable the Administrative Agent to exercise and enforce its
rights and remedies hereunder with respect to any Borrower Collateral. Without
limiting the generality of the foregoing, Borrower will: (i) mark conspicuously
each chattel paper included in the Receivables, each Related Contract, each
Assigned Agreement and, at the request of the Administrative Agent, each of its
records pertaining to the Borrower Collateral with a legend, in form and
substance satisfactory to the Administrative Agent, indicating that such
document, chattel paper, Related Contract, Assigned Agreement or Borrower
Collateral is subject to the security interest granted hereby; (ii) if any
Receivable shall be evidenced by a promissory note or other instrument,
negotiable document or chattel paper, deliver and pledge to the Administrative
Agent hereunder such promissory note, instrument, negotiable document or chattel
paper duly endorsed and accompanied by duly executed instruments of transfer or
assignment, all in form and substance satisfactory to the Administrative Agent;
(iii) execute and
12
<PAGE>
file such financing or continuation statements, or amendments thereto, and such
other instruments or notices (including, without limitation, any assignment of
claim form under or pursuant to the federal assignment of claims statute, 31
U.S.C. 5 3726, any successor or amended version thereof or any regulation
promulgated under or pursuant to any version thereof), as may be necessary or
desirable, or as the Administrative Agent may request, in order to perfect and
preserve the security interests and other rights granted or purported to be
granted to the Administrative Agent hereby; (iv) furnish to the Administrative
Agent, from time to time at the Administrative Agent's request, statements and
schedules further identifying and describing the Borrower Collateral and such
other reports in connection with the Borrower Collateral as the Administrative
Agent may reasonably request, all in reasonable detail. With respect to the
foregoing and the grant of the security interest hereunder, Borrower hereby
authorizes the Administrative Agent to file one or more financing or
continuation statements, and amendments thereto, relative to all or any part of
the Borrower Collateral, without the signature of Borrower where permitted by
law. A carbon, photographic or other reproduction of this Borrower Security
Agreement or any financing statement covering the Borrower Collateral or any
part thereof shall be sufficient as a financing statement where permitted by
law. Borrower will furnish to the Administrative Agent from time to time
statements and schedules further identifying and describing the Borrower
Collateral pledged or assigned by it hereunder and such other reports in
connection with such Borrower Collateral as the Administrative Agent may
reasonably request, all in reasonable detail. Borrower hereby covenants and
agrees that it will deliver to the Administrative Agent a supplement to Schedule
--------
2 to this Agreement promptly upon entering into any additional Assigned
- -
Agreement, and each such supplement shall thereupon become for all purposes a
part of such Schedule 2. Borrower hereby covenants and agrees that, upon the
----------
reasonable request of the Administrative Agent, it will open and maintain
lockbox accounts with banks that enter into letter agreements standard and
customary in financings of this type with Borrower and the Administrative Agent.
(i) General Covenants. Without limiting any of the foregoing
-----------------
covenants, Borrower agrees (a) to do all acts that may be necessary to maintain,
preserve and protect the Borrower Collateral; (b) not to use or permit any
Borrower Collateral to be used unlawfully or in material violation of any
provision of the Credit Agreement, this Borrower Security Agreement, or any
applicable statute, regulation or ordinance or any policy of insurance covering
the Borrower Collateral; (c) to pay promptly when due all taxes, assessments,
charges, encumbrances and liens now or hereafter imposed upon or affecting any
Borrower Collateral except those that are contested in good faith and for which
appropriate reserves have been established; (d) to procure, execute and deliver
from time to time any endorsements, assignments, financing statements and other
writings deemed necessary or appropriate by the Administrative Agent to perfect,
maintain and protect its security interest hereunder and the priority thereof;
(e) to appear in and defend any action or proceeding which may affect its title
to or the Administrative Agent's interest in the Borrower Collateral; (f) to
keep separate, accurate and complete records of the Borrower Collateral and to
provide the Administrative Agent with such records and such other reports and
information relating to the Borrower Collateral as the Administrative Agent may
reasonable request from time to time; (g) not to surrender or lose possession of
(other than to the Administrative Agent), sell, encumber, lease, rent, or
otherwise dispose of or transfer any Borrower Collateral or right or interest
therein except as hereinafter provided or those of the nature permitted under
the Credit Agreement, and, to keep the Borrower Collateral free of all levies
and security interests or other liens or charges except as permitted under the
Credit Agreement; and (h) to account fully for and promptly deliver to the
Administrative Agent, in the form received, all documents, instruments and
agreements, including, without limitation, stock certificates, constituting
Borrower Collateral hereunder and
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<PAGE>
appropriate stock transfer powers endorsed in blank or to the Administrative
Agent and all proceeds of the Borrower Collateral received, endorsed to the
Administrative Agent as appropriate, and until so delivered all proceeds shall
be held by Borrower in trust for the Secured Parties, separate from all other
property of Borrower and identified as the property of the Secured Parties.
11. Authorized Action by the Administrative Agent. Borrower hereby
---------------------------------------------
irrevocably appoints the Administrative Agent as its attorney-in-fact to do (but
the Administrative Agent shall not be obligated to and shall incur no liability
to Borrower or any third party for failure so to do), at any time and from time
to time following the occurrence of an Event of Default which has not been
expressly waived pursuant to the Credit Agreement, any act which Borrower is
obligated by this Borrower Security Agreement to do, and to exercise such rights
and powers as Borrower might exercise with respect to the Borrower Collateral,
including, without limitation, the right to (a) collect by legal proceedings or
otherwise and endorse, receive and receipt for all dividends, interest,
payments, proceeds and other sums and property now or hereafter payable on or on
account of the Borrower Collateral; (b) enter into any extension,
reorganization, deposit, merger, consolidation or other agreement pertaining to,
or deposit, surrender, accept, hold or apply other property in exchange for the
Borrower Collateral; (c) insure, process and preserve the Borrower Collateral;
(d) transfer the Borrower Collateral to its own or its nominee's name; and (e)
make any compromise or settlement, and take any action it deems advisable, with
respect to the Borrower Collateral. Borrower agrees to reimburse the
Administrative Agent upon demand for any costs and expenses, including, without
limitation, attorneys' fees, the Administrative Agent may incur while acting as
Borrower's attorney-in-fact hereunder, all of which costs and expenses are
included in the Obligations secured hereby. It is further agreed and understood
between the parties hereto that such care as the Administrative Agent gives to
the safekeeping of its own property of like kind shall constitute reasonable
care of the Borrower Collateral when in the Administrative Agent's possession;
provided, however, that the Administrative Agent shall not be required to make
any presentment, demand or protest, or give any notice and need not take any
action to preserve any rights against any prior party or any other person in
connection with the Obligations or with respect to the Borrower Collateral.
12. Administration of the Pledged Shares. In addition to any
------------------------------------
provisions of this Borrower Security Agreement which govern the administration
of the Borrower Collateral generally, the following provisions shall govern the
administration of the Pledged Shares:
(a) Until there shall have occurred and be continuing an Event of
Default, Borrower shall be entitled to vote or consent with respect to the
Pledged Shares in any manner not inconsistent with this Borrower Security
Agreement or any document or instrument delivered or to be delivered pursuant to
or in connection with any thereof and to receive all dividends paid with respect
to the Pledged Shares. If there shall have occurred and be continuing an Event
of Default and the Administrative Agent shall have notified Borrower that the
Administrative Agent desires to exercise its proxy rights with respect to all or
a portion of the Pledged Shares, Borrower hereby grants to the Administrative
Agent an irrevocable proxy for the Pledged Shares pursuant to which proxy the
Administrative Agent shall be entitled to vote or consent, in its discretion,
and in such event Borrower agrees to deliver to the Administrative Agent such
further evidence of the grant of such proxy as the Administrative Agent may
request.
14
<PAGE>
(b) In the event that at any time or from time to time after the date
hereof, Borrower, as record and beneficial owner of the Pledged Shares, shall
receive or shall become entitled to receive, any dividend or any other
distribution whether in securities or property by way of stock split, spin-off,
split-up or reclassification, combination of shares or the like, or in case of
any reorganization, consolidation or merger, and Borrower, as record and
beneficial owner of the Pledged Shares, shall thereby be entitled to receive
securities or property in respect of such Pledged Shares, then and in each such
case, Borrower shall deliver to the Administrative Agent and the Administrative
Agent shall be entitled to receive and retain all such securities or property as
part of the Pledged Shares as security for the payment and performance of the
Borrower Obligations; provided, however, that until there shall have occurred an
Event of Default, Borrower shall be entitled to retain any cash dividends paid
on account of the Pledged Shares.
(c) Upon the occurrence of an Event of Default, the Administrative
Agent is authorized to sell the Pledged Shares and, at any such sale of any of
the Pledged Shares, if it deems it advisable to do so, to restrict the
prospective bidders or purchasers to persons or entities who (1) will represent
and agree that they are purchasing for their own account, for investment, and
not with a view to the distribution or sale of any of the Pledged Shares; and
(2) satisfy the offeree and purchaser requirements for a valid private placement
transaction under Section 4(2) of the Securities Act of 1933, as amended (the
"Act"), and under Securities and Exchange Commission Release Nos. 33-6383; 34-
18524; 35-22407; 39-700; IC-12264; AS-306, or under any similar statute, rule or
regulation. Borrower agrees that disposition of the Pledged Shares pursuant to
any private sale made as provided above may be at prices and on other terms less
favorable than if the Pledged Shares were sold at public sale, and that the
Administrative Agent has no obligation to delay the sale of any Pledged Shares
for public sale under the Act. Borrower agrees that a private sale or sales
made under the foregoing circumstances shall be deemed to have been made in a
commercially reasonable manner. In the event that the Administrative Agent
elects to sell the Pledged Shares, or part of them, and there is a public market
for the Pledged Shares, in a public sale Borrower shall use its best efforts to
register and qualify the Pledged Shares, or applicable part thereof, under the
Act and all state Blue Sky or securities laws required by the proposed terms of
sale and all expenses thereof shall be payable by Borrower, including, but not
limited to, all costs of (i) registration or qualification of, under the Act or
any state Blue Sky or securities laws or pursuant to any applicable rule or
regulation issued pursuant thereto, any Pledged Shares, and (ii) sale of such
Pledged Shares, including, but not limited to, brokers' or underwriters'
commissions, fees or discounts, accounting and legal fees, costs of printing and
other expenses of transfer and sale.
(d) If any consent, approval or authorization of any state, municipal
or other governmental department, agency or authority should be necessary to
effectuate any sale or other disposition of the Pledged Shares, or any part
thereof, Borrower will execute such applications and other instruments as may be
required in connection with securing any such consent, approval or
authorization, and will otherwise use its best efforts to secure the same.
(e) Nothing contained in this Paragraph 12 shall be deemed to limit
the other obligations of Borrower contained in the Credit Agreement or this
Borrower Security Agreement and the rights of the Administrative Agent and the
other Secured Parties hereunder or thereunder.
15
<PAGE>
13. Default and Remedies. Borrower shall be deemed in default under
--------------------
this Borrower Security Agreement upon the occurrence of an "Event of Default"
under (and as the term "Event of Default" is defined in) the Credit Agreement.
Upon the occurrence of any Event of Default which has not been expressly waived
pursuant to the Credit Agreement, the Administrative Agent shall at the request
and direction of the Lenders (which request and direction must be in writing if
so requested by the Administrative Agent), without notice to or demand on
Borrower, and in addition to all rights and remedies available to the Secured
Parties, at law or in equity or otherwise, (a) foreclose or otherwise enforce
the Administrative Agent's security interest for the benefit of the Secured
Parties in the Borrower Collateral in any manner permitted by law or provided
for in this Borrower Security Agreement; (b) sell or otherwise dispose of the
Borrower Collateral or any part thereof at one or more public or private sales
at any place or places, including, without limitation, any broker's board or
securities exchange, whether or not such Borrower Collateral is present at the
place of sale, for cash or credit or future delivery on such terms and in such
manner as the Administrative Agent may determine; (c) require Borrower to
assemble the Borrower Collateral and/or books and records relating thereto and
make such available to the Administrative Agent at a place to be designated by
the Administrative Agent; (d) recover from Borrower all costs and expenses,
including, without limitation, attorneys' fees, incurred or paid by the
Administrative Agent in exercising any right, power or remedy provided by this
Borrower Security Agreement or by law; (e) enter into property where any
Borrower Collateral or books and records relating thereto are located and take
possession thereof with or without judicial process; and (f) prior to the
disposition of the Borrower Collateral, prepare it for disposition in any manner
and to the extent the Administrative Agent deems appropriate. Borrower shall be
given five (5) Business Days' prior notice of the time and place of any public
sale or of the time after which any private sale or other intended disposition
is to be made, which notice Borrower hereby agrees shall be deemed reasonable
notice thereof. Upon any sale or other disposition pursuant to this Borrower
Security Agreement, the Administrative Agent shall have the right to deliver,
assign and transfer to the purchaser thereof the Borrower Collateral or portion
thereof and transfer to the purchaser thereof the Borrower Collateral or portion
thereof so sold or disposed of. Each purchaser at any such sale or other
disposition (including any Secured Party) shall hold the Borrower Collateral
free from any claim or right of whatever kind, including any equity or right of
redemption of Borrower and Borrower specifically waives (to the extent permitted
by law) all rights of redemption, stay or appraisal which it has or may have
under any rule of law or statute now existing or hereafter adopted.
14. Waiver of Hearing. Borrower expressly waives any constitutional
-----------------
or other right to a judicial hearing prior to the time the Administrative Agent
takes possession or disposes of the Borrower Collateral upon the occurrence of
an Event of Default as provided in Paragraph 13 hereof.
15. Cumulative Rights. The rights, powers and remedies of the
-----------------
Administrative Agent and any of the Secured Parties under this Borrower Security
Agreement shall be in addition to all rights, powers and remedies given to the
Administrative Agent and any of the Secured Parties by virtue of any statute or
rule of law, the Credit Agreement or any other agreement, all of which rights,
powers and remedies shall be cumulative and may be exercised successively or
concurrently without impairing the Administrative Agent's and any of the Secured
Parties' security interest in the Borrower Collateral.
16. Waiver. Any forbearance or failure or delay by the
------
Administrative Agent in exercising any right, power or remedy shall not preclude
the further exercise thereof, and
16
<PAGE>
every right, power or remedy of the Administrative Agent or any of the Secured
Parties shall continue in full force and effect until such right, power or
remedy is specifically waived in a writing executed by the Administrative Agent
or such other Secured Party, as applicable. Borrower waives any right to require
any Secured Party to proceed against any person or to exhaust any Borrower
Collateral or to pursue any remedy in such Secured Party's power.
17. Setoff. Borrower agrees that each Secured Party may exercise its
------
rights of setoff with respect to the Obligations in the same manner as if the
Obligations were unsecured.
18. Miscellaneous Provisions. The representations and warranties,
------------------------
covenants and agreements set forth in the Credit Agreement are incorporated in
this Borrower Security Agreement by this reference.
19. ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS BORROWER
SECURITY AGREEMENT MAY BE BROUGHT IN THE COURTS OF THE STATE OF CALIFORNIA OR OF
THE UNITED STATES FOR THE CENTRAL DISTRICT OF CALIFORNIA, AND BY EXECUTION AND
DELIVERY OF THIS BORROWER SECURITY AGREEMENT, EACH OF BORROWER AND THE
ADMINISTRATIVE AGENT CONSENTS, FOR ITSELF AND IN RESPECT OF ITS PROPERTY, TO THE
NON-EXCLUSIVE JURISDICTION OF THOSE COURTS. EACH OF BORROWER AND THE
ADMINISTRATIVE AGENT IRREVOCABLY WAIVES ANY OBJECTION, INCLUDING ANY OBJECTION
TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS, WHICH IT
--------------------
MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY ACTION OR PROCEEDING IN SUCH
JURISDICTION IN RESPECT OF THIS BORROWER SECURITY AGREEMENT. EACH OF BORROWER
AND THE ADMINISTRATIVE AGENT WAIVES PERSONAL SERVICE OF ANY SUMMONS, COMPLAINT
OR OTHER PROCESS, WHICH MAY BE MADE BY ANY OTHER MEANS PERMITTED BY CALIFORNIA
LAW.
20. EACH OF BORROWER AND THE ADMINISTRATIVE AGENT (R) WAIVES ITS
RIGHTS TO A TRIAL BY JURY OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING
OUT OF OR RELATED TO THIS BORROWER SECURITY AGREEMENT OR THE TRANSACTIONS
CONTEMPLATED HEREBY, IN ANY ACTION, PROCEEDING OR OTHER LITIGATION OF ANY TYPE
BROUGHT BY ANY PARTY AGAINST ANY OTHER PARTY, WHETHER WITH RESPECT TO CONTRACT
CLAIMS, TORT CLAIMS, OR OTHERWISE. EACH OF BORROWER AND THE ADMINISTRATIVE
AGENT AGREES THAT ANY SUCH CLAIM OR CAUSE OF ACTION SHALL BE TRIED BY A COURT
TRIAL WITHOUT A JURY. WITHOUT LIMITING THE FOREGOING, EACH OF BORROWER AND THE
ADMINISTRATIVE AGENT FURTHER AGREES THAT ITS RIGHT TO A TRIAL BY JURY IS WAIVED
BY OPERATION OF THIS SECTION AS TO ANY ACTION, COUNTERCLAIM OR OTHER PROCEEDING
WHICH SEEKS, IN WHOLE OR IN PART, TO CHALLENGE THE VALIDITY OR ENFORCEABILITY OF
THIS BORROWER SECURITY AGREEMENT OR ANY PROVISION HEREOF. THIS WAIVER SHALL
APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO
THIS BORROWER SECURITY AGREEMENT.
17
<PAGE>
EXECUTED as of the day and year first above written.
DOLLAR FINANCIAL GROUP, INC.,
a New York corporation
By:
------------------------------------------------
Richard S. Dorfman
Chief Financial Officer
WELLS FARGO BANK, NATIONAL ASSOCIATION, a national
banking association, as Administrative Agent
By:
------------------------------------------------
Luann Bangsund
Senior Vice President
18
<PAGE>
LIST OF SCHEDULES AND EXHIBITS
Schedule 1 Pledged Shares
Schedule 2 Assigned Agreements
Schedule 3 Notes Receivables
Schedule 4 Deposit Accounts
Schedule 5 Copyrights and Copyright Licenses
Schedule 6 Patents and Patent Licenses
Schedule 7 Trademarks and Trademark Licenses
Schedule 8 Trade Secret Licenses
Schedule 9 Locations of Equipment, Inventory, Lockboxes, Places of
Business, Chief Executive Office, Books and Records, and
Assigned Agreements
Exhibit A Supplemental Security Agreement (Trademarks)
Exhibit B Supplemental Security Agreement (Patents)
Exhibit C Supplemental Security Agreement (Copyrights)
19
<PAGE>
EXHIBIT 10.18
SUBORDINATION AGREEMENT
THIS SUBORDINATION AGREEMENT (the "Subordination Agreement") is made
and dated as of the 18th day of December, 1998 by and among DOLLAR FINANCIAL
GROUP, INC., a New York corporation (the "Borrower"), WELLS FARGO BANK, NATIONAL
ASSOCIATION, acting in its capacity as administrative agent (in such capacity,
the "Administrative Agent") for the Lenders from time to time party to that
certain Credit Agreement dated as of December 18, 1998 by and among the
Borrower, the Parent, the Administrative Agent, the Arrangers, the Syndication
Agent and the Lenders (as amended, extended and replaced from time to time, the
"Credit Agreement," and with capitalized terms not otherwise defined herein used
with the meanings given such terms in the Credit Agreement), and DFG HOLDINGS,
INC., a Delaware corporation (the "Creditor").
RECITALS
A. Pursuant to the Credit Agreement the Lenders have agreed to extend
credit to the Borrower on the terms and subject to the conditions set forth
therein.
B. As a condition precedent to the Lenders' obligation to extend
credit under the Credit Agreement, the Creditor is required to subordinate its
right to the payment of monies from the Borrower to the payment and performance
of the Obligations under (and as defined in) the Credit Agreement (the "Senior
Obligations"), and to execute and deliver this Subordination Agreement to the
Administrative Agent for the benefit of the Lenders as evidence thereof.
NOW, THEREFORE, in consideration of the above Recitals and for other
good and valuable consideration, the receipt and adequacy of which are hereby
acknowledged, the parties hereto hereby agree as follows:
AGREEMENT
1. The Creditor has extended and may in the future extend credit to
the Borrower from time to time. The principal of all now existing and hereafter
arising indebtedness of the Borrower to the Creditor together with accrued but
unpaid interest thereon is hereinafter referred to as the "Claims".
2. The Creditor is or will be the sole and absolute owner of the
Claims and has not sold, assigned, transferred or otherwise disposed of any
right it may have to repayment of the Claims or any security therefor.
3. The Claims and all rights and remedies of the Creditor with
respect thereto and any lien securing payment thereof are and shall continue to
be subject, subordinate and rendered junior in the right of payment to the
Senior Obligations, as the same may be extended, amended or replaced form time
to time.
1
<PAGE>
4. The Borrower and the Creditor hereby agree that upon the
occurrence of any Event of Default which has not been expressed waived pursuant
to the Credit Agreement, until the Senior Obligations are paid in full and the
Lenders have no further obligation to make Loans under the Credit Agreement:
(a) The Borrower will not make or give, and the Creditor will
not receive, directly or indirectly, any payment, advance, credit or further
security of any kind whatsoever on account of the Claims, or any new or further
evidence thereof;
(b) The Creditor will not sell, assign, transfer or endorse the
Claims or any part or evidence thereof;
(c) The Creditor will not modify the Claims or any part or
evidence thereof; and
(d) The Creditor will not take, or permit any action to be taken,
to assert, collect or enforce the Claims or any part thereof.
5. Each of the Borrower and the Creditor waives notice of acceptance
of this Subordination Agreement by the Lenders, and each of the Creditor waives
notice of and consent to the amount and terms of any loan or loans which the
Lenders may from time to time make to the Borrower and any renewal or extension
thereof and any action which the Lenders in their sole and absolute discretion
may take or omit to take with respect thereto.
6. This Subordination Agreement shall constitute a continuing
agreement of subordination and the Lenders may, from time to time and without
notice to the Creditor, lend money to or make other financial arrangements with
the Borrower in reliance hereon until written notice of termination shall be
delivered by the Creditor to the Lenders by certified mail, return receipt
requested. The receipt by the Lenders of such notice shall not affect this
Subordination Agreement as it relates to any Senior Obligations then existing,
to any Senior Obligations incurred thereafter pursuant to a previous commitment
by the Lenders or to any amendments to, or extensions or renewals of, any such
Senior Obligations.
7. In the event of a default in the performance or observance of any
of the foregoing, the Senior Obligations shall forthwith become due and payable
at the election of the Lenders, without presentment, demand or notice of any
kind, all of which are hereby waived.
8. The Creditor agrees as follows:
(a) Upon any distribution of all of the assets of the Borrower to
creditors of the Borrower upon the dissolution, winding up, liquidation,
arrangement, or reorganization of the Borrower, whether in any bankruptcy,
insolvency, arrangement, reorganization or receivership proceeding or upon an
assignment for the benefit of creditors or any other marshalling of the assets
and liabilities of the Borrower or otherwise, any payment or distribution of any
kind (whether in cash, property or securities) which otherwise would be payable
or deliverable upon or with respect to the Claims shall be paid or delivered
directly to the Administrative Agent for application (in the case of cash) to,
or as collateral (in the case of non-cash property or securities) for, the
payment or prepayment of the Senior Obligations until the Senior Obligations
shall have been paid in full.
2
<PAGE>
(b) If any proceeding referred to in subsection (a) above is commenced
by or against the Borrower:
(1) The Lenders are hereby irrevocably authorized and
empowered (in their own name or in the name of the Creditor or otherwise), but
shall have no obligation, to demand, sue for, collect and receive every payment
or distribution referred to in subsection (a) above and give acquittance
therefor and to file claims and proofs of claim and take such other action
(including, without limitation, voting the Claims or enforcing any security
interest or other lien securing payment of the Claims) as the Lenders may deem
necessary or advisable for the exercise or enforcement of any of the rights or
interests of the Lenders hereunder; and
(2) The Creditor shall duly and promptly take such action
as the Lenders may request (i) to collect the Claims for account of the Lenders
and to file appropriate claims or proofs of claim in respect of the Claims, (ii)
to execute and deliver to the Administrative Agent such powers of attorney,
assignments, or other instruments as it may request in order to enable it to
enforce any and all claims with respect to, and any security interests and other
liens securing payment of, the Claims, and (iii) to collect and receive any and
all payments or distributions which may be payable or deliverable upon or with
respect to the Claims.
(c) All payments or distributions upon or with respect to the Claims
which are received by the Creditor contrary to the provisions of this
Subordination Agreement shall be received in trust for the benefit of the
Lenders, shall be segregated from other funds and property held by the Creditor
and shall be forthwith paid over to the Administrative Agent in the same form as
so received (with any necessary endorsement) to be applied (in the case of cash)
to, or held as collateral (in the case of non-cash property or securities) for,
the payment or prepayment of the Senior Obligations.
(d) The Administrative Agent on behalf of the Lenders is hereby
authorized to demand specific performance of this Subordination Agreement,
whether or not the Borrower shall have complied with any or all of the
provisions hereof applicable to the Borrower, at any time when the Creditor
shall have failed to comply with any of the provisions of this Subordination
Agreement applicable to it.
9. It is the intent of the Creditor to create by this Subordination
Agreement a security interest in favor of the Administrative Agent for the
benefit of the Lenders in the Claims and in the Creditor's other rights to
receive money or other property from the Borrower, whether such rights shall
constitute accounts, contract rights, chattel paper, instruments, general
intangibles or otherwise. The Creditor hereby grants to the Administrative Agent
for the benefit of the Lenders a security interest in the Claims in order to
secure the payment and performance of the Creditor' obligations pursuant to this
Subordination Agreement.
10. The Creditor authorizes the Administrative Agent and the Lenders
(whether or not after revocation of this Subordination Agreement), without
notice or demand (except as shall be required by applicable statute and cannot
be waived), and without affecting or impairing the Creditor's obligations
hereunder, from time to time to (a) renew, compromise, extend, increase,
accelerate or otherwise change the time for payment of, or otherwise change the
terms of the Senior Obligations or any part thereof, including without
limitation to increase
3
<PAGE>
or decrease the rate of interest thereon; (b) take and hold security for the
payment of the Senior Obligations and exchange, enforce, waive and release any
such security; (c) apply such security and direct the order or manner of sale
thereof as the Administrative Agent and the Lenders in their sole discretion may
determine; and (d) release and substitute any one or more endorsers, warrantors,
the Borrower or other obligors.
11. This Subordination Agreement shall extend to and be binding upon
the successors and assigns of each of the parties hereto.
12. This Subordination Agreement may be executed in any number of
counterparts all of which taken together shall constitute one agreement and any
party hereto may execute this Subordination Agreement by signing any such
counterpart.
13. This Subordination Agreement shall be governed by and construed
in accordance with the laws of the State of California without giving effect to
its choice of law rules.
14. ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS SUBORDINATION
AGREEMENT MAY BE BROUGHT IN THE COURTS OF THE STATE OF CALIFORNIA OR OF THE
UNITED STATES FOR THE CENTRAL DISTRICT OF CALIFORNIA, AND BY EXECUTION AND
DELIVERY OF THIS SUBORDINATION AGREEMENT, EACH OF THE CREDITOR, THE BORROWER AND
THE ADMINISTRATIVE AGENT CONSENTS, FOR ITSELF AND IN RESPECT OF ITS PROPERTY, TO
THE NON-EXCLUSIVE JURISDICTION OF THOSE COURTS. EACH OF THE CREDITOR, THE
BORROWER AND THE ADMINISTRATIVE AGENT IRREVOCABLY WAIVES ANY OBJECTION,
INCLUDING ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM
-----
NON CONVENIENS, WHICH IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY ACTION
- --------------
OR PROCEEDING IN SUCH JURISDICTION IN RESPECT OF THIS SUBORDINATION AGREEMENT.
EACH OF THE CREDITOR, THE BORROWER AND THE ADMINISTRATIVE AGENT WAIVES PERSONAL
SERVICE OF ANY SUMMONS, COMPLAINT OR OTHER PROCESS, WHICH MAY BE MADE BY ANY
OTHER MEANS PERMITTED BY CALIFORNIA LAW.
15. EACH OF THE CREDITOR, THE BORROWER AND THE ADMINISTRATIVE AGENT
WAIVES ITS RIGHTS TO A TRIAL BY JURY OF ANY CLAIM OR CAUSE OF ACTION BASED UPON
OR ARISING OUT OF OR RELATED TO THIS SUBORDINATION AGREEMENT OR THE TRANSACTIONS
CONTEMPLATED HEREBY, IN ANY ACTION, PROCEEDING OR OTHER LITIGATION OF ANY TYPE
BROUGHT BY ANY PARTY AGAINST ANY OTHER PARTY, WHETHER WITH RESPECT TO CONTRACT
CLAIMS, TORT CLAIMS, OR OTHERWISE. EACH OF THE CREDITOR, THE BORROWER AND THE
ADMINISTRATIVE AGENT AGREES THAT ANY SUCH CLAIM OR CAUSE OF ACTION SHALL BE
TRIED BY A COURT TRIAL WITHOUT A JURY. WITHOUT LIMITING THE FOREGOING, EACH OF
THE CREDITOR, THE BORROWER AND THE ADMINISTRATIVE AGENT FURTHER AGREES THAT ITS
RIGHT TO A TRIAL BY JURY IS WAIVED BY OPERATION OF THIS SECTION AS TO ANY
ACTION, COUNTERCLAIM OR OTHER PROCEEDING WHICH SEEKS, IN WHOLE OR IN PART, TO
CHALLENGE THE VALIDITY OR
4
<PAGE>
ENFORCEABILITY OF THIS SUBORDINATION AGREEMENT OR ANY PROVISION HEREOF. THIS
WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR
MODIFICATIONS TO THIS SUBORDINATION AGREEMENT.
WELLS FARGO BANK, NATIONAL ASSOCIATION, as the
Administrative Agent
By: ____________________________
Name:___________________________
Title:__________________________
DOLLAR FINANCIAL GROUP, INC.,
a New York corporation, as the Borrower
By: ____________________________
Name:___________________________
Title:__________________________
DFG HOLDINGS, INC., a Delaware corporation, as the
Creditor
By: ____________________________
Name: __________________________
Title: _________________________
5
<PAGE>
EXHIBIT 10.19
SUPPLEMENTAL SECURITY AGREEMENT
(Trademarks)
THIS SUPPLEMENTAL SECURITY AGREEMENT (the "Supplemental Trademark
Agreement") is made and dated this 18th day of December, 1998 by and between
DOLLAR FINANCIAL GROUP, INC., a New York corporation ("Borrower") and WELLS
FARGO BANK, NATIONAL ASSOCIATION, a national banking association, as
administrative agent (in such capacity, the "Administrative Agent") for itself
and the Lenders under (and as that term and capitalized terms not otherwise
defined herein are defined in) that certain Credit Agreement dated as of
December 18, 1998 by and among Borrower, the Parent, the Administrative Agent,
the Arrangers, the Syndication Agent and the Lenders from time to time party
thereto (as amended, extended and replaced from time to time, the "Credit
Agreement").
RECITALS
--------
A. Pursuant to that certain Pledge and Security Agreement dated as of even
date herewith between Borrower and the Administrative Agent (the "Borrower
Security Agreement"), Borrower has granted to the Administrative Agent a first
priority perfected security interest in certain assets of Borrower, including,
without limitation, all patents, trademarks, service marks, trade names,
copyrights, goodwill, licenses and other intellectual property owned by Borrower
or used in Borrower's business.
B. The parties hereto desire to supplement the Borrower Security Agreement
as it relates to certain of such intellectual property consisting generally of
trademarks and to create hereby a document appropriate for recordation in the
Patent and Trademark Office of the United States (the "PTO").
NOW, THEREFORE, in consideration of the above Recitals and for other good
and valuable consideration, the receipt and adequacy of which are hereby
acknowledged, the parties hereto hereby agree as follows:
AGREEMENT
---------
1. Confirmation of Grant of Security Interest. Borrower hereby confirms
------------------------------------------
the grant of security interest, pledge, assignment and mortgage set forth in the
Borrower Security Agreement and acknowledges that the Borrower Collateral
described therein includes, without limitation, all of Borrower's right, title
and interest in the following (the "Trademark Collateral"):
(a) All trademarks, service marks, designs, logos, indicia,
tradenames, corporate names, company names, business names, fictitious business
names trade styles and other source, product and business identifiers pertaining
to the products, services and business of Borrower, whether now owned or
hereafter acquired, including, without limitation, the trademarks specifically
described on Schedule I attached hereto, as the same may be amended or replaced
----------
from time to time with the consent of the Administrative Agent;
(b) All now existing and hereafter arising registrations and
applications for registration relating to any of the foregoing, all renewals and
extensions thereof throughout the world in perpetuity, and all rights to make
such applications and to renew and extend the same;
<PAGE>
(c) All now existing and hereafter arising rights and licenses to
make, have made, use and/or sell any items disclosed and claimed by any of the
foregoing;
(d) All now existing and hereafter arising right (but not the
obligation) to register claims under any state, federal or foreign trademark law
or regulation;
(e) All now existing and hereafter arising rights, claims and
interests under licensing or other contracts pertaining to any of the foregoing
to the extent such rights are assignable;
(f) All now existing and hereafter arising documents, instruments and
agreements which reveal the name and address of sources of supply, distribution
methods and all terms of purchase, rental, license or use and delivery for all
materials, products and components used in connection with any of the foregoing;
(g) All now existing and hereafter arising specifications as to and
quality control manuals used in connection with the operations conducted under
the name of or in connection with the foregoing;
(h) All now existing and hereafter arising goodwill associated with
any of the foregoing;
(i) All now existing and hereafter arising right (but not the
obligation) to sue or bring opposition or cancellation proceedings in the name
of Borrower or the Administrative Agent for past, present and future
infringements of any of the foregoing;
(j) All products and Proceeds of any of the foregoing.
2. Additional Representation and Warranty and Covenant. In addition to
---------------------------------------------------
all representations and warranties, covenants and agreements set forth in the
Borrower Security Agreement, Borrower hereby:
(a) Represents and warrants that Schedule I attached hereto sets forth
----------
an accurate and complete list of all trademarks owned by Borrower which are
registered with the PTO as of the date hereof; and
(b) Agrees to promptly notify the Administrative Agent in writing of
any additional trademarks registered with the PTO of which Borrower becomes the
owner and to amend Schedule I accordingly.
----------
3. No Present Assignment. Neither the Borrower Security Agreement, this
---------------------
Supplemental Trademark Agreement nor any other document, instrument or agreement
creates or is intended to create a present assignment of the Trademark
Collateral. Subject to the rights of the Administrative Agent under the Borrower
Security Agreement and this Supplemental Trademark Agreement, it is the
intention of the parties hereto that Borrower continue to own the Trademark
Collateral and that upon the indefeasible payment and performance in full of the
Obligations, the rights of the Administrative Agent under the Borrower Security
Agreement and this Supplemental Trademark Agreement in and to the Trademark
Collateral shall be released and terminated.
2
<PAGE>
4. Relationship to Security Agreement. The Trademark Collateral shall
----------------------------------
constitute Borrower Collateral for all purposes of the Borrower Security
Agreement and the other Loan Documents and the Administrative Agent shall have
all rights, powers and remedies with respect to the Trademark Collateral to the
same extent as they have with respect to other Borrower Collateral. Reference
is hereby made to the Borrower Security Agreement, the terms and conditions of
which are incorporated herein by this reference.
EXECUTED this 18th day of December, 1998.
DOLLAR FINANCIAL GROUP, INC.,
a New York corporation
By:_______________________________________
Richard S. Dorfman
Chief Financial Officer
WELLS FARGO BANK, NATIONAL ASSOCIATION, as
Administrative Agent
By:_______________________________________
Luann Bangsund
Senior Vice President
3
<PAGE>
SCHEDULE I
----------
List of Trademarks
4
<PAGE>
EXHIBIT 10.20
================================================================================
PURCHASE AGREEMENT
among
DOLLAR FINANCIAL GROUP, INC.,
GS MEZZANINE PARTNERS, L.P.,
GS MEZZANINE PARTNERS OFFSHORE, L.P.,
STONE STREET FUND 1998, L.P.,
BRIDGE STREET FUND 1998, L.P.,
ARES LEVERAGED INVESTMENT FUND, L.P.,
and
ARES LEVERAGED INVESTMENT FUND II, L.P.,
Dated as of December 18, 1998
Relating to:
$20,000,000 Aggregate Principal Amount of
10 7/8% Senior Subordinated Notes Due 2006
================================================================================
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
RECITALS.................................................................................. 1
SECTION 1
DEFINITIONS AND ACCOUNTING TERMS
--------------------------------
1.1. Definitions......................................................................... 3
-----------
1.2. Computation of Time Periods......................................................... 26
---------------------------
1.3. Accounting Terms.................................................................... 27
----------------
SECTION 2
consolidating statements
AUTHORIZATION AND ISSUANCE OF NOTES
-----------------------------------
2.1. Authorization of Issue.............................................................. 27
----------------------
2.2. Grant of Option; Exercise........................................................... 27
-------------------------
2.3. Closings............................................................................ 28
--------
SECTION 3
CONDITIONS TO CLOSINGS
----------------------
3.1. Representations and Warranties...................................................... 28
------------------------------
3.2. Performance; No Default under Other Agreements...................................... 29
----------------------------------------------
3.3. Compliance Certificates............................................................. 29
-----------------------
(a) Officer's Certificate...................................................... 29
---------------------
(b) Secretary's Certificate.................................................... 29
-----------------------
3.4. Opinions of Counsel................................................................. 29
-------------------
3.5. Changes in Corporate Structure...................................................... 29
------------------------------
3.6. Refinancing......................................................................... 30
-----------
3.7. Merger; Credit Agreement; Buyer Cash Contribution; Minimum Aggregate
--------------------------------------------------------------------
Proceeds........................................................................... 30
--------
(a) Merger..................................................................... 30
------
(b) Credit Documents........................................................... 30
----------------
(c) Buyer Cash Contribution.................................................... 30
-----------------------
</TABLE>
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<TABLE>
<CAPTION>
Page
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<S> <C>
(d) Minimum Aggregate Proceeds................................................. 30
--------------------------
3.8. Commitment Fee....................................................................... 30
--------------
3.9. Material Adverse Effect............................................................. 31
-----------------------
3.10. Financial Information.............................................................. 31
---------------------
3.11. Proceedings and Documents.......................................................... 31
-------------------------
3.12. Purchaser Permitted By Applicable Law, etc......................................... 31
------------------------------------------
3.13. Transaction Documents in Force and Effect; Information............................. 31
------------------------------------------------------
(a) Transaction Documents...................................................... 31
---------------------
(b) Accuracy of Information.................................................... 31
-----------------------
3.14. No Violation; No Legal Constraints; Consents, Authorizations and Filings,
-------------------------------------------------------------------------
etc................................................................................ 32
---
SECTION 4
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
---------------------------------------------
4.1. Due Incorporation; Power and Authority.............................................. 33
--------------------------------------
4.2. Capitalization...................................................................... 33
--------------
4.3. Subsidiaries........................................................................ 34
------------
4.4. Due Authorization, Execution and Delivery........................................... 34
-----------------------------------------
(a) Agreement.................................................................. 34
---------
(b) Notes and the Exchange Notes............................................... 34
----------------------------
(c) Exchange and Registration Rights Agreement................................. 35
------------------------------------------
(d) Other Transaction Documents................................................ 35
---------------------------
4.5. Non-Contravention; Authorizations and Approvals..................................... 35
-----------------------------------------------
4.6. Company Financial Statements; Company Reports....................................... 36
---------------------------------------------
(a) Company Financial Statements............................................... 36
----------------------------
(b) Company Reports............................................................ 37
---------------
4.7. Absence of Undisclosed Liabilities or Events........................................ 37
--------------------------------------------
4.8. No Actions or Proceedings........................................................... 38
-------------------------
4.9. Title to Properties................................................................. 38
-------------------
4.10. Intellectual Property Rights....................................................... 38
----------------------------
4.11. Taxes.............................................................................. 39
-----
4.12. Employee Benefit Plans............................................................. 40
----------------------
4.13. Private Offering; No Integration or General Solicitation........................... 41
--------------------------------------------------------
4.14. Eligibility for Resale under Rule 144A............................................. 42
--------------------------------------
4.15. Status Under Certain Statutes...................................................... 42
-----------------------------
4.16. Insurance.......................................................................... 42
---------
4.17. Use of Proceeds; Margin Regulations................................................ 42
-----------------------------------
</TABLE>
-ii-
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
4.18. Existing Indebtedness; Future Liens................................................ 43
-----------------------------------
4.19. Compliance with Laws; Permits...................................................... 43
-----------------------------
4.20. Solvency........................................................................... 44
--------
4.21. Affiliate Transactions............................................................. 44
----------------------
4.22. Material Contracts................................................................. 44
------------------
4.23. No Changes to Applicable Law....................................................... 44
----------------------------
4.24. Indebtedness....................................................................... 44
------------
4.25. Fees............................................................................... 44
----
4.26. Brokerage Fees..................................................................... 45
--------------
4.27. Documents and Procedures........................................................... 45
------------------------
4.28. Standards and Procedures........................................................... 45
------------------------
4.29. No Unrelated Liabilities........................................................... 45
------------------------
SECTION 5
REPRESENTATIONS OF THE PURCHASERS
---------------------------------
5.1. Purchase for Investment............................................................. 46
-----------------------
SECTION 6
COVENANTS TO PROVIDE INFORMATION
--------------------------------
6.1. Future Reports to Purchasers........................................................ 46
----------------------------
(a) Monthly Statements......................................................... 46
------------------
(b) Quarterly Statements....................................................... 47
--------------------
(c) Annual Statements.......................................................... 48
-----------------
(d) Chief Financial Officer Certificates....................................... 49
------------------------------------
(e) Auditors' Reports.......................................................... 49
-----------------
(f) Other Information.......................................................... 49
-----------------
(g) Notice of Default or Event of Default...................................... 50
-------------------------------------
(h) Additional Information to Holders of Other Indebtedness.................... 50
-------------------------------------------------------
(i) Changes to Indebtedness.................................................... 50
-----------------------
</TABLE>
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<TABLE>
<CAPTION>
Page
----
SECTION 7
OTHER AFFIRMATIVE COVENANTS
---------------------------
<S> <C>
7.1. Preservation of Corporate Existence and Franchises.................................. 50
--------------------------------------------------
7.2. Maintenance of Properties........................................................... 51
-------------------------
7.3. Taxes............................................................................... 51
-----
(a) Payment of Taxes........................................................... 51
----------------
(b) Tax Returns................................................................ 51
-----------
(c) Contest Provisions......................................................... 52
------------------
7.4. Books, Records and Access........................................................... 52
-------------------------
7.5. Compliance with Law................................................................. 52
-------------------
7.6. Insurance........................................................................... 52
---------
7.7. Offer to Repurchase Upon Change of Control.......................................... 53
------------------------------------------
7.8. Offer to Purchase by Application of Excess Proceeds................................. 54
---------------------------------------------------
7.9. Further Assurances.................................................................. 56
------------------
SECTION 8
NEGATIVE COVENANTS
------------------
8.1. Stay, Extension and Usury Laws...................................................... 57
------------------------------
8.2. Restricted Payments................................................................. 57
-------------------
8.3. Dividend and Other Payment Restrictions Affecting Subsidiaries...................... 59
--------------------------------------------------------------
8.4. Incurrence of Indebtedness and Issuance of Preferred Stock.......................... 60
----------------------------------------------------------
8.5. Asset Sales......................................................................... 63
-----------
8.6. Transactions with Affiliates........................................................ 64
----------------------------
8.7. Limitation on Ranking of Certain Indebtedness....................................... 65
---------------------------------------------
8.8. Limitation on Liens Securing Company Subordinated Indebtedness...................... 65
--------------------------------------------------------------
8.9. Limitation on Issuances and Sales of Capital Stock of Subsidiaries.................. 66
------------------------------------------------------------------
8.10. Payments for Consents.............................................................. 66
---------------------
8.11. Merger, Consolidation, or Sale of Assets........................................... 66
----------------------------------------
8.12. Successor Company Substituted...................................................... 67
-----------------------------
8.13. Additional Subsidiary Guarantees................................................... 67
--------------------------------
SECTION 9
PROVISIONS RELATING TO RESALES OF NOTES
---------------------------------------
</TABLE>
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<TABLE>
<CAPTION>
Page
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<S> <C>
9.1. Private Offerings................................................................... 68
-----------------
(a) Offers and Sales only to Institutional Accredited Investors or
--------------------------------------------------------------
Qualified Institutional Buyers.................................................. 68
------------------------------
(b) No General Solicitation.................................................... 68
-----------------------
(c) Purchases by Non-Bank Fiduciaries.......................................... 68
---------------------------------
(d) Restrictions on Transfer................................................... 68
------------------------
(e) No Future Liability........................................................ 68
-------------------
9.2. Offering Memorandum................................................................. 69
-------------------
9.3. Amendments and Supplements to the Offering Memorandum............................... 70
-----------------------------------------------------
9.4. Copies of the Offering Memorandum................................................... 71
---------------------------------
9.5. Blue Sky Compliance................................................................. 71
-------------------
9.6. Ratings of the Notes................................................................ 71
--------------------
9.7. The Depositary...................................................................... 71
--------------
9.8. Additional Company Information...................................................... 72
------------------------------
9.9. Agreement Not to Offer or Sell Additional Securities................................ 72
----------------------------------------------------
9.10. Exchange and Registration Rights Agreement......................................... 72
------------------------------------------
9.11. No Integration..................................................................... 72
--------------
9.12. Restriction on Repurchases......................................................... 72
--------------------------
9.13. DTC Agreement...................................................................... 73
-------------
9.14. PORTAL............................................................................. 73
------
9.15. Form D............................................................................. 73
------
9.16. Syndication........................................................................ 73
-----------
9.17. Exchange Right..................................................................... 75
--------------
SECTION 10
THE NOTES
---------
10.1. Form and Execution................................................................. 76
------------------
10.2. Terms of the Notes................................................................. 76
------------------
(a) Stated Maturity............................................................ 76
---------------
(b) Interest................................................................... 76
--------
10.3. Denominations...................................................................... 76
-------------
10.4. Form of Legend for the Notes....................................................... 76
----------------------------
10.5. Payments and Computations.......................................................... 77
-------------------------
10.6. Registration, Registration of Transfer and Exchange................................ 77
---------------------------------------------------
(a) Security Register.......................................................... 77
-----------------
(b) Registration of Transfer................................................... 77
------------------------
(c) Exchange................................................................... 77
--------
</TABLE>
-v-
<PAGE>
<TABLE>
<CAPTION>
Page
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<S> <C>
(d) Effect of Registration of Transfer or Exchange............................ 78
----------------------------------------------
(e) Requirements; Charges..................................................... 78
---------------------
(f) Certain Limitations....................................................... 78
-------------------
10.7. Transfer Restrictions............................................................. 78
---------------------
10.8. Mutilated, Destroyed, Lost and Stolen Notes....................................... 80
-------------------------------------------
10.9. Persons Deemed Owners............................................................. 81
---------------------
10.10. Cancellation..................................................................... 81
------------
10.11. Home Office Payment.............................................................. 81
-------------------
SECTION 11
EVENTS OF DEFAULT
-----------------
11.1. Events of Default................................................................. 82
-----------------
11.2. Remedies.......................................................................... 84
--------
11.3. Waiver of Past Defaults........................................................... 85
-----------------------
SECTION 12
REDEMPTION
----------
12.1. Right of Redemption............................................................... 86
-------------------
12.2. Partial Redemptions............................................................... 86
-------------------
12.3. Notice of Redemption.............................................................. 86
--------------------
12.4. Deposit of Redemption Price....................................................... 87
---------------------------
12.5. Notes Payable on Redemption Date.................................................. 87
--------------------------------
12.6. Notes Redeemed in Part............................................................ 87
----------------------
SECTION 13
SUBORDINATION OF NOTES
----------------------
13.1. Notes Subordinate to Senior Indebtedness.......................................... 88
----------------------------------------
13.2. Payment Over of Proceeds Upon Dissolution, Etc.................................... 88
----------------------------------------------
13.3. No Payment When Senior Indebtedness in Default.................................... 89
----------------------------------------------
13.4. Payment Permitted If No Default................................................... 91
-------------------------------
13.5. Subrogation to Rights of Holders of Senior Indebtedness........................... 91
-------------------------------------------------------
</TABLE>
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<PAGE>
<TABLE>
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Page
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13.6. Provisions Solely to Define Relative Rights....................................... 91
-------------------------------------------
13.7. No Waiver of Subordination Provisions............................................. 92
-------------------------------------
13.8. Reliance on Judicial Order or Certificate of Liquidating Agent.................... 93
--------------------------------------------------------------
13.9. Reliance by Holders of Senior Indebtedness on Subordination Provisions............. 93
----------------------------------------------------------------------
SECTION 14
SUBSIDIARY GUARANTEES
---------------------
14.1. Subsidiary Guarantees............................................................. 93
---------------------
14.2. Execution and Delivery of Subsidiary Guarantees................................... 94
-----------------------------------------------
14.3. Guarantors May Consolidate, Etc. On Certain Terms................................. 95
-------------------------------------------------
14.4. Releases of Subsidiary Guarantees................................................. 96
---------------------------------
14.5. Subordination of Subsidiary Guarantees............................................ 97
--------------------------------------
14.6. Limitation on Guarantor Liability................................................. 97
---------------------------------
14.7. Endorsement of Subsidiary Guarantees.............................................. 97
------------------------------------
SECTION 15
EXPENSES, INDEMNIFICATION AND CONTRIBUTION
------------------------------------------
15.1. Expenses.......................................................................... 98
--------
15.2. Indemnification................................................................... 98
---------------
(a) Indemnification by the Company............................................ 98
------------------------------
(b) Indemnification by the Purchasers......................................... 100
---------------------------------
(c) Notifications and Other Indemnification Procedures........................ 100
--------------------------------------------------
15.3. Contribution...................................................................... 101
------------
15.4. Survival.......................................................................... 102
--------
SECTION 16
MISCELLANEOUS
-------------
16.1. Notices........................................................................... 102
-------
16.2. Benefit of Agreement; Assignments and Participations.............................. 103
----------------------------------------------------
16.3. No Waiver; Remedies Cumulative.................................................... 104
------------------------------
</TABLE>
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<TABLE>
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16.4. Amendments, Waivers and Consents................................................. 104
--------------------------------
16.5. Counterparts..................................................................... 104
------------
16.6. Reproduction..................................................................... 105
------------
16.7. Headings......................................................................... 105
--------
16.8. Survival of Covenants and Indemnities............................................ 105
-------------------------------------
16.9. Governing Law; Submission to Jurisdiction; Venue................................. 105
------------------------------------------------
16.10. Severability.................................................................... 107
------------
16.11. Entirety........................................................................ 107
--------
16.12. Survival of Representations and Warranties...................................... 107
------------------------------------------
16.13. Construction.................................................................... 107
------------
16.14. Incorporation................................................................... 107
-------------
</TABLE>
EXHIBITS
- --------
Exhibit A - Form of Note
Exhibit B - Exchange and Registration Rights Agreement
Exhibit C - Form of Subsidiary Guarantee
Exhibit D - Form of Supplemental Agreement
Exhibit E - Management Services Agreement
Exhibit F - Form of Notation of Subsidiary Guarantee
Exhibit 3.3(a) - Form of Officer's Certificate
Exhibit 3.3(b) - Form of Secretary's Certificate
Exhibit 3.4 - Form of Opinion of Counsel for Company
SCHEDULES
- ---------
Schedule A - Information Relating to Purchasers
Schedule B - List of Current Guarantor Subsidiaries
Schedule 4.03 - Subsidiaries
Schedule 4.07(a) - Liabilities or Events
Schedule 4.07(b) - Other MAE Changes in Financial Condition
Schedule 4.08 - Actions or Proceedings
Schedule 4.9 - Liens
Schedule 4.11 - Taxes
Schedule 4.12(e) - Plans
Schedule 4.18 - Existing Indebtedness
Schedule 4.19(a) - Compliance with Laws
Schedule 4.19(b) - List of Permits
Schedule 4.21(a) - Affiliate Transactions
Schedule 4.22 - Material Contracts
Schedule 4.26 - Broker's Fees
-viii-
<PAGE>
Schedule 4.27 - Documents and Procedures
-ix-
<PAGE>
PURCHASE AGREEMENT
PURCHASE AGREEMENT, dated as of December 18, 1998, among Dollar
Financial Group, Inc., a New York corporation (the "Company"), GS Mezzanine
-------
Partners, L.P., a limited partnership organized under the laws of Delaware ("GS
--
Mezzanine"), GS Mezzanine Partners Offshore, L.P., a limited partnership
- ---------
organized under the laws of the Cayman Islands ("GS Mezzanine Offshore"), Stone
---------------------
Street Fund 1998, L.P., a limited partnership organized under the laws of
Delaware ("Stone Street"), Bridge Street Fund 1998, L.P., a limited partnership
------------
organized under the laws of Delaware ("Bridge Street", and collectively with
-------------
Stone Street, GS Mezzanine and GS Mezzanine Offshore, the "GSMP Purchasers"),
---------------
Ares Leveraged Investment Fund, L.P., a limited partnership organized under the
laws of Delaware ("Ares I") and Ares Leveraged Investment Fund II, L.P., a
------
limited partnership organized under the laws of Delaware ("Ares II" and,
-------
collectively with Ares I, "Ares" and, collectively with GSMP Purchasers, the
----
"Purchasers").
----------
RECITALS
--------
WHEREAS, DFG Holdings, Inc., a Delaware corporation ("Holdings"), owns
--------
all of the outstanding shares of the Company and Holdings has entered into an
Agreement and Plan of Merger, dated as of November 13, 1998 (the "Merger
------
Agreement"), with DFG Acquisition, Inc., a Delaware corporation (the "Buyer"),
- --------- -----
and the other parties named therein pursuant to which the Buyer will be merged
with and into Holdings (the "Merger").
------
WHEREAS, the Merger Agreement provides for a recapitalization of
Holdings (the "Recapitalization") prior to the Merger pursuant to which the
----------------
outstanding shares of Common Stock, par value $0.001 per share, of Holdings will
be reclassified into 3,183.4587 shares of Class A Common Stock, par value $0.001
per share (the "Class A Common Stock"), of Holdings and 31,448.0500 shares Class
--------------------
B Common Stock, par value $0.001 per share (the "Class B Common Stock"), of
--------------------
Holdings.
WHEREAS, in the Merger (a) the Class A Common Stock will remain
outstanding, (b) the Class B Common Stock will be converted into the right to
receive cash in the amount of $3,225 per share and (c) each outstanding share of
common stock, par value $.01 per share, of Buyer will be converted into
12,403.10 shares of Class A Common Stock.
<PAGE>
WHEREAS, the cash consideration payable in the Merger and the fees and
expenses of Holdings in connection with the Merger will be funded through the
following transactions: (a) Green Equity Investors II, L.P., a limited
partnership organized under the laws of Delaware and the parent of Buyer
("GEI"), will cause an equity contribution of $41,973,169.78 in cash to be made
---
to Buyer prior to the Merger (the "Buyer Cash Contribution"), (b) upon the terms
-----------------------
and subject to the conditions set forth therein, Holdings will sell to the
Purchasers an aggregate of 1,647.4603 shares of Class A Common Stock (the
"Shares") pursuant to a Subscription Agreement, dated the date hereof (the
------
"Subscription Agreement"), among Holdings and the Purchasers for aggregate
----------------------
purchase price of $5,313,059.46 million, and (c) upon the terms and subject to
the conditions set forth in the Purchase Agreement, dated the date hereof (the
"Holdings Purchase Agreement"), among Holdings and the Purchasers, Holdings will
---------------------------
sell $120,625,617.30 aggregate principal amount of its 13% Senior Discount Notes
Due 2006 in the form of Exhibit A to the Holdings Purchase Agreement (the
---------
"Senior Discount Notes") and 1,040.6103 shares of Class A Common Stock (the
---------------------
"Senior Discount Note Shares") to the Purchasers for aggregate cash proceeds of
---------------------------
$62.08 million.
WHEREAS, the Company will enter into a $160 million credit facility,
dated December 18, 1998 (the "Credit Agreement"), among the Company, Holdings
----------------
and Wells Fargo Bank, National Association, a national banking association
("Wells Fargo"), as administrative agent for the lenders named therein, First
-----------
Union Capital Markets and Wells Fargo, as arrangers of the credit facilities
evidenced thereby, First Union National Bank, as syndication agent, U.S. Bank
National Association, as documentation agent, and the lenders named therein,
which will provide for a revolving credit facility in favor of the Company of up
to $70 million (of which not more than $14 million will be drawn at the Initial
Closing (as defined herein)) and two term loan facilities in favor of the
Company of up to $90 million,
WHEREAS, upon the terms and subject to the conditions set forth in
this Agreement, the Company shall have the right at any time or from time to
time prior to nine months after the Initial Closing Date (as defined herein) to
sell to the Purchasers up to an aggregate of $20 million aggregate principal
amount of its 10 7/8% Senior Subordinated Notes Due 2006 in the form of
Exhibit A hereto (the "Notes") to (i) finance the repurchase by the Company of
- --------- -----
any of its currently outstanding 10 7/8% Series A Senior Notes Due 2006 (the
"Senior Notes") that are put to it as a result of the Merger pursuant to the
------------
indenture, dated as of November 15, 1996 (the "Senior Note Indenture"), among
---------------------
the Company, the Guarantors (as defined therein) and Fleet National Bank, as
trustee, under which the Senior Notes were issued and (ii) (x) finance any
acquisitions made by the
-2-
<PAGE>
Company after the Initial Closing Date or (y) to refinance any acquisitions made
by the Company after the Initial Closing Date and on or prior to the Change of
Control Payment Date (as defined in the Senior Note Indenture).
WHEREAS, the holders of the Notes from time to time will be entitled
to the benefits of an Exchange and Registration Rights Agreement, dated the date
hereof (the "Exchange and Registration Rights Agreement"), among the Company and
------------------------------------------
the Purchasers in the form of Exhibit B hereto.
---------
WHEREAS, the Company has duly authorized the creation and issuance of
the Notes and the execution and delivery of this Agreement and the Exchange and
Registration Rights Agreement.
WHEREAS, all things necessary to make this Agreement, the Notes (when
issued and delivered hereunder) and the Exchange and Registration Rights
Agreement valid and binding obligations of the Company in accordance with their
respective terms have been done.
NOW, THEREFORE, the parties hereto agree as follows:
SECTION 1
DEFINITIONS AND ACCOUNTING TERMS
--------------------------------
1.1 Definitions. As used herein, the following terms shall have the
-----------
meanings specified herein unless the context otherwise requires:
"Accredited Investor" means any Person that is an "accredited
-------------------
investor" within the meaning of Rule 501(a) under the Securities Act.
"Acquired Debt" means, with respect to any specified Person, (i)
-------------
Indebtedness of any other Person existing at the time such other Person is
merged with or into or became a Subsidiary of such specified Person, including,
without limitation, Indebtedness incurred in connection with, or in
contemplation of, such other Person merging with or into or becoming a
Subsidiary of such specified Person, and (ii) Indebtedness secured by a Lien
encumbering any asset acquired by such specified Person at the time such asset
is acquired by such specified Person.
-3-
<PAGE>
"Acquisition Documents" means the Merger Agreement and all
---------------------
certificates, instruments, financial and other statements and other documents
made or delivered in connection therewith.
"Additional Company Information" is defined in Section 9.8.
------------------------------
"Affiliate" means, with respect to any specified Person, any other
---------
Person directly or indirectly controlling or controlled by or under direct or
indirect common control with such specified Person. For purposes of this
definition, "control" (including, with correlative meanings, the terms
-------
"controlling," "controlled by" and "under common control with"), as used with
----------- ------------- -------------------------
respect to any specified Person, shall mean the possession, directly or
indirectly, of the power to direct or cause the direction of the management or
policies of such Person, whether through the ownership of voting securities, by
agreement or otherwise; provided, however, that in the case of the Company or
any of its Subsidiaries beneficial ownership of 10% or more of the voting
securities of the Company or such Subsidiary, as the case may be, shall be
deemed to be control. Notwithstanding the foregoing, in no event will the
Purchasers or any of their Affiliates be deemed to be an Affiliate of the
Company.
"Affiliate Transaction" is defined in Section 8.6.
---------------------
"Agreement" is defined in Section 16.4.
---------
"Applicable Law" means all applicable laws, statutes, treaties, rules,
--------------
codes (including building codes), ordinances, regulations, certificates, orders
and licenses of, and interpretations by, any Governmental Authority and
judgments, decrees, injunctions, writs, permits, orders or like governmental
action of any Governmental Authority (including environmental laws and those
pertaining to health or safety) applicable to the Company any of its
Subsidiaries or any of their property or operations.
"Ares", "Ares I" and "Ares II" are defined in the preamble to this
---- ------ -------
Agreement.
"Asset Sale" is defined in Section 8.5(a).
----------
"Asset Sale Offer" is defined in Section 7.8(a).
----------------
"Audit Date" is defined in Section 4.6(b).
----------
-4-
<PAGE>
"Bankruptcy Law" means Title 11 of the United States Code or any
--------------
similar federal or state bankruptcy, insolvency, reorganization or other law for
the relief of debtors.
"Board" means the Board of Directors of the Company, or any authorized
-----
committee of such Board of Directors.
"Borrowing Base" means the sum of the following amounts with respect
--------------
to the Company and its Subsidiaries, determined on a consolidated basis and,
where applicable, in accordance with GAAP: (i) 100% of cash held overnight in
store safes; (ii) 100% of balances held in store accounts; (iii) 100% of checks
held in store safes; (iv) 100% of clearing house transfers initiated on the
previous day and transfers of same-day funds to be credited to store accounts;
(v) 100% of cash held overnight by armored car carriers; (vi) 100% of eligible
government receivables in respect of government contracts; and (vii) 100% of
cash balances held in demand deposit accounts and/or investment accounts. The
Borrowing Base shall be determined by the Company upon each incurrence of
Indebtedness, and such determination shall be conclusive so long as it is made
in good faith.
"Bridge Street" is defined in the preamble to this Agreement.
-------------
"Business Day" means any day other than a Legal Holiday.
------------
"Buyer" is defined in the first recital to this Agreement.
-----
"Buyer Cash Contribution" is defined in the fourth recital to this
-----------------------
Agreement.
"Calculation Date" means, with respect to any calculation of the Fixed
----------------
Charge Ratio, the date on which the event requiring such calculation occurs.
"Capital Lease Obligation" means, at the time any determination
------------------------
thereof is to be made, the amount of the liability in respect of a capital lease
that would at such time be required to be capitalized on a balance sheet in
accordance with GAAP.
"Capital Stock" means (i) in the case of a corporation, corporate
-------------
stock, (ii) in the case of an association or business entity, any and all
shares, interests, participations, rights or other equivalents (however
designated) of corporate stock, (iii) in the case of a partnership, partnership
interests (whether
-5-
<PAGE>
general or limited) and (iv) any other interest or participation that confers on
a Person the right to receive a share of the profits and losses of, or
distributions of assets of, the issuing Person.
"Cash Equivalents" means (i) direct obligations of the United States
----------------
of America or any agency thereof having maturities of not more than one year
from the date of acquisition, (ii) time deposits and certificates of deposit of
any domestic commercial bank of recognized standing having capital and surplus
in excess of $500 million, with maturities of not more than one year from the
date of acquisition, (iii) repurchase obligations issued by any bank described
in clause (ii) above with a term not to exceed 30 days; (iv) commercial paper
rated at least A-1 or the equivalent thereof by S&P or at least P-1 or the
equivalent thereof by Moody's, in each case maturing within one year after the
date of acquisition and (v) shares of any money market mutual fund, or similar
fund, in each case having excess of $500 million, which invests predominantly in
investments of the types describes in clauses (i) through (iv) above.
"Change of Control" means the occurrence of any of the following: (i)
-----------------
the sale, lease, transfer, conveyance or other disposition (other than by way of
merger or consolidation), in one or more related transactions, of all or substan
tially all of the properties and assets of the Company and its Subsidiaries
taken as a whole to any "person" (as such term is used in Section 13(d)(3) of
the Exchange Act), other than the Principals or their Related Parties, (ii) the
adoption of a plan relating to the liquidation or dissolution of the Company,
(iii) the consummation of any transaction or other event (including, without
limitation, any merger or consolidation) the result of which is that any
"person" (as defined above), other than the Principals and their Related
Parties, becomes the "beneficial owner" (as such term is defined in Rule 13d-3
and Rule 13d-5 under the Exchange Act), directly or indirectly, of more than 35%
of the voting stock of the Company or Holdings, (iv) the consummation of any
transaction (including, without limitation, any merger or consolidation) the
result of which is that Holdings ceases to own 100% of the outstanding Equity
Interests of the Company or (v) the first day on which a majority of the members
of the Board of Directors of the Company are not Continuing Directors.
"Change of Control Payment" is defined in Section 7.7(a).
-------------------------
"Change of Control Payment Date" is defined in Section 7.7(b)(ii).
------------------------------
"Class A Common Stock" is defined in the second recital.
--------------------
"Class B Common Stock" is defined in the second recital.
--------------------
-6-
<PAGE>
"Closing" is defined in Section 2.3(a).
-------
"Closing Date" is defined in Section 2.3(a).
------------
"Code" means the Internal Revenue Code of 1986, as amended from time
----
to time, and the rules and regulations promulgated thereunder from time to time.
"Commission" means the Securities and Exchange Commission, as from
----------
time to time constituted, created under the Exchange Act or, if at any time
after the execution of this Agreement such Commission is not existing and
performing the duties now assigned to it under the Exchange Act, the body
performing such duties at such time.
"Commitment Fee" is defined in Section 2.2.
--------------
"Company" shall have the meaning assigned in the preamble to this
-------
Agreement and its successors and permitted assigns.
"Company Financial Statements" is defined in Section 4.6(a).
----------------------------
"Company Indemnified Person" is defined in Section 15.2(b).
--------------------------
"Company Party" is defined in Section 4.4(f).
-------------
"Company Reports" is defined in Section 4.6(b).
---------------
"Consolidated" or "consolidated" (including the correlative term
------------ ------------
"consolidating") or on a "consolidated basis", when used with reference to any
------------- ------------------
financial term in this Agreement (but not when used with respect to any tax
return or tax liability), means the aggregate for two or more Persons of the
amounts signified by such term for all such Persons, with inter-company items
eliminated and, with respect to net income or earnings, after eliminating the
portion of net income or earnings properly attributable to minority interests,
if any, in the capital stock of any such Person or attributable to shares of
preferred stock of any such Person not owned by any other such Person, in
accordance with GAAP.
"Consolidated Cash Flow" means, with respect to any Person for any
----------------------
period, the Consolidated Net Income of such Person for such period plus (i) an
amount equal to any extraordinary or non-recurring loss plus any net loss
realized in connection with an Asset Sale, the closure of any stores, the
-7-
<PAGE>
disposition of any securities by such Person or any of its Subsidiaries or the
extinguishment of any Indebtedness by such Person or its Subsidiaries (to the
extent such losses were deducted in computing such Consolidated Net Income),
plus (ii) provision for taxes based on income or profits of such Person and its
Subsidiaries for such period, to the extent that such provision for taxes was
included in computing such Consolidated Net Income, plus (iii) consolidated
interest expense of such Person and its Subsidiaries for such period, whether
paid or accrued and whether or not capitalized (including, without limitation,
amortization of original issue discount, non-cash interest payments, the
interest component of any deferred payment obligations, the interest component
of all payments associated with Capital Lease Obligations, imputed interest with
respect to commissions, discounts and other fees and charges incurred in respect
of letter of credit or bankers' acceptance financings, and net payments (if any)
pursuant to Hedging Obligations), to the extent that any such expense was
deducted in computing such Consolidated Net Income, plus (iv) depreciation,
amortization (including amortization of goodwill and other intangibles but
excluding amortization of prepaid cash expenses that were paid in a prior
period) and other non-cash charges (excluding any such non-cash charge to the
extent that it represents an accrual of or reserve for cash charges in any
future period or amortization of a prepaid cash expense that was paid in a prior
period) of such Person and its Subsidiaries for such period to the extent that
such depreciation, amortization and other non-cash charges were deducted in
computing such Consolidated Net Income, minus (v) non-cash items increasing
consolidated revenues in determining such Consolidated Net Income for such
period, minus (vi) the amount of Earn-out Obligations paid during such period
(to the extent not already reflected as an expense in Consolidated Net Income),
in each case, on a consolidated basis and determined in accordance with GAAP.
"Consolidated Net Income" means, with respect to any specified Person
-----------------------
for any period, the aggregate of the Net Income of such Person and its
Subsidiaries for such period, on a consolidated basis, determined in accordance
with GAAP; provided, that (i) the Net Income (but not loss) of any Person that
is not a Subsidiary or that is accounted for by the equity method of accounting
shall be included only to the extent of the amount of dividends or distributions
paid in cash to the specified Person or one of its Wholly Owned Subsidiaries,
(ii) the Net Income of any Subsidiary shall be excluded to the extent that the
declaration or payment of dividends or similar distributions by that Subsidiary
of that Net Income is not at the date of determination permitted without any
prior governmental approval (that has not been obtained) or, directly or
indirectly, by operation of the terms of its charter or any agreement,
instrument, judgment, decree, order, statute, rule or governmental regulation
applicable to that Subsidiary or its stockholders, (iii) the Net Income of any
Person acquired in a
-8-
<PAGE>
pooling of interests transaction for any period prior to the date of such
acquisition shall be excluded and (iv) the cumulative effect of a change in
accounting principles shall be excluded.
"Consolidated Net Worth" means, with respect to any Person as of any
----------------------
date, the sum of (i) the consolidated equity of the common stockholders of such
Person and its consolidated Subsidiaries as of such date plus (ii) the
respective amounts reported on such Person's balance sheet as of such date with
respect to any series of preferred stock (other than Disqualified Stock) that by
its terms is not entitled to the payment of dividends unless such dividends may
be declared and paid only out of net earnings in respect of the year of such
declaration and payment, but only to the extent of any cash received by such
Person upon issuance of such preferred stock, less (x) all write-ups (other than
write-ups resulting from foreign currency translations and write-ups of tangible
assets of a going concern business made within 12 months after the acquisition
of such business) subsequent to the date of this Agreement in the book value of
any asset owned by such Person or a consolidated Subsidiary of such Person and
(y) all unamortized debt discount and expense and unamortized deferred charges
as of such date, all of the foregoing determined in accordance with GAAP.
"Continuing Directors" means, as of any date of determination, any
--------------------
member of the Board of Directors of the Company who (i) was a member of such
Board of Directors immediately after consummation of the Merger or (ii) was
nominated for election or elected to such Board of Directors with the approval,
recommendation or endorsement of a majority of the Continuing Directors who were
members of such Board at the time of such nomination or election.
"Contract" is defined in Section 4.5.
--------
"Controlling Person" is defined in Section 15.2(a).
------------------
"Credit Agreement" means the Credit Agreement as defined in the fifth
----------------
recital to this Agreement, including any related notes, Guarantees, collateral
documents, instruments and agreements executed in connection therewith, and in
each case as amended, modified, restated, renewed, refunded, replaced or
refinanced from time to time.
"Credit Documents" means the Credit Agreement and all certificates,
----------------
instruments, financial and other statements and other documents and agreements
made or delivered in connection therewith and related thereto.
-9-
<PAGE>
"Custodian" is defined in Section 11.1(h).
---------
"Default" means any event, act or condition that is, or with the
-------
giving of notice, lapse of time or both would constitute an Event of Default.
"Depositary" is defined in Section 9.13.
----------
"Designated Senior Indebtedness" shall mean (i) the obligations of the
------------------------------
Company under the Credit Agreement and (ii) any other Senior Indebtedness of the
Company (other than to an Affiliate of the Company) permitted under this
Agreement the principal amount of which at original issuance is $5 million or
more and that has been designated by the Company as Designated Senior
Indebtedness.
"Director" means a member of the Board; provided, however, that in no
--------
event shall a Non-Voting Observer be deemed to be a Director.
"Disclosure Schedule" means all numbered Schedules to this Agreement.
-------------------
"Disqualified Stock" means any Capital Stock that, by its terms (or by
------------------
the terms of any security into which it is convertible or for which it is
exchangeable), or upon the happening of any event, matures or is mandatorily
redeemable, pursuant to a sinking fund obligation or otherwise, or redeemable at
the option of the holder thereof, in whole or in part, on or prior to the date
that is 91 days after the Stated Maturity of the Notes.
"Earn-out Obligations" means contingent payment obligations of the
--------------------
Company or any of its Subsidiaries incurred in connection with the acquisition
of assets or businesses, which obligations are payable based on the performance
of the assets or businesses so acquired; provided, however, that (i) such
obligations shall be expressly subordinated to the Notes to the same extent as
the Notes are subordinated to Senior Indebtedness as provided herein, (ii) the
amount of such obligations shall not exceed 25% of the total consideration paid
for such assets or businesses, and (iii) the amount of such obligations
outstanding at any time shall be measured by the maximum amount potentially
payable thereunder without regard to performance criteria, the passage of time
or other conditions.
"Enforceability Exceptions" means, with respect to any specified
-------------------------
obligation, any limitations on the enforceability of such obligation due to
bankruptcy, insolvency, reorganization, moratorium, and other similar laws of
-10-
<PAGE>
general applicability relating to or affecting creditors' rights or general
equity principles (other than, in any such case, any Federal or state laws
relating to fraudulent transfers).
"Equity Interests" means Capital Stock and all warrants, options or
----------------
other rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock).
"Equity Investee" is defined in Section 4.3.
---------------
"ERISA" is defined in Section 4.12.
-----
"ERISA Affiliate" is defined in Section 4.12.
---------------
"Event of Default" is defined in Section 11.1 hereof.
----------------
"Excess Proceeds" is defined in Section 8.5(b).
---------------
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
------------
"Exchange and Registration Rights Agreement" is defined in the seventh
------------------------------------------
recital.
"Exchange Notes" means the notes issued in the Exchange Offer.
--------------
"Exchange Note Offering" means an offering of all or any portion of
----------------------
the Exchange Notes without registration under the Securities Act.
"Exchange Offer" is defined in the Exchange and Registration Rights
--------------
Agreement.
"Exchange Offer Registration Statement" is defined in the Exchange and
-------------------------------------
Registration Rights Agreement.
"Existing Indebtedness" is defined in Section 4.18.
---------------------
"Financing Documents" means collectively, this Agreement, the Holdings
-------------------
Purchase Agreement, the Subscription Agreement, the Exchange and Registration
Rights Agreement, the Exchange and Registration Rights Agreement (as defined in
the Holdings Purchase Agreement), the Stockholders Agreement, the Notes, the
Exchange Notes, the Senior Discount Notes and all
-11-
<PAGE>
certificates, instruments, financial and other statements and other documents
made or delivered in connection herewith and therewith.
"Fixed Charges" means, with respect to any Person for any period, the
-------------
sum of, without duplication, (i) the consolidated interest expense of such
Person and its Subsidiaries for such period, whether paid or accrued (including,
without limitation, amortization of original issue discount, non-cash interest
payments, the interest component of any deferred payment obligations, the
interest component of all payments associated with Capital Lease Obligations,
imputed interest with respect to commissions, discounts and other fees and
charges incurred in respect of letter of credit or bankers' acceptance
financings, and net payments (if any) pursuant to Hedging Obligations) and (ii)
the consolidated interest expense of such Person and its Subsidiaries that was
capitalized during such period, and (iii) any interest expense on Indebtedness
of another Person that is Guaranteed by such Person or one of its Subsidiaries
or secured by a Lien on assets of such Person or one of its Subsidiaries
(whether or not such Guarantee or Lien is called upon) and (iv) the product of
(A) all cash dividend payments (and non-cash dividend payments in the case of a
Person that is a Subsidiary) on any series of preferred stock of such Person
plus all accrued but unpaid cash dividends on Disqualified Stock, times (B) a
fraction, the numerator of which is one and the denominator of which is one
minus the then current combined federal, state and local statutory tax rate of
such Person, expressed as a decimal, in each case, on a consolidated basis and
in accordance with GAAP.
"Fixed Charge Coverage Ratio" means with respect to any Person for any
---------------------------
period, the ratio of the Consolidated Cash Flow of such Person for such period
to the Fixed Charges of such Person for such period calculated as provided in
Section 8.4.
"GAAP" means United States generally accepted accounting principles
----
set forth in the opinions and pronouncements of the Accounting Principles Board
of the American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity as have been approved by a significant segment
of the accounting profession, which are in effect on the date of this Agreement.
"GEI" is defined in the fourth recital to this Agreement.
---
-12-
<PAGE>
"Governmental Authority" means (a) the government of the United States
----------------------
of America or any State or other political subdivision thereof,(b) any
government or political subdivision of any other jurisdiction in which the
Company or any Subsidiary conducts all or any part of its business, or which
asserts jurisdiction over any properties of the Company or any Subsidiary or (c)
any entity exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to, any such government.
"GS Mezzanine" is defined in the preamble to this Agreement.
------------
"GS Mezzanine Offshore" is defined in the preamble to this Agreement.
---------------------
"GSMP Purchasers" is defined in the preamble to this Agreement.
---------------
"Guarantee" means a guarantee (other than by endorsement of negotiable
---------
instruments for collection in the ordinary course of business), direct or
indirect, in any manner (including, without limitation, letters of credit and
reimbursement agreements in respect thereof), of all or any part of any
Indebtedness.
"Guarantors" means each of (i) the Subsidiaries of the Company set
----------
forth on Schedule B hereto and (ii) any other Subsidiary of the Company that
----------
executes a Subsidiary Guarantee in accordance with the provisions of this
Agreement, and their respective successors and assigns.
"Guarantor Senior Indebtedness" means (i) the Indebtedness of any
-----------------------------
Subsidiary of the Company evidenced by a guarantee of the obligations under the
Credit Agreement and (ii) the principal of (and premium, if any) and interest on
any other Indebtedness of any Guarantor for money borrowed, whether incurred on
or prior to the date of original issuance of the Notes or thereafter, and any
amendments, renewals, extensions, modifications, refinanc ings and refundings
of any such Indebtedness; provided, however, that the following shall not
constitute Guarantor Senior Indebtedness: (1) any Indebtedness as to which the
terms of the instrument creating or evidencing the same provide that such
Indebtedness is not superior in right of payment to the Subsidiary Guarantees,
(2) any Indebtedness as to which the terms of the instrument creating or
evidencing the same provide that such Indebtedness is subordinated in right of
payment in any respect to any other Indebtedness of such Guarantor, (3)
Indebtedness evidenced by the Subsidiary Guarantees, (4) any Indebtedness owed
to a Person when such Person is a Subsidiary of the Company, (5) any obligation
of such Guarantor arising from Disqualified Stock of
-13-
<PAGE>
such Subsidiary, (6) any portion of any Indebtedness which is incurred in
violation of this Agreement and (7) Indebtedness which, when incurred and
without respect to any election under Section 1111(b) of Title 11, United States
Code, is without recourse to such Guarantor.
"Hedging Obligations" means, with respect to any Person, the
-------------------
obligations of such Person under (i) interest rate swap agreements, interest
rate cap agreements and interest rate collar agreements and (ii) other
agreements or arrangements designed to protect such Person against fluctuations
in interest rates.
"Holder" means a Person in whose name a Note is registered on the
------
Security Register.
"Holdings" is defined in the first recital to this Agreement.
--------
"Holdings Purchase Agreement" is defined in the fourth recital to this
---------------------------
Agreement.
"incur" is defined in Section 11.3(a).
-----
"Indebtedness" means, with respect to any Person, any indebtedness of
------------
such Person, whether or not contingent, (i) in respect of borrowed money or
evidenced by bonds, notes, debentures or similar instruments or letters of
credit (or reimbursement agreements in respect thereof), (ii) representing
Capital Lease Obligations, (iii) the balance deferred and unpaid of the purchase
price of any property or services, except any such balance that constitutes an
accrued expense or trade payable, or (iv) representing any Hedging Obligations,
if and to the extent any of the foregoing indebtedness (other than letters of
credit and Hedging Obligations) would appear as a liability upon a balance sheet
of such Person prepared in accordance with GAAP, as well as all indebtedness of
others secured by a Lien on any asset of such Person (whether or not such
indebtedness is assumed by such Person) and, to the extent not otherwise
included, the Guarantee by such Person of any Indebtedness of any other Person.
"Indemnified Person" is defined in Section 15.2(c).
------------------
"Initial Closing" means the Closing as defined in the Holdings
---------------
Purchase Agreement.
-14-
<PAGE>
"Initial Closing Date" means the Closing Date as defined in the
--------------------
Holdings Purchase Agreement.
"Institutional Accredited Investors" is defined in Section 9.1(a).
----------------------------------
"Institutional Investor" means (a) any original purchaser of a Note
----------------------
and any transferee that is an Affiliate of any original purchaser, (b) any
holder of a Note holding more than 25% of the aggregate principal amount of the
Notes then outstanding, and (c) any bank, trust company, savings and loan
association or other financial institution, any pension plan, any investment
company or investment fund, any insurance company, any broker or dealer, or any
other similar financial institution or entity, regardless of legal form
organized under the laws of the United States or a State thereof, with capital
and surplus in excess of $50,000,000.
"Intellectual Property" means (a) all inventions and discoveries
---------------------
(whether patentable or unpatentable and whether or not reduced to practice), all
improvements thereto, and all patents, patent applications and patent
disclosures, together with all reissuances, continuations, continuations-in-
part, revisions, extensions and reexaminations thereof, (b) all trademarks,
service marks, trade dress, logos, trade names and corporate names, together
with all translations, adaptations, derivations and combinations thereof and
including all goodwill associated therewith, (c) all copyrightable works, all
copyrights and all applications, registrations and renewals in connection
therewith, (d) all broadcast rights, (e) all mask works and all applications,
registrations and renewals in connection therewith, (f) all know-how, trade
secrets and confidential business information, whether patentable or
unpatentable and whether or not reduced to practice (including ideas, research
and development, know-how, formulas, compositions and manufacturing and
production process and techniques, technical data, designs, drawings,
specifications, customer and supplier lists, pricing and cost information and
business and marketing plans and proposals), (g) all computer software
(including data and related documentation), (h) all other proprietary rights,
(i) all copies and tangible embodiments thereof (in whatever form or medium) and
(j) all licenses and agreements in connection therewith.
"Interest Payment Date" is defined in Exhibit A.
--------------------- ---------
"Investments" means, with respect to any Person, all investments by
-----------
such Person in other Persons (including Affiliates) in the form of direct or
indirect loans (including Guarantees of Indebtedness or other obligations),
advances or capital contributions (excluding (i) commission, travel and similar
advances to officers and employees, (ii) extensions of trade credit and (iii)
any
-15-
<PAGE>
loans to customers, in each case made on commercially reasonable terms and in
the ordinary course of business), purchases or other acquisitions for
consideration of Indebtedness, Equity Interests or other securities, together
with all items that are or would be classified as investments on a balance sheet
prepared in accordance with GAAP; provided, however, that an acquisition of
assets, Equity Interests or other securities by the Company for consideration
consisting of common equity securities of the Company shall not be deemed to be
an Investment. If the Company or any Subsidiary of the Company sells or
otherwise disposes of any Equity Interests of any direct or indirect Subsidiary
of the Company such that, after giving effect to any such sale or disposition,
such Person is no longer a Subsidiary of the Company, the Company shall be
deemed to have made an Investment on the date of any such sale or disposition
equal to the fair market value of the Equity Interests of such Subsidiary not
sold or disposed of.
"IPO" means any underwritten public offering of the common stock of
---
the Company or Holdings, whether on a primary or secondary basis, pursuant to an
effective registration statement filed under the Securities Act which generates
gross proceeds to the seller(s) of at least $25 million.
"Legal Holiday" means a Saturday, a Sunday or a day on which banking
-------------
institutions in The City of New York or at a place of payment are authorized by
law, regulation or executive order to remain closed. If any payment date in
respect of the Notes is a Legal Holiday at a place of payment, payment may be
made at that place on the next succeeding day that is not a Legal Holiday, and
no interest shall accrue for the intervening period.
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
----
charge, security interest or encumbrance of any kind in respect of such asset,
whether or not filed, recorded or otherwise perfected under applicable law
(including any conditional sale or other title retention agreement, any lease in
the nature thereof, any option or other agreement to sell or give a security
interest in and any filing of or agreement to give any financing statement under
the Uniform Commercial Code (or equivalent statutes) of any jurisdiction).
"Management Services Agreement" means the Management Services
-----------------------------
Agreement, dated the date hereof, among the Company, Holdings, and Leonard Green
& Partners, L.P. in the form set forth in Exhibit E hereto.
---------
"Material" means material in relation to the business, operations,
--------
affairs, financial condition, properties, assets, results of operations or
prospects of the Company and its Subsidiaries, taken as a whole.
-16-
<PAGE>
"Material Adverse Effect" means a material adverse effect on (a) the
-----------------------
business, operations, affairs, financial condition, assets, property, results of
operations or prospects of the Company and its Subsidiaries taken as a whole,
(b) the ability of the Company or any Subsidiary to perform any of its material
obligations under any of the Transaction Documents, or (c) the validity or
enforceability of any Transaction Document that is Material or material to the
holders of Notes.
"Material Contracts" means any agreements, contracts or arrangements
------------------
between the Company or its Subsidiaries, on the one hand, and any third parties,
on the other, that are Material.
"Maturity", when used with respect to any Note, means the date on
--------
which the principal of such Note becomes due and payable as therein or herein
provided, whether at the Stated Maturity or by declaration of acceleration, call
for redemption or otherwise (including in connection with any offer to purchase
that this Agreement requires the Company to make).
"Merger" is defined in the first recital to this Agreement.
------
"Merger Agreement" is defined in the first recital to this Agreement.
----------------
"Net Income" means, with respect to any Person, the net income (loss)
----------
of such Person, determined in accordance with GAAP and before any reduction in
respect of preferred stock dividends, excluding, however, (i) any gain (but not
loss), together with any related provision for taxes on such gain (but not
loss), realized in connection with (A) any Asset Sale (including, without
limitation, dispositions pursuant to sale and leaseback transactions) or (B) the
disposition of any securities by such Person or any of its Subsidiaries or the
extinguishment of any Indebtedness of such Person or any of its Subsidiaries,
(ii) any extraordinary or nonrecurring gain (but not loss), together with any
related provision for taxes on such extraordinary or nonrecurring gain (but not
loss) and (iii) any non-cash compensation expense of such Person attributable to
the exercise of options to acquire Capital Stock of Holdings by any officers,
directors or employees of Holdings or any of its Subsidiaries in each case prior
to the consummation of the Merger.
"Net Proceeds" means the aggregate cash proceeds received by the
------------
Company or any of its Subsidiaries in respect of any Asset Sale (including,
without limitation, any cash received upon the sale or other disposition of any
non-cash consideration received in any Asset Sale), net of the direct costs
relating to such Asset Sale (including, without limitation, legal, accounting
and
-17-
<PAGE>
investment banking fees, and sales commissions) and any relocation expenses
incurred as a result thereof, taxes paid or payable as a result thereof (after
taking into account any available tax credits or deductions and any tax sharing
arrangements), amounts required to be applied to the repayment of Indebted ness
(other than revolving credit Indebtedness under the Credit Agreement) secured by
a Lien on the asset or assets that were the subject of such Asset Sale and any
reserve for adjustment in respect of the sale price of such asset or assets
established in accordance with GAAP.
"New Documents" has the meaning specified in Section 9.17.
-------------
"Notes" has the meaning specified in the sixth recital.
-----
"Notes Payment" is defined in Section 13.2.
-------------
"Obligations" means any principal, premium, interest, Special Interest
-----------
and other liabilities payable by the Company or any of its Subsidiaries under or
in respect of this Agreement or the Notes.
"Offer Amount" is defined in Section 7.8(a).
------------
"Offer Period" is defined in Section 7.8(a).
------------
"Offering" means, collectively, any Exchange Note Offering and any
--------
Private Offering.
"Offering Memorandum" means an Offering Memorandum of the Company in
-------------------
form and substance satisfactory to the Purchasers delivered to the Purchasers in
connection with an Offering, including amendments or supplements thereto, any
exhibits thereto and the documents incorporated therein, in the most recent form
that has been prepared and delivered by the Company to the Purchasers in
connection with their solicitation of offers to purchase Notes or Exchange Notes
in connection with such Offering. Further, any reference to the Offering
Memorandum shall be deemed to refer to and include any Additional Company
Information furnished by the Company prior to the completion of the distribution
of the Notes or Exchange Notes in connection with any Offering and any
registration statement (if any) filed with the Commis sion related to such
Offering Memorandum. All references in this Agreement to financial statements
and schedules and other information which is "contained," "included" or "stated"
in the Offering Memorandum (or other references of like import) shall be deemed
to mean and include all such financial statements and schedules and other
information which are incorporated by reference in the
-18-
<PAGE>
Offering Memorandum, and all references in this Agreement to amendments or
supplements to the Offering Memorandum shall be deemed to mean and include the
filing of any document under the Exchange Act which is incorporated or deemed to
be incorporated by reference in the Offering Memorandum.
"outstanding", when used with respect to the Notes, means, as of the
-----------
date of determination, all Notes theretofore executed and delivered under this
Agreement, except:
------
(i) Notes theretofore cancelled by the Company or delivered to the
Company for cancellation;
(ii) Notes for whose payment or redemption money in the necessary
amount has been theretofore set aside by the Company with a third party in
trust for the Holders of such Notes; provided that if such Notes are to be
redeemed, notice of such redemption has been duly given as provided in this
Agreement; and
(iii) Notes which have been paid pursuant to Section 10.8 or in exchange
for or in lieu of which other Notes have been executed and delivered
pursuant to this Agreement, other than any such Notes in respect of which
there shall have been presented to the Company proof satisfactory to it
that such Notes are held by a bona fide purchaser in whose hands such Notes
are valid obligations of the Company;
provided, however, that in determining whether the Holders of the requisite
principal amount of the outstanding Notes have given any request, demand,
authorization, direction, notice, consent or waiver hereunder, Notes owned by
the Company or any other obligor upon the Notes or any Affiliate of the Company
or of such other obligor shall be disregarded and deemed not to be outstanding.
Notes so owned which have been pledged in good faith may be regarded as
outstanding if the pledgee establishes to the satisfaction of the Requisite
Holders the pledgee's right so to act with respect to such Notes and that the
pledgee is not the Company or any other obligor upon the Notes or any Affiliate
of the Company or of such other obligor.
"Payment Blockage Period" is defined in Section 13.3.
-----------------------
"Payment Default" is defined in Section 11.1(f).
---------------
"Pension Plan" is defined in Section 4.12(b).
------------
-19-
<PAGE>
"Permits" means all licenses, permits, certificates of need, approvals
-------
and authorizations from all Governmental Authorities required to lawfully
conduct a business as presently conducted.
"Permitted Investments" means (a) any Investment in the Company or in
---------------------
a Wholly Owned Subsidiary of the Company that is a Guarantor and that is engaged
in the same or a similar line of business as the Company and its Subsidiaries
were engaged in on the date of this Agreement; (b) any Investment in Cash
Equivalents, the Notes or the Senior Notes; (c) any Investment by the Company or
any Subsidiary of the Company in a Person, if as a result of such Investment (i)
such Person becomes a Wholly Owned Subsidiary of the Company and a Guarantor
that is engaged in the same or a similar line of business as the Company and its
Subsidiaries were engaged in on the date of this Agreement or (ii) such Person
is merged, consolidated or amalgamated with or into, or transfers or conveys
substantially all of its assets to, or is liquidated into, the Company or a
Wholly Owned Subsidiary of the Company and that is engaged in the same or a
similar line of business as the Company and its Subsidiaries were engaged in on
the date of this Agreement; (d) any Restricted Investment made as a result of
the receipt of non-cash consideration from an Asset Sale that was made pursuant
to and in compliance with the provisions of Section 8.05 hereof; (e) other
Investments in any Person (other than a Subsidiary of the Company) having an
aggregate fair market value (measured on the date each such Investment was made
and without giving effect to subsequent changes in value), when taken together
with all other Investments made pursuant to this clause (e) that are at the time
outstanding, not to exceed $3.0 million; (f) any loan by the Company to a Wholly
Owned Subsidiary of the Company that is not a Guarantor and any other Investment
in a Wholly Owned Subsidiary of the Company that is not a Guarantor to the
extent necessary to preserve the full deductibility of interest relating to
Indebtedness of such Subsidiary; and (g) Investments in Subsidiaries of the
Company formed or acquired after the Initial Closing Date which (i) are
incorporated outside the United States, (ii) are not Guarantors and (iii) if
they were Guarantors would give rise to an investment in United States property
within the meaning of Section 956 of the Code which Investments shall not exceed
in the aggregate more than $15 million outstanding at any time (treating any
such Investment that is not Indebtedness at the value thereof on the date it is
made).
"Permitted Liens" means (i) Liens securing Indebtedness under the
---------------
Credit Agreement that was permitted by the terms of this Agreement to be
incurred; (ii) Liens in favor of the Company; (iii) Liens on property of a
Person existing at the time such Person is merged into or consolidated with the
Company or any Subsidiary of the Company; provided, however, that such Liens
-20-
<PAGE>
were in existence prior to the contemplation of such merger or consolidation and
do not extend to any assets other than those of the Person merged into or
consolidated with the Company; (iv) Liens on property existing at the time of
acquisition thereof by the Company or any Subsidiary of the Company; provided,
however, that such Liens were in existence prior to the contemplation of such
acquisition; (v) Liens to secure the performance of statutory obligations,
surety or appeal bonds, performance bonds or other obligations of a like nature
incurred in the ordinary course of business; (vi) Liens securing Indebtedness
(including Capital Lease Obligations) permitted by clause (iv) of Section 8.4(b)
hereof covering only the assets acquired with such Indebtedness; (vii) Liens
existing on the date of this Agreement; (viii) Liens for taxes, assessments or
governmental charges or claims that are not yet delinquent or that are being
contested in good faith by appropriate proceedings promptly instituted and
diligently concluded; provided, however, that any reserve or other appropriate
provision as shall be required in conformity with GAAP shall have been made
therefor; (ix) Liens incurred in the ordinary course of business of the Company
or any Subsidiary of the Company with respect to obligations that do not exceed
$5.0 million at any one time outstanding and that (A) are not incurred in
connection with the borrowing of money or the obtaining of advances or credit
(other than trade credit in the ordinary course of business) and (B) do not in
the aggregate materially detract from the value of the property or materially
impair the use thereof in the operation of business by the Company or such
Subsidiary; and (x) Liens securing Permitted Refinancing Indebtedness; provided,
however, that the Company was permitted to incur Liens with respect to the
Indebtedness so refinanced.
"Permitted Refinancing Indebtedness" means any Indebtedness of the
----------------------------------
Company or any of its Subsidiaries issued in exchange for, or the net proceeds
of which are used to extend, refinance, renew, replace, defease or refund other
Indebtedness of the Company or any of its Subsidiaries; provided, however, that
(i) the principal amount (or accreted value, if applicable) of such Permitted
Refinancing Indebtedness does not exceed the principal amount plus accrued
interest (or accreted value, if applicable) of the Indebtedness so extended,
refinanced, renewed, replaced, defeased or refunded (plus the amount of
reasonable expenses incurred in connection therewith); (ii) such Permitted
Refinancing Indebtedness has a final maturity date later than the final maturity
date of, and has a Weighted Average Life to Maturity equal to or greater than
the Weighted Average Life to Maturity of, the Indebtedness being extended,
refinanced, renewed, replaced, defeased or refunded; (iii) if the Indebtedness
being extended, refinanced, renewed, replaced, defeased or refunded is
subordinated in right of payment to the Notes, such Permitted Refinancing
Indebtedness has a final maturity date later than the final maturity date of,
and is
-21-
<PAGE>
subordinated in right of payment to, the Notes on terms at least as favorable to
the Holders of Notes as those contained in the documentation governing the
Indebtedness being extended, refinanced, renewed, replaced, defeased or
refunded; (iv) such Indebtedness is incurred either by the Company or by the
Subsidiary which is the obligor on the Indebtedness being extended, refinanced,
renewed, replaced, defeased or refunded and (v) if the Indebtedness being
extended, refinanced, renewed, replaced, defeased or refunded was incurred in
reliance upon clause (vi) or (vii) of Section 8.4(b), such Indebtedness also
meets the requirements of such clause.
"Person" means any individual, corporation, partnership, joint
------
venture, association, joint-stock company, limited liability company, trust,
unincorporated organization or government or agency or political subdivision
thereof (including any subdivision or ongoing business of any such entity or
substantially all of the assets of any such entity, subdivision or business).
"Plan" is defined in Section 4.12(a).
----
"PORTAL Market" is defined in Section 9.14.
-------------
"Predecessor Note" of any particular Note means every previous Note
----------------
evidencing all or a portion of the same debt as that evidenced by such
particular Note.
"principal amount" means, when used with respect to any particular
----------------
Note, the principal amount of such Note at its Stated Maturity.
"Principals" means GEI or any person that is a general partner of GEI
----------
as of the date of this Agreement.
"Private Offering" is any offering by any of the Purchasers of some or
----------------
all of the Notes without registration under the Securities Act.
"Proceeding" is defined in Section 13.2.
----------
"property" means any interest in any kind of property or asset,
--------
whether real, personal or mixed, or tangible or intangible.
"Purchase Date" is defined in Section 7.8(a).
-------------
"Purchase Price" is defined in Section 2.2.
--------------
-22-
<PAGE>
"Purchasers" is defined in the preamble to this Agreement.
----------
"Purchaser Indemnified Person" is defined in Section 15.2(a).
----------------------------
"Qualified Institutional Buyer" means any Person that is a "qualified
-----------------------------
institutional buyer" within the meaning of Rule 144A.
"Recapitalization" is defined in the second recital to this Agreement.
----------------
"Redemption Date", when used with respect to any Note to be redeemed,
---------------
means the date fixed for such redemption by or pursuant to this Agreement.
"Redemption Price", when used with respect to any Note to be redeemed,
----------------
means the price at which it is to be redeemed pursuant to this Agreement.
"Registration Default" is defined in Exhibit A.
--------------------
"Regular Record Date" is defined in Exhibit A.
-------------------
"Regulation S" means Regulation S under the Securities Act (or any
------------
successor provision), as it may be amended from time to time.
"Regulation U" means Regulation U of the Board of Governors of the
------------
Federal Reserve System as from time to time in effect and any successor to all
or a portion thereof.
"Related Party" with respect to any Principal means (a) any Subsidiary
-------------
of such Principal or any general partner of such Principal or (b) any investment
fund or investment partnership managed by such Principal or any Affiliate of
such Principal.
"Replacement Notes" is defined in Section 9.17.
-----------------
"Request Date" is defined in Exhibit A.
------------
"Required Holders" means Holders holding more than 50% of the
----------------
aggregate principal amount of outstanding Notes and Exchange Notes (exclusive of
Notes then owned directly or indirectly by the Company, any other obligor on the
Notes or any Affiliate of the Company).
-23-
<PAGE>
"Resale Registration Statement" is defined in Exhibit A.
-----------------------------
"Restricted Investment" means an Investment other than a Permitted
---------------------
Investment.
"Restricted Payments" is defined in Section 8.2(a).
-------------------
"Rule 144" means Rule 144 under the Securities Act (or any successor
--------
provision), as it may be amended from time to time.
"Rule 144A" means Rule 144A under the Securities Act (or any successor
---------
provision), as it may be amended from time to time.
"sale" is defined in Section 10.7(a).
----
"Securities Act" means the Securities Act of 1933, as amended from
--------------
time to time.
"Security Register" has the meaning given to such term in Section
-----------------
10.6(a).
"Selling Purchaser" is defined in Section 9.2(b).
-----------------
"Senior Discount Note Shares " is defined in the fourth recital to
---------------------------
this Agreement.
"Senior Discount Notes" is defined in the fourth recital to this
---------------------
Agreement.
"Senior Indebtedness" means (i) the principal of (and premium, if any)
-------------------
and interest (including interest accruing on or after the filing of any petition
in bankruptcy or for reorganization relating to the Company whether or not such
claim for post-petition interest is allowed in such proceeding) on, and
penalties and any obligation of the Company for reimbursement (including
attorneys' fees incurred in connection with any such proceeding, whether or not
allowed in such proceeding), indemnities and fees relating to, and all other
amounts owing under, the Credit Agreement, (ii) the principal of (and premium,
if any) and interest on Indebtedness of the Company for money borrowed, whether
incurred on or prior to the date of original issuance of the Notes or
thereafter, and any amendments, renewals, extensions, modifications,
refinancings and refundings of any such Indebtedness and (iii) Hedging
Obligations entered into with respect to Indebtedness described in clauses (i)
and (ii) above; provided, however, that
-24-
<PAGE>
the following shall not constitute Senior Indebtedness: (1) any Indebtedness
evidenced by the Senior Notes, (2) any Indebtedness as to which the terms of the
instrument creating or evidencing the same provide that such Indebtedness is not
superior in right of payment to the Notes, (3) any Indebtedness as to which the
terms of the instrument creating or evidencing the same provide that such
Indebtedness is subordinated in right of payment in any respect to any other
Indebtedness of the Company, (4) Indebtedness evidenced by the Notes or the
Subsidiary Guarantees, (5) any Indebtedness owed to a Person when such Person is
a Subsidiary of the Company, (6) any obligation of the Company arising from
Disqualified Stock of the Company, (7) any portion of any Indebtedness which is
incurred in violation of this Agreement and (8) Indebtedness which, when
incurred and without respect to any election under Section 1111(b) of Title 11,
United States Code, is without recourse to the Company.
"Senior Nonmonetary Default" is defined in Section 13.3.
--------------------------
"Senior Note Indenture" is defined in the sixth recital to this
---------------------
Agreement.
"Senior Notes" is defined in the sixth recital to this Agreement.
------------
"Senior Payment Default" is defined in Section 13.3.
----------------------
"Shares" is defined in the fourth recital to this Agreement.
------
"Shelf Registration Statement" is defined in the Exchange and
----------------------------
Registration Rights Agreement.
"Significant Subsidiary" means any Subsidiary that would be a
----------------------
"significant subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X,
promulgated pursuant to the Securities Act, as such Regulation is in effect on
the date hereof.
"Solvent" means, with respect to any Person as of the date of any
-------
determination, that on such date (a) such Person is able to pay its debts and
other liabilities, contingent obligations and other commitments as they mature
in the normal course of business, (b) such Person does not intend to, and does
not believe that it will, incur debts or liabilities beyond such Person's
ability to pay as such debts and liabilities mature, and (c) such Person is not
engaged in a business or a transaction, and is not about to engage in a business
or a transaction, for which such Person's property would constitute unreasonably
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<PAGE>
small capital after giving due consideration to current and anticipated future
capital requirements and current and anticipated future business conduct and the
prevailing practice in the industry in which such Person is engaged. In
computing the amount of contingent liabilities at any time, such liabilities
shall be computed as the amount which, in light of the facts and circumstances
existing at such time, represents the amount that can reasonably be expected to
become an actual or matured liability.
"Special Interest" is defined in Exhibit A.
----------------
"Stated Maturity", when used with respect to any Note or any
---------------
installment of interest thereon, means the date specified in this Agreement or
such Note as the fixed date on which the principal of such Note or such
installment of interest is due and payable.
"Stockholders Agreement" means the Amended and Restated Stockholders
----------------------
Agreement, dated the date hereof, among Holdings, the Purchasers and the other
stockholders of Holdings named therein.
"Stone Street" is defined in the preamble to this Agreement.
------------
"Subscription Agreement" is defined in the fourth recital to this
----------------------
Agreement.
"Subsequent Purchaser" is defined in Section 4.13(a).
--------------------
"Subsidiary" means, with respect to any Person, (i) any corporation,
----------
association or other business entity of which more than 50% of the total voting
power of shares of Capital Stock entitled (without regard to the occurrence of
any contingency) to vote in the election of directors, managers or trustees
thereof is at the time owned or controlled, directly or indirectly, by such
Person or one or more of the other Subsidiaries of that Person (or a combination
thereof) and (ii) any partnership (A) the sole general partner or the managing
general partner of which is such Person or a Subsidiary of such Person or (B)
the only general partners of which are such Person or of one or more
Subsidiaries of such Person (or any combination thereof).
"Subsidiary Guarantees" means the Guarantees by the Guarantors of the
---------------------
Obligations.
"Successor Company" is defined in Section 8.11.
-----------------
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<PAGE>
"Tax Returns" means all reports and returns required to be filed on or
-----------
before the Closing Date with respect to the Taxes of the Company and the Tax
Subsidiaries including, without limitation, consolidated federal income tax
returns of the Company and the Tax Subsidiaries.
"Tax Subsidiaries" means any Subsidiary of the Company of which the
----------------
Company owns, directly or indirectly, 80% or more of the equity interests
therein for U.S. federal income tax purposes.
"Taxes" means all federal, state, local or foreign income, gross
-----
receipts, windfall profits, severance, property, production, sales, use,
license, excise, franchise, employment, withholding or similar taxes imposed on
the income, properties or operations of the Company and the Tax Subsidiaries,
together with any interest, additions or penalties with respect thereto and any
interest in respect of such additions or penalties.
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C. ss.ss. 77aaa-
---
77bbbb) as in effect on the date on which the Indenture is qualified under the
TIA.
"Transaction Documents" means, collectively, the Financing Documents,
---------------------
the Credit Documents and the Acquisition Documents.
"Transactions" means the Transactions provided for in, or contemplated
------------
by, the Transaction Documents.
"United States" shall have the meaning assigned to such term in
-------------
Regulation S.
"Weighted Average Life to Maturity" means, when applied to any
---------------------------------
Indebtedness at any date, the number of years obtained by dividing (i) the sum
of the products obtained by multiplying (A) the amount of each then remaining
installment, sinking fund, serial maturity or other required payments of
principal, including payment at final maturity, in respect thereof, by (B) the
number of years (calculated to the nearest one-twelfth) that will elapse between
such date and the making of such payment, by (ii) the then outstanding principal
amount of such Indebtedness.
"Wholly Owned Subsidiary" of any Person means a Subsidiary of such
-----------------------
Person all of the outstanding Capital Stock or other ownership interests of
which (other than directors' qualifying shares) shall at the time be owned by
such
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<PAGE>
Person or by one or more Wholly Owned Subsidiaries of such Person and one or
more Wholly Owned Subsidiaries of such Person.
1.2. Computation of Time Periods. For purposes of computation of
---------------------------
periods of time hereunder, the word "from" means "from and including" and the
words "to" and "until" each mean "to but excluding."
1.3. Accounting Terms. Accounting terms used but not otherwise
----------------
defined herein shall have the meanings provided, and be construed in accordance
with, GAAP.
SECTION 2
AUTHORIZATION AND ISSUANCE OF NOTES
-----------------------------------
2.1. Authorization of Issue. On or prior to the execution and
----------------------
delivery of this Agreement, the Company will authorize the issue and sale of up
to $20 million aggregate principal amount of the Notes. The Notes shall be in
the form specified in this Agreement.
2.2. Grant of Option; Exercise. Subject to the terms and conditions
-------------------------
set forth in this Agreement, in consideration for the payment by the Company to
the Purchasers of an aggregate commitment fee of $200,000 (the "Commitment Fee")
--------------
concurrently with the execution and delivery of this Agreement (such fee to be
allocated among the Purchasers in accordance with the percentages set forth
opposite their respective names in Schedule A hereto) each of the Purchasers
----------
hereby grants to the Company an option (collectively, the "Option") to sell up
------
to an aggregate of $20 million aggregate principal amount of the Notes to the
Purchasers in one or more exercises at any time or from time to time prior to
nine months on or after the Initial Closing Date for cash at a purchase price
(the "Purchase Price") equal to 98% of the principal amount of the Notes to be
--------------
sold; provided, however, that in no event may the Option be exercised for an
aggregate principal amount of Notes of less than $5 million. In order to
exercise the Option in whole or in part the Company must deliver a written
exercise notice (each, an "Exercise Notice") to the Purchasers stating the
---------------
aggregate principal amount of the Notes with respect to which the Option is
exercised and the closing date (each, a "Closing Date") for the purchase and
------------
sale pursuant to such exercise; provided, that an Exercise Notice must be
delivered to the Purchasers at least twenty Business Days prior to the Closing
Date specified in such Exercise Notice. If the Company shall have validly
delivered an Exercise Notice, then subject to the terms and conditions provided
herein the Company shall sell
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<PAGE>
to each Purchaser, and each Purchaser shall purchase from the Company, on the
Closing Date specified in such Exercise Notice the percentage of the aggregate
principal amount of Notes specified in the Exercise Notice that is set forth
opposite such Purchaser's name in Schedule A hereto for cash at the Purchase
----------
Price provided above.
2.3. Closings.
--------
(a) Each purchase and sale of Notes pursuant to an exercise of the
Option shall occur at the offices of Sullivan & Cromwell, 125 Broad Street, New
York, New York 10004, at 10:00 a.m., New York City time, at a closing (each, a
"Closing") on the Closing Date specified in the applicable Exercise Notice. At
- --------
each Closing, the Company will deliver to each Purchaser certificates for the
Notes to be purchased by such Purchaser on such Closing Date, in such
denominations (in any integral multiple of $1,000 principal amount) as such
Purchaser may request, dated the Closing Date and registered in such Purchaser's
name, against payment by such Purchaser to the Company or to its order of
immediately available funds in the amount of the Purchase Price therefor (as
provided in Section 2.2) by wire transfer of immediately available funds to such
bank account or accounts as the Company may request in writing at least two
Business Days prior to the Closing Date.
(b) If at any Closing the Company shall fail to deliver to the
Purchasers the certificates evidencing all the Notes to be purchased by such
Purchaser at such Closing, as provided in Section 2.3(a), or any of the
conditions specified in Section 3 shall not have been fulfilled with respect to
such Closing to the Purchasers' satisfaction, then each Purchaser shall, at its
election, be relieved of all further obligations under this Agreement and the
Option with respect to such Notes, without thereby waiving any rights such
Purchaser may have by reason of such failure or such nonfulfillment.
SECTION 3
CONDITIONS TO CLOSINGS
----------------------
Each Purchaser's obligation to purchase and pay for the Notes to be
purchased by it at any Closing is subject to the satisfaction or waiver by it
prior to or at such Closing of each of the conditions specified below in this
Section 3:
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<PAGE>
3.1. Representations and Warranties. Each of the representations
------------------------------
and warranties of the Company in this Agreement and in each of the other
Transaction Documents shall be true and correct (in the case of such other
Transaction Documents only, in all material respects) when made and (except in
the case of the Merger Agreement) on or as of the Closing Date as if made on and
as of the Closing Date (unless stated to relate to a specific earlier date, in
which case such representations and warranties shall be true and correct as of
such earlier date and, in any such case, there shall not have occurred since
such date and prior to the time of such Closing any developments with respect to
the subject matter of any such representation and warranty which the Purchasers
reasonably consider to be Material and adverse).
3.2. Performance; No Default under Other Agreements. The Company
----------------------------------------------
and its Subsidiaries, to the extent parties hereto or thereto, shall have
performed and complied in all material respects with all agreements and
conditions contained in this Agreement and each of the other Financing Documents
and Credit Documents required to be performed or complied with by it prior to or
at such Closing, and after giving effect to the issue and sale of the Notes and
the other Transactions (and the application of the proceeds thereof as
contemplated by Section 4.17 hereof and the other Transaction Documents) no
Default or Event of Default shall have occurred and be continuing and no default
or event of default shall have occurred and be continuing under any of the other
Financing Documents or under the Credit Documents.
3.3. Compliance Certificates.
-----------------------
(a) Officer's Certificate. The Company shall have delivered to
---------------------
such Purchaser an Officer's Certificate, dated the Closing Date, in the form of
Exhibit 3.03(a) hereto, certifying that the conditions specified in Sections
- ---------------
3.1, 3.2, 3.5, 3.6, 3.7, 3.9, 3.12, 3.13 and 3.14 have been fulfilled.
(b) Secretary's Certificate. The Company shall have delivered to
-----------------------
such Purchaser a certificate in the form of Exhibit 3.03(b) hereto certifying as
---------------
to the Company's certificate of incorporation, bylaws and resolutions attached
hereto, the incumbency and signatures of certain officers of the Company, and
other corporate proceedings of the Company relating to the authorization,
execution and delivery of the Notes, this Agreement and the other Transaction
Documents to which the Company is a party.
-30-
<PAGE>
3.4. Opinions of Counsel. Such Purchaser shall have received
-------------------
opinions in form and substance satisfactory to it, dated the date of such
Closing, from Irell & Manella LLP, counsel for the Company, substantially in the
form set forth in Exhibit 3.04 and as to such other matters as such Purchaser
------------
may reasonably request.
3.5. Changes in Corporate Structure. Except for the consummation of
------------------------------
the Merger on the Initial Closing Date and the Merger Agreement, neither the
Company nor any of its Subsidiaries shall have changed their respective
jurisdiction of incorporation or been a party to any merger or consolidation or
succeeded to all or any substantial part of the liabilities of any other Person
at any time following the Audit Date and there shall have occurred no event
which constitutes a Change of Control of the Company and the Company shall not
have entered into any agreement or understanding which, if consummated, would
constitute a Change of Control of the Company.
3.6. Refinancing. Except for the Existing Indebtedness, on the
-----------
Initial Closing Date, all Indebtedness of the Company and each of its
Subsidiaries shall have been repaid in full and such Purchaser shall have
received evidence of such repayment satisfactory to the Purchaser and such
Purchaser's special counsel.
3.7. Merger; Credit Agreement; Buyer Cash Contribution; Minimum
----------------------------------------------------------
Aggregate Proceeds.
- ------------------
(a) Merger. Prior to or simultaneously with the Closing of the
------
sale and purchase of the Notes, (i) in the case of any Closing on the Initial
Closing Date, all of the conditions to the Merger set forth in the Merger
Agreement shall have been satisfied or waived on terms and conditions
satisfactory to such Purchaser or (ii) in the case of any other Closing, the
Merger shall have been consummated on the terms provided in the Merger Agreement
on the date hereof, and in each case the Purchaser shall have received evidence
satisfactory to the Purchaser and such Purchaser's special counsel of the
foregoing.
(b) Credit Documents. The Credit Documents (i) shall be on the
----------------
Initial Closing Date in the form satisfactory to the Purchaser and such
Purchaser's special counsel, (ii) shall have been duly authorized, executed and
delivered by the parties thereto, (iii) shall constitute a valid, binding and
enforceable obligation of the parties thereto and shall be in full force and
effect and (iv) no default on the part of any party thereto shall exist
thereunder.
-31-
<PAGE>
(c) Buyer Cash Contribution. Buyer shall have received the Buyer
-----------------------
Cash Contribution on terms and conditions satisfactory to the Purchaser and such
Purchaser's special counsel.
(d) Minimum Aggregate Proceeds. Prior to or simultaneously with
--------------------------
the consummation of the Merger, Holdings and the Company shall have received not
less than an aggregate amount of $16,313,059.46 in cash proceeds from the
purchase of Class A Common Stock under the Subscription Agreement and revolving
loans made under the Credit Agreement and on or prior to the time of such
Closing the Purchasers shall have purchased the Senior Discount Notes and the
Senior Discount Note Shares.
3.8. Commitment Fee. Such Purchaser shall have received from the
--------------
Company the portion of the Commitment Fee allocable to it pursuant to Section
2.2.
3.9. Material Adverse Effect. No event or events shall have
-----------------------
occurred since the Initial Closing Date which, individually or in the aggregate,
have had or would reasonably be expected to have a Material Adverse Effect.
3.10. Financial Information. Such Purchaser shall have received a
---------------------
pro forma consolidated balance sheet for the Company and its Subsidiaries as of
such Closing Date after giving effect to the Transactions, including the
issuance of the Notes and the use of the proceeds thereof, which have been
certified by the chief financial officer of the Company and which are in form
and substance satisfactory to such Purchaser.
3.11. Proceedings and Documents. All corporate and other proceedings
-------------------------
in connection with the transactions contemplated by this Agreement and the other
Transaction Documents, and all documents and instruments incident to such
transactions and the terms thereof, shall be reasonably satisfactory to such
Purchaser and such Purchaser's special counsel, and such Purchaser and the
Purchaser's special counsel shall have received all such counterpart originals
or certified or other copies of such documents as it or they may reasonably
request.
3.12. Purchaser Permitted By Applicable Law, etc. On such Closing
-------------------------------------------
Date, such Purchaser's purchase of the Notes shall (a) be permitted by the laws
and regulations of each jurisdiction to which it is subject, (b) not violate any
Applicable Law (including, without limitation, Regulation U, T or X of the Board
of Governors of the Federal Reserve System) and (c) not subject such
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<PAGE>
Purchaser to any tax, penalty or liability under or pursuant to any Applicable
Law, which Applicable Law was not in effect on the date hereof.
3.13. Transaction Documents in Force and Effect; Information.
------------------------------------------------------
(a) Transaction Documents. The Purchasers shall have received true
---------------------
and correct copies of all Transaction Documents and such documents (i) shall
have been duly executed and delivered by the parties thereto, (ii) shall be in
form and substance reasonably satisfactory to the Purchasers and (iii) shall be
valid and binding obligation of the parties thereto enforceable against each of
them in accordance with its respective terms, subject to the Enforceability
Exceptions.
(b) Accuracy of Information. All information furnished by the
-----------------------
Company and its representatives to the Purchasers on or prior to the time of
such Closing with respect to the business and financial condition of the Company
and its Subsidiaries shall be accurate and complete in all material respects.
3.14. No Violation; No Legal Constraints; Consents, Authorizations
---------------------------------------------------------------
and Filings, etc.
- ----------------
(a) The consummation by the Company and its Subsidiaries of the
Transactions shall not contravene, violate or conflict with any Applicable Law,
except for violations which, individually or in the aggregate, do not, and could
not reasonably be expected to, have a Material Adverse Effect.
(b) All consents, authorizations and filings, if any, required in
connection with the execution, delivery and performance by each of the Company
and its Subsidiaries of the Transaction Documents to which it is a party shall
have been obtained or made and shall be in full force and effect, except for
such consents, authorizations and filings the failure of which to obtain or
make, individually or in the aggregate, do not, and would not reasonably be
expected to, have a Material Adverse Effect.
(c) There shall be no inquiry, injunction, restraining order,
action, suit or proceeding pending or entered or any statute or rule proposed,
enacted or promulgated by any Governmental Authority or any other Person which,
in the opinion of the Purchasers, (i) individually or in the aggregate, has had
or would reasonably be expected to have a Material Adverse Effect or which seeks
to enjoin or seek damages against the Company or its Subsidiaries or any of the
Purchasers as a result of the Transactions, including the Merger or the issuance
of the Notes, Senior Discount Notes, Senior Discount Note Shares or
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<PAGE>
Shares or (ii) relates to any of the Transactions and has or will have a
material adverse effect on any Purchaser or (iii) alleges liability on the part
of any Purchaser in connection with this Agreement, any other Transaction
Documents or the transactions contemplated hereby or thereby or (iv) would bar
the issuance of the Notes, Senior Discount Notes, Senior Discount Note Shares or
Shares or the use of the proceeds thereof in accordance with the terms of this
Agreement and the other Transaction Documents.
SECTION 4
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
---------------------------------------------
The Company represents and warrants to the Purchasers as of the date
hereof and on each Closing Date (in each case both before and after giving pro
forma effect to the issuance of the Notes to be issued on such Closing Date and,
if such Closing Date is the Initial Closing Date, to the consummation on such
Closing Date of the Merger, the transactions contemplated by this Agreement and
the other Transaction Documents, the issuance of the Senior Discount Notes and
the Shares, and in each case the application of the proceeds thereof) that:
4.1. Due Incorporation; Power and Authority. Each of the Company and
--------------------------------------
each of its Subsidiaries (a) is a corporation duly incorporated, validly
existing and in good standing under the laws of its jurisdiction of
incorporation, (b) is duly qualified as a foreign corporation to transact
business and is in good standing in each jurisdiction in which such
qualification is required, other than any failures to so qualify or to be in
good standing which, individually or in the aggregate, have not had and would
not be reasonably expected to have a Material Adverse Effect, (c) has full
corporate power and authority to own, lease and operate its properties and to
conduct its businesses as they are currently conducted, and (d) has full
corporate power and authority to enter into and perform its obligations under
each of the Transaction Documents to which it is a party.
4.2 Capitalization. As of the date of this Agreement the
--------------
authorized Capital Stock of the Company consists solely of 20,000 shares of
Common Stock, of which 100 shares were issued and outstanding. All the shares of
Common Stock were held by Holdings and no shares of any class of the Capital
Stock of the Company were held by the Company in its treasury or by the
Company's Subsidiaries. The Company (i) has not issued any shares of any class
of its Capital Stock and (ii) has not split, combined or reclassified any of its
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<PAGE>
shares of any class of its Capital Stock. All the issued and outstanding shares
of Common Stock have been duly authorized and are validly issued, fully paid and
nonassessable and are free of preemptive rights. There are no securities of the
Company or any of its Subsidiaries that are convertible into or exchangeable for
shares of any Capital Stock of the Company or any of its Subsidiaries, and no
options, warrants, calls, subscriptions, convertible securities, or other
rights, agreements or commitments which obligate the Company or any of its
Subsidiaries to issue, transfer or sell any shares of Capital Stock of, or other
interests in, the Company or any of its Subsidiaries. There are no outstanding
obligations of the Company or any of its Subsidiaries to repurchase, redeem or
otherwise acquire any shares of Capital Stock of the Company or any of its
Subsidiaries and neither the Company nor any of its Subsidiaries has any awards
or options outstanding under any stock option plans or agreements or any other
outstanding stock-related awards. After the Closing Date, neither the Company
nor any of its Subsidiaries will have any obligation to issue, transfer or sell
any shares of Capital Stock of the Company or its Subsidiaries. There are no
voting trusts or other agreements or understandings to which the Company or any
of its Subsidiaries is a party with respect to the holding, voting or disposing
of Capital Stock of the Company or any of its Subsidiaries. As of the date
hereof, neither the Company nor any of its Subsidiaries has any outstanding
bonds, debentures, notes or other obligations or other securities (other than
the Common Stock) that entitle the holders thereof to vote with the stockholders
of the Company or any of its Subsidiaries on any matter or which are convertible
into or exercisable for securities having such a right to vote.
4.3. Subsidiaries. Schedule 4.03 correctly states as of the Initial
------------ -------------
Closing Date (a) the name of each of the Company's Subsidiaries and any other
Person whose Equity Interests are owned, directly or indirectly, by the Company
(each, an "Equity Investee"), (b) the name of each holder of each class of
---------------
outstanding Capital Stock or other securities of the Company or any of its
Subsidiaries or any Equity Investee and the nature and number of such securities
held by such holder, and (c) the number of authorized, issued and treasury
shares of each Subsidiary of the Company and each Equity Investee. The Company
does not own or control, directly or indirectly, any Capital Stock or other
interest or investment (whether equity or debt) in any Person other than the
Capital Stock of its Subsidiaries and Equity Investees listed on Schedule 4.03.
-------------
Each issued and outstanding share of Capital Stock of each Subsidiary and Equity
Investee of the Company (a) has been duly authorized and validly issued and is
fully paid and nonassessable and free of preemptive rights and (b) except for
any Equity Interests of any Equity Investee not owned directly of indirectly by
the Company as shown on Schedule 4.03, is owned by the Company, directly or
-------------
through Subsidiaries, free and clear of any security interest, mortgage, pledge,
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<PAGE>
lien, encumbrance or claim, other than the liens established under the Credit
Documents.
4.4. Due Authorization, Execution and Delivery.
-----------------------------------------
(a) Agreement. This Agreement has been duly authorized, executed
---------
and delivered by the Company and constitutes a valid and legally binding
obligation of the Company, enforceable against it in accordance with its terms,
subject to the Enforceability Exceptions.
(b) Notes and the Exchange Notes. The Notes to be purchased by the
----------------------------
Purchasers from the Company are in the form contemplated by this Agreement, have
been duly authorized for issuance and sale pursuant to this Agreement and, when
issued and delivered by the Company on the Closing Date as provided herein, will
have been duly executed, issued and delivered by the Company, and will
constitute valid and legally binding obligations of the Company, enforceable
against it in accordance with their terms, subject to the Enforceability
Exceptions. If and when the Exchange Notes are issued pursuant to the Exchange
and Registration Rights Agreement and this Agreement in accordance with the
terms thereof and hereof, the Exchange Notes will have been duly and validly
authorized for issuance by the Company, will have been duly executed, issued and
delivered by the Company, and will constitute valid and legally binding
obligations of the Company, enforceable against it in accordance with their
terms, subject to the Enforceability Exceptions.
(c) Exchange and Registration Rights Agreement. The Exchange and
------------------------------------------
Registration Rights Agreement has been duly authorized, executed and delivered
by the Company and constitutes a valid and binding obligation of the Company,
enforceable against it in accordance with its terms, subject to the
Enforceability Exceptions.
(d) Other Transaction Documents. Each Transaction Document (other
---------------------------
than those referred to in paragraphs (a) through (c) of this Section 4.04) to
which Holdings, the Company or any of its Subsidiaries is a party (each such
party, a "Company Party") (i) has been duly authorized, executed and delivered
-------------
by each Company Party and (ii) constitutes a valid and legally binding
obligation of each Company Party, enforceable against such Company Party in
accordance with its terms, subject to the Enforceability Exceptions.
4.5. Non-Contravention; Authorizations and Approvals. Neither the
-----------------------------------------------
Company nor any of its Subsidiaries is in violation of its certificate of
incorporation or bylaws (or comparable constituent or governing documents) or
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<PAGE>
is in default (or, with the giving of notice, lapse of time or both, would be in
default) under any note, bond, mortgage, indenture, deed of trust, loan or
credit agreement, license, franchise, Permit, lease, contract or other
agreement, instrument, commitment or obligation to which the Company or any of
its Subsidiaries is a party or by which the Company or any of its Subsidiaries
or any of their respective properties or assets is bound (including, without
limitation, the Credit Agreement), or under which the Company or any of its
Subsidiaries or any of their respective properties or assets is entitled to a
benefit (each, a "Contract"), except for any such defaults that, individually or
--------
in the aggregate, have not had and would not reasonably be expected to have a
Material Adverse Effect. None of (a) the execution and delivery by the Company
or any of its Subsidiaries of any of the Transaction Documents to which they are
a party, (b) the performance by any of them of their respective obligations
thereunder, (c) the consummation of the transactions contemplated thereby or (d)
the issuance and delivery of the Notes hereunder will: (i) violate, conflict
with or result in a breach of any provisions of the certificate of incorporation
or bylaws (or comparable constituent or governing documents) of the Company or
any of its Subsidiaries; (ii) violate, conflict with, result in a breach of any
provision of, constitute a default (or an event which, with notice, lapse of
time or both, would constitute a default) under, result in the termination or in
a right of termination of, accelerate the performance required by or benefit
obtainable under, result in the triggering of any payment or other obligations
(including any repurchase or repayment obligations) pursuant to, result in the
creation of any Lien upon any of the properties of the Company or any of its
Subsidiaries under, or result in there being declared void, voidable, subject to
withdrawal, or without further binding effect, any of the terms, conditions or
provisions of any Contract, except for any such violations, conflicts, breaches,
defaults, accelerations, terminations or other matters which, individually or in
the aggregate, have not had and would not reasonably be expected to have a
Material Adverse Effect; (iii) require any consent, approval or authorization
of, or declaration, filing or registration with, any Governmental Authority,
except for those consents, approvals, authorizations, declarations, filings or
registrations which have been obtained or made or the failure of which to obtain
or make, individually or in the aggregate, have not had and would not be
reasonably expected to have a Material Adverse Effect; or (iv) violate any
Applicable Laws applicable to the Company, any of its Subsidiaries or any of
their respective property or assets, except for violations which, individually
or in the aggregate, have not had and would not reasonably be expected to have a
Material Adverse Effect.
-37-
<PAGE>
4.6. Company Financial Statements; Company Reports.
---------------------------------------------
(a) Company Financial Statements. The Company has delivered to the
----------------------------
Purchasers (collectively, the "Company Financial Statements") (i) complete and
----------------------------
correct copies of the consolidated balance sheets of the Company and its
Subsidiaries as of June 30, 1996, 1997 and 1998 and the related consolidated
statements of operations, stockholders' equity and cash flows for the years then
ended, including the footnotes thereto, certified by the Company's independent
certified public accountants, (ii) complete and correct copies of the unaudited
consolidated balance sheets of the Company and its Subsidiaries as of September
30, 1998 and the related unaudited consolidated statements of operations,
stockholders' equity and cash flows for the quarter then ended and (iii) a
complete and correct copy of the consolidated balance sheet of the Company and
its Subsidiaries as of November 30, 1998 and the related unaudited consolidated
statement of operations for the month then ended. Each of the consolidated
balance sheets contained in the Company Financial Statements fairly present the
consolidated financial position of the Company and its Subsidiaries as of its
date and each of the consolidated statements of operations, stockholders' equity
and cash flows included in the Company Financial Statements fairly presents the
consolidated results of operations and income, retained earnings and
stockholders' equity or cash flows, as the case may be, of the Company and its
Subsidiaries for the periods to which they relate (subject, in the case of any
unaudited interim financial statements, to normal year-end adjustments that will
not be material in amount or effect), in each case in accordance with GAAP
applied on a consistent basis during the periods involved, except as noted
therein. All projections provided by the Company to the Purchasers in
connection with the Transactions have been prepared in good faith based on
assumptions believed by management of the Company to be reasonable.
(b) Company Reports. The Company has delivered to the Purchaser
---------------
each registration statement, report or information statement prepared by the
Company since June 30, 1998 (the "Audit Date"), including (i) the Company's
----------
Annual Report on Form 10-K for the year ended June 30, 1998 and (ii) the
Company's Quarterly Report on Form 10-Q for the three months period ended
September 30, 1998, each in the form (including exhibits, annexes and any
amendments thereto) filed with the Commission (collectively, including any such
reports filed subsequent to the date hereof and as amended, the "Company
-------
Reports"). As of their respective dates, (or, if amended, as of the date of
- -------
such amendment) the Company Reports did not, and any Company Reports filed with
the Commission subsequent to the date hereof will not, contain any untrue
statement of a material fact or omit to state a material fact required to be
stated
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<PAGE>
therein or necessary to make the statements made therein, in light of the
circumstances in which they were made, not misleading. Each of the consolidated
balance sheets included in or incorporated by reference into the Company Reports
(including the related notes and schedules) fairly presents, or will fairly
present, the consolidated financial position of the Company and its subsidiaries
as of its date and each of the consolidated statements of operations,
stockholders' equity or cash flows included in or incorporated by reference into
the Company Reports (including any related notes and schedules) fairly presents,
or will fairly present, the results of operations and income, retained earnings
and stockholders' equity or cash flows, as the case may be, of the Company and
its Subsidiaries for the periods to which they relate (subject, in the case of
unaudited statements, to normal year-end audit adjustments that will not be
material in amount or effect), in each case in accordance with GAAP con
sistently applied during the periods involved, except as may be noted therein.
4.7. Absence of Undisclosed Liabilities or Events.
--------------------------------------------
(a) Except for the amounts disclosed to, and approved in writing
by, the GSMP Purchasers pursuant to Section 4.25 hereof and the liabilities and
obligations arising under the Financing Document or the Credit Documents,
neither the Company nor any of its Subsidiaries has any liabilities or
obligations, whether accrued, contingent or otherwise, except (i) for
liabilities and obligations in the respective amounts reflected or reserved
against in the consolidated balance sheet as of the Audit Date included in the
Company Financial Statements, (ii) borrowings under the Company's existing
revolving credit facility in the ordinary course of business or (iii)
liabilities and obligations incurred in the ordinary course of business since
the Audit Date which, individually or in the aggregate, have not had and would
not reasonably be expected to have a Material Adverse Effect.
(b) Since the Audit Date there has been no change in the financial
condition, results of operations, business, properties or prospects of the
Company or its Subsidiaries except for changes that, individually or in the
aggregate, have not had or would not reasonably be expected to have a Material
Adverse Effect. There are no facts known to the Company that have had or would
reasonably be expected to have a Material Adverse Effect that has not been set
forth herein or in the Disclosure Schedule.
4.8. No Actions or Proceedings. Except as set forth in Schedule
-------------------------
4.8, there are no legal or governmental actions, suits or proceedings pending
or, to the best of the Company's knowledge, threatened against or affecting the
Company, any of its Subsidiaries, any of their directors or officers (in their
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<PAGE>
capacities as such) or any of their property or assets which, individually or in
the aggregate, has had or would reasonably be expected to have a Material
Adverse Effect or to prohibit, delay or materially restrict the consummation of
any of the transactions contemplated by the Transaction Documents. To the
knowledge of the Company, no Governmental Authority has notified the Company of
an intention to conduct any audit, investigation or other review with respect to
the Company or any of its Subsidiaries, except for those investigations or
reviews which, individually or in the aggregate, have not had or would not be
reasonably expected to have a Material Adverse Effect.
4.9. Title to Properties. Except as set forth in Schedule 4.9, each
------------------- ------------
of the Company and its Subsidiaries has (a) good and marketable title to and fee
simple ownership of, or a valid and subsisting leasehold interest in, all of its
real property, and (b) good title to, or a valid and subsisting leasehold
interest in, all of its equipment and other personal property, in each case free
and clear of all Liens, except Permitted Liens. The Company and its
Subsidiaries have paid or discharged, or reserved for, all lawful claims which,
if unpaid, might become a Lien (other than a Permitted Lien) against any
property or assets of the Company or its Subsidiaries.
4.10. Intellectual Property Rights. The Company and its Subsidiaries
----------------------------
own or possess all Intellectual Property reasonably necessary to conduct their
businesses as now conducted, except where the expiration or loss of any of such
Intellectual Property, individually or in the aggregate, would not reasonably be
expected to have a Material Adverse Effect. To the best knowledge of the
Company and its Subsidiaries, (a) there is no infringement of, or conflict with,
such Intellectual Property by any third party and (b) the conduct of their
businesses as currently conducted do not infringe or conflict with any
Intellectual Property of any third party, in each case other than any such
infringements or conflicts which, individually or in the aggregate, have not had
or would not reasonably be expected to have a Material Adverse Effect.
4.11. Taxes.
-----
(a) all Tax Returns that are required to be filed on or before the
Closing Date by or with respect to the Company or the Tax Subsidiaries, have
been or will be timely filed on or before the Closing Date, and all such Tax
Returns are or will be true and complete in all material respects;
(b) all Taxes shown to be due on the Tax Returns referred to in
clause (a) have been or will be timely paid in full;
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<PAGE>
(c) adequate provision has been made for the payment of Taxes for
which the Company or Tax Subsidiaries may be liable for the periods ending after
the Closing Date that are not yet due and payable;
(d) the Tax Returns referred to in clause (a) have been examined by
the Internal Revenue Service or the appropriate state, local or foreign taxing
authority or the period for assessment of the Taxes in respect of which such Tax
Returns were required to be filed has expired;
(e) all deficiencies asserted or assessments made as a result of
such examinations have been paid in full;
(f) no issues that have been raised by the relevant taxing
authority in connection with the examination of any of the Tax Returns referred
to in clause (a) are currently pending;
(g) no waivers of statutes of limitation have been given by or
requested with respect to any Taxes of the Company or the Tax Subsidiaries;
(h) neither the Company nor the Tax Subsidiaries will be required,
as a result of (i) a change in accounting method to include any adjustment under
Section 481(c) of the Code (or any similar provision of state, local or foreign
law) in taxable income for any Tax period ending on or after the Closing Date,
or (ii) any "closing agreement" as described in Section 7121 of the Code (or any
similar provision of state, local or foreign Tax law), to include any item of
income in or exclude any item of deduction from any Tax period ending on or
after the Closing Date;
(i) there are no Liens on any of the assets of the Company or the
Tax Subsidiaries that arose in connection with any failure (or alleged failure)
to pay any Tax;
(j) the Company and the Tax Subsidiaries have never been a member of
an affiliated, combined, consolidated or unitary Tax group for purposes of
filing any Tax Return other than for purposes of filing U.S. federal income tax
returns, a group of which Holdings was the common parent;
(k) no closing agreements, private letter rulings, technical advance
memoranda or similar agreement or rulings have been entered into or issued by
any taxing authority with respect to the Company or the Tax Subsidiaries;
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<PAGE>
(l) neither the Company nor any Tax Subsidiary or any predecessors
to any of such entities has made any consent under Section 341 of the Code with
respect to the Company or any Tax Subsidiary; and
(m) all interest on debt issued by the Company pursuant to this
Agreement (including original issue discount if any) will be deductible in full,
as such interest accrues, by the Company for federal income tax purposes.
4.12. Employee Benefit Plans.
----------------------
(a) There has been no failure by any employee benefit plan, within
the meaning of Section 3(3) of the Employee Retirement Income Security Act of
1974, as amended ("ERISA"), which is maintained by the Company or any of its
-----
Subsidiaries or to which the Company or any of its Subsidiaries contributes
(each a "Plan") to comply with the applicable requirements of ERISA and the Code
----
other than any such failures that, individually or in the aggregate, have not
had and would not reasonably be expected to have a Material Adverse Effect.
There is no material pending or, to the knowledge of the Company threatened,
litigation relating to the Plans. Neither the Company nor any of its
Subsidiaries has engaged in a transaction with respect to any Plan that,
assuming the taxable period of such transaction expired as of the date hereof,
could subject the Company or any of its Subsidiary to a tax or penalty imposed
by either Section 4975 of the Code or Section 502(i) of ERISA other than those
that, individually or in the aggregate, have not had and would not reasonably be
expected to have a Material Adverse Effect.
(b) No liability under Subtitle C or D of Title IV of ERISA has
been or is expected to be incurred by the Company or any of its Subsidiaries
with respect to any ongoing, frozen or terminated "single-employer plan", within
the meaning of Section 4001(a)(15) of ERISA, currently or formerly maintained by
any of them, or the single-employer plan of any entity which is considered one
employer with the Company under Section 4001 of ERISA or Section 414 of the Code
(an "ERISA Affiliate"). Neither the Company, any of its subsidiaries nor an
---------------
ERISA Affiliate has contributed to a "multiemployer plan", within the meaning of
Section 3(37) of ERISA, at any time on or after September 26, 1980. No notice
of a "reportable event", within the meaning of Section 4043 of ERISA for which
the 30-day reporting requirement has not been waived, has been required to be
filed for any Plan which is an "employee pension benefit plan" within the
meaning of Section 3(2) of ERISA ("Pension Plan") or by any ERISA Affiliate
------------
within the 12-month period ending on the date hereof.
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<PAGE>
(c) Neither any Pension Plan nor any single-employer plan of an
ERISA Affiliate has an "accumulated funding deficiency" (whether or not waived)
within the meaning of Section 412 of the Code or Section 302 of ERISA and no
ERISA Affiliate has an outstanding funding waiver. Neither the Company nor any
of its Subsidiaries has provided, or is required to provide, security to any
Pension Plan or to any single-employer plan of an ERISA Affiliate pursuant to
Section 401(a)(29) of the Code.
(d) Under each Pension Plan which is a single-employer plan, as of
the last day of the most recent plan year ended prior to the date hereof, the
actuarially determined present value of all "benefit liabilities", within the
meaning of Section 4001(a)(16) of ERISA (as determined on the basis of the
actuarial assumptions contained in the Plan's most recent actuarial valuation),
did not exceed the then current value of the assets of such Plan, and there has
been no material change in the financial condition of such Plan since the last
day of the most recent plan year.
(e) Neither the Company nor any of its Subsidiaries has any
obligations for retiree health and life benefits under any Plan, except as
required by applicable law or as set forth on Schedule 4.12(e). The Company or
-------
the subsidiaries may amend or terminate any such Plan at any time without
incurring any liability thereunder.
4.13. Private Offering; No Integration or General Solicitation.
--------------------------------------------------------
(a) Subject to compliance by the Purchasers with the representations
and warranties set forth in Section 5 hereof and with the procedures set forth
in Section 10 hereof, it is not necessary in connection with the offer, sale and
delivery of the Notes to the Purchasers and to any Person to whom any Purchaser
sells any of such Notes (each, a "Subsequent Purchaser") in the manner
--------------------
contemplated by this Agreement to register the Notes under the Securities Act,
or, until such time as the Exchange Notes are issued or the Notes or Exchange
Notes are otherwise registered pursuant to an effective registration statement
under the Securities Act, to qualify an indenture relating to the Notes or
Exchange Notes under the TIA.
(b) The Company has not, directly or indirectly, offered, sold or
solicited any offer to buy and will not, directly or indirectly, offer, sell or
solicit any offer to buy, any security of a type or in a manner which would be
integrated with the sale of the Notes and require the Notes to be registered
under the Securities Act. None of the Company, its Affiliates or any person
acting on its or any of their behalf (other than the Purchasers, as to whom the
Company makes no
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<PAGE>
representation or warranty) has engaged or will engage in any form of general
solicitation or general advertising (within the meaning of Rule 502(c) under the
Securities Act) in connection with the offering of the Notes. With respect to
the Notes, if any, sold in reliance upon the exemption afforded by Regulation S:
(i) none of the Company, its Affiliates or any person acting on its or their
behalf (other than the Purchasers, as to whom the Company makes no
representation or warranty) has engaged or will engage in any directed selling
efforts within the meaning of Regulation S and (ii) each of the Company and its
Affiliates and any person acting on its or their behalf (other than the
Purchasers, as to whom the Company makes no representation or warranty) has
complied and will comply with the offering restrictions set forth in Regulation
S.
4.14. Eligibility for Resale under Rule 144A. The Notes are eligible
--------------------------------------
for resale pursuant to Rule 144A and will not, at the Closing Date, be of the
same class as securities listed on a national securities exchange registered
under Section 6 of the Exchange Act or quoted on a U.S. automated interdealer
quotation system.
4.15. Status Under Certain Statutes. Neither the Company nor any of
-----------------------------
its Subsidiaries is or, after receipt of payment for the Notes and the
consummation of the other transactions contemplated by the Transaction
Documents, will be (a) subject to regulation under the Public Utility Holding
Company Act of 1935, the Federal Power Act or the Interstate Commerce Act, each
as amended, (b) an "investment company" registered or required to be registered
under the Investment Company Act of 1940, as amended, or controlled by such a
company, or (c) a "holding company," or a "Subsidiary company" of a "holding
company," or an "affiliate" of a "holding company" or of a "Subsidiary" or a
"holding company," within the meaning of the Public Utility Holding Company Act
of 1935, as amended.
4.16. Insurance. Each of the Company and its Subsidiaries are
---------
insured by financially sound institutions with policies in such amounts and with
such deductibles and covering such risks as are generally deemed adequate for
their businesses including, but not limited to, policies covering real and
personal property owned or leased by the Company and its Subsidiaries against
theft, damage, destruction and acts of vandalism.
4.17. Use of Proceeds; Margin Regulations. The Company will apply
-----------------------------------
the proceeds from the sale of the Notes solely to (i) finance the repurchase by
the Company of any Senior Notes that are put to it pursuant to the Change of
Control Offer (as defined in the Senior Note Indenture) made as a result of the
Merger or (ii) finance any acquisitions made by the Company after
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<PAGE>
the Initial Closing Date or to refinance any acquisitions made by the Company
after the Initial Closing Date and on or prior to the Change of Control Payment
Date (as defined in the Senior Note Indenture). No part of the proceeds from the
sale of the Notes hereunder will be used, directly or indirectly, for the
purpose of buying or carrying any margin stock within the meaning of Regulation
U, or for the purpose of buying or carrying or trading in any securities. Margin
stock does not constitute more than 5% of the value of the consolidated assets
of the Company and its Subsidiaries and the Company has no present intention
that margin stock will constitute more than 5% of the value of such assets. As
used in this Section, the terms "margin stock" and "purpose of buying or
carrying" shall have the meanings assigned to them in Regulation U.
4.18. Existing Indebtedness; Future Liens. Schedule 4.18 sets forth a
----------------------------------- -------------
complete and correct list of all Indebtedness of the Company and its
Subsidiaries that will be outstanding immediately after the consummation of the
Merger except for any such Indebtedness not so scheduled which, in the
aggregate, does not exceed $50,000 (such scheduled and unscheduled Indebtedness,
the "Existing Indebtedness"). Neither the Company nor any Subsidiary of the
---------------------
Company is in default, and no waiver of default is currently in effect, in the
payment of the principal of or interest on any Indebtedness of the Company or
such Subsidiary and no event or condition exists with respect to any
Indebtedness of the Company or any Subsidiary of the Company that would permit
(or that with notice, lapse of time or both, would permit) any Person to cause
such Indebtedness to become due and payable before its Stated Maturity or before
its regularly scheduled dates of payment. Neither the Company nor any of its
Subsidiaries has agreed or consented to cause or permit in the future (upon the
happening of a contingency or otherwise) any of its property or assets, whether
now owned or hereafter acquired, to be subject to a Lien that would be
prohibited by this Agreement if incurred after the first issuance of Notes.
4.19. Compliance with Laws; Permits. Each of the Company and each of
-----------------------------
its Subsidiaries has complied, and is in compliance, in all material respects
with all Applicable Laws and has all Permits material to, and necessary in, the
conduct of its business as currently conducted and all such Permits are in full
force and effect. No violations have been recorded in respect of any such
licenses, permits and qualifications, and no proceeding is pending or, to the
best knowledge of the Company and its Subsidiaries, threatened to revoke or
limit any Permit, except for violations and proceedings which, individually or
in the aggregate, have not and could not reasonably be expected to have a
Material Adverse Effect. Schedule 4.19 sets forth a list of all such Permits
-------------
and the expiration dates thereof.
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<PAGE>
4.20. Solvency. The Company and its Subsidiaries are, and after
--------
giving effect to the Transactions will be, Solvent.
4.21. Affiliate Transactions. Except with respect to transactions
----------------------
occurring on or after the Initial Closing Date as permitted by Section 8.06
hereof: (a) there is no Indebtedness between the Company or any of its
Subsidiaries, on the one hand, and any officer, stockholder, director or
Affiliate (other than the Company or any of its Subsidiaries) of the Company, on
the other, (b) no such officer, stockholder, director or Affiliate provides or
causes to be provided any assets, services or facilities to the Company or any
of its Subsidiaries which, individually or in the aggregate, are material to the
business, assets, condition (financial or otherwise), results of operations or
prospects of the Company and its Subsidiaries, (c) neither the Company nor any
of its Subsidiaries provides or causes to be provided any assets, services, or
facilities to any such officer, stockholder, director or Affiliate which,
individually or in the aggregate, are material to the business, assets,
condition (financial or otherwise), results of operations or prospects of the
Company and its Subsidiaries, and (d) neither the Company nor any Subsidiary
beneficially owns, directly or indirectly, any investment in or issued by any
such officer, director or Affiliate, and (e) no such officer, stockholder,
director or Affiliate has any direct or indirect ownership interest in any
Person with which the Company or any of its Subsidiaries competes or has a
business relationship.
4.22. Material Contracts. Schedule 4.22 contains a true, correct and
------------------ -------------
complete list of all Material Contracts in effect on the Initial Closing Date.
Except as described on Schedule 4.22, as of the Closing Date each Material
-------------
Contract is in full force and effect and no material defaults enforceable
against the Company or any of its Subsidiaries currently exist thereunder. To
the best knowledge of the Company and its Subsidiaries, no party to any Material
Contract intends to terminate such Material Contract.
4.23. No Changes to Applicable Law. To the best knowledge of the
----------------------------
Company, no changes to Applicable Law affecting the Company or any of its
Subsidiaries have occurred since the Audit Date or are currently pending or
threatened, in each case other than those which have not had and would not
reasonably be expected to have a Material Adverse Effect.
4.24. Indebtedness. On the Initial Closing Date, after consummation
------------
of the Transactions, the consolidated Indebtedness of the Company and its
Subsidiaries will not exceed $130 million.
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<PAGE>
4.25. Fees. All fees and other expenses payable in connection with
----
the consummation of the Transactions and all other fees payable to GEI or its
Affiliates, in each case by the Company or any of its Subsidiaries, have been
disclosed to, and approved in writing by, the GSMP Purchasers prior to the
Initial Closing Date.
4.26. Brokerage Fees. Except as disclosed in Schedule 4.26, neither
-------------- -------------
the Company nor any of its Subsidiaries has paid, or is obligated to pay, to any
Person any brokerage or finder's fees in connection with the transactions
contemplated hereby or by any other Transaction Documents.
4.27. Documents and Procedures. The agreements, instruments and
------------------------
documents used and the procedures followed by the Company and its Subsidiaries
in the conduct of their business are sufficient to effect the transactions
purported to be effected by such agreements, instruments and documents and to
perfect the liens or security interests purported to be created by such
agreements, instruments and documents, except for failures to effect such
transactions or perfect such security interests which, individually or in the
aggregate, would not reasonably be expected to have a Material Adverse Effect.
4.28. Standards and Procedures. The Company has previously
------------------------
delivered to the Purchasers or will deliver to the Purchasers upon request
copies of the credit and loan standards, procedures and guidelines employed by
the Company and its Subsidiaries. To the Company's knowledge, such standards,
procedures and guidelines are followed by the employees and personnel of the
Company and its Subsidiaries in conducting the business of the Company and its
Subsidiaries, except for failures to follow such standards, procedures and
guidelines which, individually or in the aggregate, would not reasonably be
expected to have a Material Adverse Effect.
4.29. No Unrelated Liabilities. As of the Closing, neither the
------------------------
Company nor any of its Subsidiaries will have any liability unrelated to the
business or operations conducted by the Company and its Subsidiaries. Neither
the Company nor Holdings nor any of its Subsidiaries has since June 30, 1996
made, and will not prior to the Closing make, any payment with respect to any
such liability.
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<PAGE>
SECTION 5
REPRESENTATIONS OF THE PURCHASERS
---------------------------------
Each Purchaser severally and not jointly represents and warrants to
the Company as of the date hereof and as of each Closing Date as follows:
5.1. Purchase for Investment.
-----------------------
(a) Such Purchaser is acquiring the Notes for its own account, for
investment and not with a view to any distribution thereof within the meaning of
the Securities Act.
(b) Such Purchaser understands that (i) the Notes have not been
registered under the Securities Act and are being issued by the Company in
transactions exempt from the registration requirements of the Securities Act and
(ii) the Notes may not be offered or sold except pursuant to an effective
registration statement under the Securities Act or pursuant to an applicable
exemption from registration under the Securities Act.
(c) Such Purchaser further understands that the exemption from
registration afforded by Rule 144 (the provisions of which are known to such
Purchaser) promulgated under the Securities Act depends on the satisfaction of
various conditions, and that, if applicable, Rule 144 may afford the basis for
sales only in limited amounts.
(d) Such Purchaser did not employ any broker or finder in
connection with the transactions contemplated in this Agreement.
(e) Such Purchaser is an "Accredited Investor" (as defined in Rule
501 (a) under the Securities Act).
SECTION 6
COVENANTS TO PROVIDE INFORMATION
--------------------------------
The Company covenants and agrees with each Purchaser that until the
principal amount of (and premium, if any, on) all the Notes, and all interest,
Special Interest and other obligations hereunder in respect thereof, shall have
been paid in full:
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<PAGE>
6.1. Future Reports to Purchasers.
----------------------------
The Company shall deliver to each Purchaser (for so long as such
Purchaser holds any Notes or the Exchange Notes) and, except for the information
provided in clause (a) below, each Subsequent Purchaser that is an Institutional
Investor:
(a) Monthly Statements. As soon as available but in any event
------------------
within thirty (30) days after the end of each month, duplicate copies of:
(i) a consolidated balance sheet of the Company and its
Subsidiaries as at the end of such month, and
(ii) consolidated statements of income, stockholders' equity
and cash flows of the Company and its Subsidiaries for such month and for
the portion of the fiscal year ending with such month,
in each case setting forth in comparative form the figures for the corresponding
periods in the prior fiscal year, all in reasonable detail, prepared in
accordance with GAAP applicable to periodic financial statements generally, and
fairly presenting, in all material respects, the financial position of the
companies being reported on and their results of operations and cash flows,
subject to changes resulting from normal year-end adjustments that will not be
material in amount or effect, and accompanied by a certificate of the chief
financial officer to the foregoing effect.
(b) Quarterly Statements. As soon as available, but in any event
--------------------
within forty-five (45) days after the end of each quarter, duplicate copies of:
(i) a consolidated and consolidating balance sheet of the
Company and its Subsidiaries as at the end of such quarter, and
(ii) consolidated and consolidating statements of income,
stockholders' equity and cash flows of the Company and its Subsidiaries,
for such quarter and for the portion of the fiscal year ending with such
quarter,
in each case setting forth in comparative form the figures for the corresponding
periods in the prior fiscal year, all in reasonable detail, prepared in
accordance with GAAP applicable to periodic financial statements generally, and
fairly presenting, in all material respects, the financial position of the
companies being
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<PAGE>
reported on and their results of operations and cash flows, subject to changes
resulting from normal year-end adjustments that will not be material in amount
or effect, and accompanied by a certificate of the chief financial officer to
the foregoing effect; provided, however, that if the Company is then subject to
the reporting requirements under Section 13 or Section 15(d) of the Exchange
Act, the delivery by the Company to such Purchaser or such Subsequent Purchaser
of a Quarterly Report on Form 10-Q or any successor form within the time periods
above described shall satisfy the requirements of this Section 6.1(b). The
consolidating balance sheet and statements of income, stockholders' equity and
cash flows required by this paragraph may be in the form contained in the notes
to the financial statements included in the Company's Form 10-Q.
(c) Annual Statements. As soon as available, but in any event
-----------------
within ninety (90) days after the end of each fiscal year of the Company,
duplicate copies of:
(i) a consolidated and unaudited consolidating balance sheet
of the Company and its Subsidiaries as at the end of such year, and
(ii) consolidated and consolidating statements of income,
stockholders' equity and cash flows of the Company and its Subsidiaries for
such year,
in each case setting forth in comparative form the figures for the prior fiscal
year, all in reasonable detail, prepared in accordance with GAAP, fairly
presenting, in all material respects, the financial position of the companies
being reported on and their results of operations and cash flows, subject to
changes resulting from normal year-end adjustments, and accompanied by:
(A) an opinion thereon of independent certified public
accountants of recognized national standing, which opinion (i) shall
state that such financial statements (other than consolidating
statements) present fairly, in all material respects, the financial
position of the companies being reported upon and their results of
operations and cash flows and have been prepared in conformity with
GAAP, and that the examination of such accountants in connection with
such financial statements (other than consolidating statements) has
been made in accordance with generally accepted auditing standards in
the United States, and that such audit provides a reasonable basis for
such opinion in the circumstances, and (ii) shall not contain a "going
concern" or like qualification, or
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<PAGE>
any exception or other qualification arising out of the scope of the
audit,
(B) a certificate of such accountants stating that they have
reviewed this Agreement and, if applicable, stating further that based
upon their work performed in connection with their examination of such
financial statements (other than consolidating statements), they are
not aware of any Default or Event of Default specified in Section 11
or, if applicable, the corresponding section of the Agreement, or, if
they are aware of any such Default or Event of Default, specifying the
nature thereof (it being understood that such accountants shall not be
liable, directly or indirectly, for any failure to obtain knowledge of
any such Default or Event of Default unless such accountants should
have obtained knowledge thereof in making an audit in accordance with
generally accepted auditing standards), and
(C) a certificate of the chief financial officer stating that
such financial statements have been prepared in accordance with GAAP
applicable to periodic financial statements generally and fairly
present, in all material respects, the financial position of the
companies being reported on and their results of operations and
income, retained earnings and stockholders' equity, and cash flows,
provided, however, that if the Company is then subject to the reporting
requirements under Section 13 or Section 15(d) of the Exchange Act, the delivery
by the Company to such Purchaser or such Subsequent Purchaser of an Annual
Report on Form 10-K or any successor form within the time periods above
described shall satisfy the requirements of this Section 6.1(c). The
consolidating balance sheet and statements of income, stockholders' equity and
cash flows required by this paragraph may be in the form contained in the notes
to the financial statements included in Company's Form 10-K.
(d) Chief Financial Officer Certificates. Concurrently with the
------------------------------------
delivery of the financial statements referred to in subsections (a) through (c)
of this Section 6.1, a certificate of the chief financial officer of the Company
(i) stating that, to the best of such officer's knowledge after due inquiry,
each of the Company and its respective Subsidiaries has observed or performed
all of its covenants and other agreements, and satisfied every condition,
contained in this Agreement and the other Transaction Documents to be observed,
performed or satisfied by it, and that such officer has obtained no knowledge of
any Default or
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Event of Default except as specified in such certificate, (ii) showing in detail
as of the end of the related fiscal period the figures and calculations
supporting such statement in respect of Sections 8.2 and 8.4 of this Agreement
or, if applicable, the corresponding sections of the Indenture.
(e) Auditors' Reports. Promptly upon receipt thereof, copies of
-----------------
all final reports submitted to the Company or to any of its Subsidiaries by
independent certified public accountants in connection with each annual, interim
or special audit of the books of the Company or any of its Subsidiaries made by
such accountants, including, without limitation, any final comment letter
submitted by such accountants to management in connection with their annual
audit.
(f) Other Information. Promptly upon their becoming available,
-----------------
copies of all financial statements, reports, notices and proxy statements sent
to its securityholders or made available generally by the Company or any of its
Subsidiaries and all regular and periodic reports and all registration
statements and final prospectuses, if any, filed by the Company or any of its
Subsidiaries with any securities exchange or with the Commission or any
Governmental Authority succeeding to any of its functions and, promptly upon
request, such additional financial and other information as any Purchasers may
from time to time reasonably request.
(g) Notice of Default or Event of Default. Promptly, but in any
-------------------------------------
event within three (3) Business Days, after any officer of the Company becomes
aware of the existence of any Default or Event of Default or that any Person has
given any notice or taken any other action with respect to a claimed Default or
Event of Default, a written notice thereof specifying the nature and existence
thereof and what action the Company is taking or proposes to take with respect
thereto.
(h) Additional Information to Holders of Other Indebtedness. Prior
-------------------------------------------------------
to the first consummation of an IPO, simultaneously with the furnishing of such
information to any other holder of Indebtedness of the Company or any of its
Subsidiaries, (i) copies of all other financial statements, reports or
projections with respect to the Company or its Subsidiaries which are broader in
scope or on a more frequent basis than the Company is required to provide under
this Agreement and (ii) copies of all studies, reviews, reports or assessments
relating to environmental matters that reveal circumstances, events or other
matters that would reasonably be expected to have a Material Adverse Effect.
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(i) Changes to Indebtedness. At least 10 days prior thereto,
-----------------------
written notice of any proposed extension, renewal, refinancing or modification
of any Indebtedness exceeding $250,000 of the Company or any of its
Subsidiaries.
SECTION 7
OTHER AFFIRMATIVE COVENANTS
---------------------------
The Company further covenants and agrees with each Purchaser that
until the principal amount of (and premium, if any, on) all the Notes, and all
interest, Special Interest and other obligations hereunder in respect thereof,
shall have been paid in full:
7.1. Preservation of Corporate Existence and Franchises. Subject to
--------------------------------------------------
Section 8 hereof, the Company shall do or cause to be done all things necessary
to preserve and keep in full force and effect (a) its corporate existence, and
the corporate, partnership or other existence of each of its Subsidiaries, in
accordance with the respective organizational documents (as the same may be
amended from time to time) of the Company or any such Subsidiary and (b) the
rights (charter and statutory), licenses and franchises of the Company and its
Subsidiaries; provided, however, that the Company shall not be required to
preserve any such right, license or franchise, or the corporate, partnership or
other existence of any of its Subsidiaries if (i) the Board shall determine that
the preservation thereof is no longer desirable in the conduct of the business
of the Company and its Subsidiaries, taken as a whole, and (ii) the loss thereof
is not reasonably likely to result in a Material Adverse Effect.
7.2. Maintenance of Properties. The Company will cause all
-------------------------
properties used or useful in the conduct of its business or the business of any
of its Subsidiaries to be maintained and kept in good condition, repair and
working order and supplied with all necessary equipment and will cause to be
made all necessary repairs, renewals, replacements, betterments and improvements
thereof, all as in the judgement of the Company may be necessary so that the
business carried on in connection therewith may properly and advantageously
conducted at all times; provided, however, that the foregoing shall not prevent
the Company from discontinuing the operation or maintenance of any of such
properties if (i) the Board determines that such discontinuance is desirable in
the conduct of its business or the business of any Subsidiary and (ii) not
reasonably likely to result in a Material Adverse Effect.
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7.3 Taxes.
-----
(a) Payment of Taxes. The Company shall pay or discharge or cause
----------------
to be paid or discharged, before the same shall become delinquent, (i) all
taxes, assessments and governmental charges levied or imposed upon the Company
or any of its Subsidiaries or upon the income, profits or property of the
Company or any of its Subsidiaries, and (ii) all lawful claims for labor,
materials and supplies which, if unpaid, might by law become a lien upon the
property of the Company or any of its Subsidiaries; provided, however, that the
Company shall not be required to pay or discharge or cause to be paid or
discharged any such tax, assessment, charge or claim whose amount, applicability
or validity is being contested in good faith by appropriate proceedings provided
that appropriate reserves therefor are established in the Company's consolidated
financial statements in accordance with GAAP.
(b) Tax Returns. The Company and Tax Subsidiaries shall timely
-----------
file or cause to be filed when due all Tax Returns that are required to be filed
by or with respect to the Company for taxable years ending after the Closing
Date and shall pay any Taxes due in respect of such Tax Returns.
(c) Contest Provisions. The Company shall promptly notify the
------------------
Purchasers in writing upon receipt by the Company or the Tax Subsidiaries or any
of their Affiliates of notice of any pending or threatened federal, state, local
or foreign income or franchise tax audits or assessments which may materially
affect the tax liabilities of the Company.
7.4. Books, Records and Access. The Company and its Subsidiaries
-------------------------
will keep complete and accurate books and records of their transactions in
accordance with good accounting practices on the basis of GAAP applied on a
consistent basis (including the establishment and maintenance of appropriate
reserves). To the extent reasonably required in connection with any resale of
the Notes and upon reasonable notice, the Company shall, and shall cause its
Subsidiaries to, subject to compliance with Applicable Laws and confidentiality
obligations to third parties, give each Purchaser (and, any sales or placement
agent or underwriter participating in such resale) and their authorized
representatives reasonable access during normal business hours to all contracts,
books, records, personnel, offices and other facilities and properties of the
Company and its Subsidiaries and their legal advisors, accountants and, to the
extent available to the Company after the Company uses reasonable efforts to
obtain them, the accountants' work papers, permit each Purchaser (and any such
sales or placement agent or underwriter) to make such copies and inspections
thereof as such Purchaser may reasonably request and furnish each
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Purchaser (and any such sales or placement agent or underwriter) with such
financial and operating data and other information with respect to the business
and properties of the Company and its Subsidiaries as such Purchaser (and any
such sales or placement agent or underwriter) may from time to time reasonably
request; provided, however, that no investigation or information furnished
pursuant to this Section 7.04 shall affect any representations or warranties
made by the Company herein or the conditions to the obligations of the
Purchasers to consummate the transactions contemplated hereby. Any such visits
will be at the expense of such Purchaser.
7.5. Compliance with Law. The Company will, and will cause each of
-------------------
its Subsidiaries to, comply with all Applicable Laws and will obtain and
maintain, and will cause each of its Subsidiaries to obtain and maintain, all
Permits necessary to the ownership of their respective properties or to the
conduct of their respective businesses, in each case to the extent necessary to
ensure that any such non-compliance with Applicable Law or any failure to obtain
or maintain such Permits, individually or in the aggregate, would not reasonably
be expected to have a Material Adverse Effect.
7.6. Insurance. The Company shall, and shall cause its Subsidiaries
---------
to, maintain, with financially sound and reputable insurers, insurance with
respect to their respective properties and business against such casualties and
contingencies, of such types, on such terms and in such amounts (including
deductibles, co-insurance and self-insurance, if adequate reserves are
maintained with respect thereto) as is customary in the case of entities of
estab lished reputations engaged in the same or a similar business and
similarly situated.
7.7. Offer to Repurchase Upon Change of Control.
------------------------------------------
(a) Upon the occurrence of a Change of Control, the Company shall
make an offer (a "Change of Control Offer") to each Holder to repurchase all or
-----------------------
any part (equal to $1,000 or an integral multiple thereof) of each Holder's
Notes at an offer price in cash equal to 101% of the principal amount thereof as
of the Change of Control Payment Date, plus accrued and unpaid interest and
Special Interest, if any, thereon to the Change of Control Payment Date (the
"Change of Control Payment"). The Company shall comply with the requirements of
- --------------------------
Rule 14e-1 under the Exchange Act and any other securities laws and regulations
thereunder to the extent such laws and regulations are applicable in connection
with the repurchase of the Notes as a result of a Change of Control, and the
Company shall not be in violation of this Agreement by reason of any act
required by such rule or other applicable law.
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<PAGE>
(b) Within 25 days following any Change of Control, the Company
shall mail a notice to each Holder stating:
(i) that the Change of Control Offer is being made pursuant
to this Section 7.7 and that all Notes tendered will be accepted for
payment;
(ii) the purchase price and the purchase date, which shall be
at least 30 but no more than 60 days from the date on which the Company
mails notice of the Change of Control (the "Change of Control Payment
-------------------------
Date");
----
(iii) that any Notes not tendered will continue to accrue
interest;
(iv) that, unless the Company defaults in the payment of the
Change of Control Payment, all Notes accepted for payment pursuant to the
Change of Control Offer shall cease to accrue interest after the Change of
Control Payment Date;
(v) that Holders electing to have any Notes purchased
pursuant to a Change of Control Offer shall be required to surrender the
Notes, with the form entitled "Option of Holder to Elect Purchase" on the
reverse of the Notes completed, to the Company or its designated agent for
such purpose at the address specified in the notice prior to the close of
business on the third Business Day preceding the Change of Control Payment
Date;
(vi) that Holders will be entitled to withdraw their election
if the Company or its designated agent for such purpose receives, not later
than the close of business on the second Business Day preceding the Change
of Control Payment Date, a telegram, telex, facsimile transmission or
letter setting forth the name of the Holder, the principal amount of Notes
delivered for purchase, and a statement that such Holder is withdrawing his
election to have the Notes purchased; and
(vii) that Holders whose Notes are being purchased only in part
will be issued new Notes equal in principal amount to the unpurchased
portion of the Notes surrendered, which unpurchased portion must be equal
to $1,000 in principal amount or an integral multiple thereof.
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<PAGE>
(c) On the Change of Control Payment Date, the Company shall, to
the extent lawful, (i) accept for payment all Notes or portions thereof properly
tendered pursuant to the Change of Control Offer and (ii) deposit with the
Paying Agent an amount equal to the Change of Control Payment in respect of all
Notes or portions thereof so tendered. The Paying Agent shall promptly mail to
each Holder of Notes so tendered the Change of Control Payment for such Notes,
and the Company shall promptly execute and mail (or cause to be transferred by
book-entry) to each Holder a new Note equal in principal amount to any
unpurchased portion of the Notes surrendered, if any; provided, however, that
each such new Note shall be in a principal amount of $1,000 or an integral
multiple thereof. The Company shall publicly announce the results of the Change
of Control Offer on or as soon as practicable after the Change of Control
Payment Date.
(d) The Company shall not be required to make a Change of Control
Offer upon a Change of Control if a third party makes the Change of Control
Offer in a manner, at the times and otherwise in compliance with the
requirements set forth in this Section 7.7 and such third party purchases all
Notes validly tendered and not withdrawn under such Change of Control Offer.
7.8. Offer to Purchase by Application of Excess Proceeds.
---------------------------------------------------
(a) In the event that, pursuant to Section 8.5 hereof, the Company
shall be required to commence an offer to all Holders to purchase Notes (an
"Asset Sale Offer"), it shall follow the procedures specified in this Section
- -----------------
7.8. Each Asset Sale Offer shall remain open for a period of 20 Business Days
following its commencement and no longer, except to the extent that a longer
period is required by applicable law (the "Offer Period"). No later than five
------------
Business Days after the termination of the Offer Period (the "Purchase Date"),
-------------
the Company shall purchase the principal amount of Notes required to be
purchased pursuant to Section 8.5 hereof (the "Offer Amount") or, if less than
------------
the Offer Amount has been tendered, all Notes tendered in response to the Asset
Sale Offer. Payment for any Notes so purchased shall be made in the same manner
as interest payments are made.
(b) If the Purchase Date is on or after a Regular Record Date and
on or before the next succeeding Interest Payment Date, any accrued and unpaid
interest shall be paid to the Person in whose name a Note is registered at the
close of business on such Regular Record Date, and no additional interest shall
be payable to the Holders of Notes tendered and purchased pursuant to the Asset
Sale Offer.
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<PAGE>
(c) Upon the commencement of an Asset Sale Offer, the Company shall
send, by first class mail, a notice to each of the Holders which shall contain
all instructions and materials necessary to enable such Holders to tender Notes
pursuant to the Asset Sale Offer. The Asset Sale Offer shall be made to all
Holders. The notice, which shall govern the terms of the Asset Sale Offer,
shall state:
(i) that the Asset Sale Offer is being made pursuant to this
Section 7.8 and Section 8.5 hereof and the length of time the Asset Sale
Offer shall remain open;
(ii) the Offer Amount, the purchase price and the Purchase
Date;
(iii) that any Note not tendered or accepted for payment shall
continue to accrue interest and Special Interest, if any;
(iv) that, unless the Company defaults in making such payment,
any Note accepted for payment pursuant to the Asset Sale Offer shall cease
to accrue interest and Special Interest, if any, after the Purchase Date;
(v) that Holders electing to have a Note purchased pursuant
to an Asset Sale Offer may only elect to have all of such Note purchased
and may not elect to have only a portion of such Note purchased;
(vi) that Holders electing to have a Note purchased pursuant
to any Asset Sale Offer shall be required to surrender the Note, with the
form entitled "Option of Holder to Elect Purchase" on the reverse of the
Note completed to the Company at the address specified in the notice at
least three Business Days before the Purchase Date;
(vii) that Holders shall be entitled to withdraw their election
if the Company receives, not later than the expiration of the Offer Period,
a telegram, telex, facsimile transmission or letter setting forth the name
of the Holder, the principal amount of the Note the Holder delivered for
purchase and a statement that such Holder is withdrawing his election to
have such Note purchased;
(viii) that, if the aggregate principal amount of Notes
surrendered by Holders exceeds the Offer Amount, the Company shall
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select the Notes to be purchased on a pro rata basis (with such adjustments
as may be deemed appropriate by the Company so that only Notes in
denominations of $1,000, or integral multiples thereof, shall be
purchased); and
(ix) that Holders whose Notes were purchased only in part
shall be issued new Notes equal in principal amount to the unpurchased
portion of the Notes surrendered.
(d) On or before the Purchase Date, the Company shall, to the
extent lawful, accept for payment, on a pro rata basis to the extent necessary,
the Offer Amount of Notes or portions thereof tendered pursuant to the Asset
Sale Offer, or if less than the Offer Amount has been tendered, all Notes
tendered, and shall deliver to the Holders an Officers' Certificate stating that
such Notes or portions thereof were accepted for payment by the Company in
accordance with the terms of this Section 7.8. The Company shall promptly (but
in any case not later than five days after the Purchase Date) mail or deliver to
each tendering Holder an amount equal to the purchase price of the Notes
tendered by such Holder and accepted by the Company for purchase, and the
Company shall promptly issue a new Note and deliver it to such Holder, in a
principal amount equal to any unpurchased portion of the Note surrendered. Any
Note not so accepted shall be promptly mailed or delivered by the Company to the
Holder thereof.
7.9. Further Assurances. The Company shall, upon the request of the
------------------
Holders, execute and deliver such further instruments and do such further acts
as may be reasonably necessary or proper to carry out more effectively the
provisions of this Agreement.
SECTION 8
NEGATIVE COVENANTS
------------------
The Company hereby covenants and agrees with each Purchaser that until
the principal amount of (and premium, if any, on) all the Notes, and all
interest, Special Interest and other obligations hereunder in respect thereof,
shall have been paid in full:
8.1. Stay, Extension and Usury Laws. The Company covenants (to the
------------------------------
extent that it may lawfully do so) that it shall not at any time insist upon,
plead, or in any manner whatsoever claim or take the benefit or advantage of,
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any stay, extension or usury law wherever enacted, now or at any time hereafter
in force, that may affect the covenants or the performance of its obligations
under the Notes or this Agreement, and the Company hereby expressly waives all
benefit or advantage of any such law, and covenants that it shall not, by resort
to any such law, hinder, delay or impede the execution of any power herein
granted to the Purchasers, but shall suffer and permit the execution of every
such power as though no such law has been enacted.
8.2. Restricted Payments.
-------------------
(a) The Company shall not, and shall not permit any of its
Subsidiaries to, directly or indirectly, (i) declare or pay any dividend or make
any other payment or distribution on account of the Company's Equity Interests
(including, without limitation, any payment in connection with any merger or
consolidation involving the Company) or to the direct or indirect holders of the
Company's Equity Interests in their capacity as such (other than dividends or
distributions payable solely in Equity Interests (other than Disqualified Stock)
of the Company or dividends or distributions payable to the Company or any
Wholly Owned Subsidiary of the Company); (ii) purchase, redeem or otherwise
acquire or retire for value any Equity Interests of the Company or any direct or
indirect parent of the Company or other Affiliate of the Company (other than
Equity Interests of a Subsidiary of the Company); (iii) make any principal
payment on, or purchase, redeem, defease or otherwise acquire or retire for
value any Indebtedness that is subordinated to the Notes or any Subsidiary
Guarantee thereof, except at final maturity; or (iv) make any Restricted
Investment (all such payments and other actions set forth in clauses (i) through
(iv) above being collectively referred to as "Restricted Payments"), unless, at
-------------------
the time of and after giving effect to such Restricted Payment:
(A) no Default or Event of Default shall have occurred and be
continuing or would occur as a consequence thereof; and
(B) the Company would, at the time of such Restricted Payment and
after giving pro forma effect thereto as if such Restricted Payment had
been made at the beginning of the applicable four-quarter period, have been
permitted to incur at least $1.00 of additional Indebtedness pursuant to
the Fixed Charge Coverage Ratio test set forth in Section 8.4(a) hereof;
and
(C) such Restricted Payment, together with the aggregate of all other
Restricted Payments made by the Company and its Subsidiaries after the date
of this Agreement (excluding Restricted Payments permitted
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by clauses (ii) and (iii), and the aggregate cash proceeds referred to in
clause (iv), of the next succeeding paragraph), is less than the sum of (1)
50% of the Consolidated Net Income of the Company for the period (taken as
one accounting period) from the beginning of the first fiscal quarter
commencing after the date of this Agreement to the end of the Company's
most recently ended fiscal quarter for which internal financial statements
are available at the time of such Restricted Payment (or, if such
Consolidated Net Income for such period is a deficit, less 100% of such
deficit), plus (2) 100% of the aggregate net cash proceeds received by the
Company from the issue or sale since the date of this Agreement of Equity
Interests of the Company or of debt securities of the Company that have
been converted into such Equity Interests (other than Equity Interests (or
convertible debt securities) sold to a Subsidiary of the Company and other
than Disqualified Stock or debt securities that have been converted into
Disqualified Stock), plus (3) to the extent that any Restricted Investment
that was made after the date of this Agreement is sold for cash or
otherwise liquidated or repaid for cash, the lesser of (x) the cash return
of capital with respect to such Restricted Investment (less the cost of
disposition, if any) and (y) the initial amount of such Restricted
Investment.
(b) The foregoing provisions shall not prohibit any of the following
if no Default or Event of Default shall have occurred and be continuing
immediately after any such transaction: (i) the payment of any dividend within
60 days after the date of declaration thereof, if at said date of declaration
such payment would have complied with the provisions of this Agreement; (ii) the
redemption, repurchase, retirement or other acquisition of any Equity Interests
of the Company in exchange for, or out of the proceeds of, the substantially
concurrent sale (other than to a Subsidiary of the Company) of other Equity
Interests of the Company (other than any Disqualified Stock); provided, however,
that the amount of any such net cash proceeds that are utilized for any such
redemption, repurchase, retirement or other acquisition shall be excluded from
clause (C)(2) of the preceding paragraph; (iii) the defeasance, redemption or
repurchase of subordinated Indebtedness with the net cash proceeds from an
incurrence of Permitted Refinancing Indebtedness or the substantially concurrent
sale (other than to a Subsidiary of the Company) of Equity Interests of the
Company (other than Disqualified Stock); provided, however, that the amount of
any such net cash proceeds that are utilized for any such redemption,
repurchase, retirement or other acquisition shall be excluded from clause (C)(2)
of the preceding paragraph; (iv) the payment of any distribution or dividend to
Holdings to enable Holdings to (A) pay its overhead expenses, (B) make any
payments it is required to make under the Management Services Agreement (or
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any agreement extending or replacing the Management Services Agreement which
contains the same terms with respect to fees and other terms no less favorable
to the Company and its Subsidiaries) or (C) repurchase, redeem or otherwise
acquire or retire for value of any Equity Interests of Holdings, the Company or
any Subsidiary of the Company held by any member of the Company's (or any of its
Subsidiaries') management pursuant to any management equity subscription
agreement or stock option agreement; provided, however, that the aggregate price
paid for all such repurchased, redeemed, acquired or retired Equity Interests
shall not exceed $1,000,000 in any twelve-month period plus the aggregate cash
proceeds received by the Company or any Subsidiary during such twelve-month
period from any reissu ance of Equity Interests by the Company or any Subsidiary
to members of management of the Company and its Subsidiaries plus any proceeds
received during such 12-month period under key man insurance policies with
respect to such members of management; and provided, further, that any such
aggregate cash proceeds from any such reissuance of Equity Interests shall be
excluded from clause (C)(2) of the preceding paragraph and (v) payments in an
aggregate amount not to exceed $3.0 million since the date of this Agreement in
respect of the purchase, retirement or redemption of Existing Indebtedness for
an amount less than the face amount thereof.
(c) The amount of all Restricted Payments (other than cash) shall
be the fair market value (evidenced by a resolution of the Board of Directors
set forth in an officers' certificate delivered to the Trustee) on the date of
the Restricted Payment of the asset(s) proposed to be transferred by the Company
or such Subsidiary, as the case may be, pursuant to the Restricted Payment. Not
later than the date of making any Restricted Payment, the Company shall deliver
to the Holders an Officers' Certificate stating that such Restricted Payment is
permitted and setting forth the basis upon which the calculations required by
this Section 8.2 were computed, which calculations may be based upon the
Company's latest available financial statements.
8.3. Dividend and Other Payment Restrictions Affecting Subsidiaries.
--------------------------------------------------------------
The Company shall not, and shall not permit any of its Subsidiaries to, directly
or indirectly, create or otherwise cause or suffer to exist or become effective
any encumbrance or restriction on the ability of any Subsidiary to (a)(i) pay
dividends or make any other distributions to the Company or any of its
Subsidiaries (A) on its Capital Stock or (B) with respect to any other interest
or participation in, or measured by, its profits, or (ii) pay any indebtedness
owed to the Company or any of its Subsidiaries, (b) make loans or advances to
the Company or any of its Subsidiaries or (c) transfer any of its properties or
assets to the Company or any of its Subsidiaries, except for such encumbrances
or
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restrictions existing under or by reason of (i) Existing Indebtedness as in
effect on the date of this Agreement, (ii) the Credit Agreement as in effect as
of the date of this Agreement, and any amendments, modifications, restatements,
renewals, increases, supplements, refundings, replacements or refinancings
thereof; provided, however, that such amendments, modifications, restatements,
renewals, increases, supplements, refundings, replacement or refinancings are no
more restrictive with respect to such dividend and other payment restrictions
than those contained in the Credit Agreement as in effect on the date of this
Agreement, (iii) this Agreement, the Notes, the Holdings Purchase Agreement and
the Senior Discount Notes, (iv) applicable law, (v) by reason of customary non-
assignment provisions in leases, licenses and other agreements entered into in
the ordinary course of business and consistent with past practices, (vi)
purchase money obligations for property acquired in the ordinary course of
business that impose restrictions of the nature described in clause (c) above on
the property so acquired, (vii) Permitted Refinancing Indebtedness; provided,
however, that the restrictions contained in the agreements governing such
Permitted Refinancing Indebtedness are no more restrictive than those contained
in the agreements governing the Indebtedness being refinanced, or (viii) any
instrument governing Indebtedness or Capital Stock of a Person acquired by the
Company or any of its Subsidiaries as in effect at the time of such acquisition
(except to the extent such instrument was created or such Indebtedness was
incurred in connection with or in contemplation of such acquisition), which
encumbrance or restriction is not applicable to any Person, or the properties or
assets of any Person, other than the Person, or the property or assets of the
Person, so acquired, provided that, in the case of Indebtedness, such
Indebtedness was permitted by the terms of this Agreement to be incurred.
8.4. Incurrence of Indebtedness and Issuance of Preferred Stock.
----------------------------------------------------------
(a) The Company shall not, and shall not permit any of its
Subsidiaries to, directly or indirectly, create, incur, issue, assume, Guarantee
or otherwise become directly or indirectly liable, contingently or otherwise,
with re spect to (collectively, "incur") any Indebtedness (including Acquired
-----
Debt) and the Company shall not issue any Disqualified Stock and shall not
permit any of its Subsidiaries to issue any shares of preferred stock; provided,
however, that the Company may incur Indebtedness (including Acquired Debt), and
the Guarantors may guarantee such Indebtedness, and the Company may issue shares
of Disqualified Stock, if the Fixed Charge Coverage Ratio for the Company's most
recently ended four full fiscal quarters for which internal financial statements
are available immediately preceding the date on which such additional
Indebtedness is incurred or such Disqualified Stock is issued (in either case,
the "Incurrence Date") would have been at least 2.0 to 1. The foregoing
---------------
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<PAGE>
ratio shall be calculated on a pro forma basis giving effect to (i) (x) the
incurrence of the Indebtedness or issuance of the Disqualified Stock giving rise
to such calculation, (y) any other incurrence of Indebtedness (other than
revolving credit borrowings) or issuance of Disqualified Stock subsequent to the
commencement of the four-quarter reference period and (z) in each such case, the
application of the net proceeds therefrom as if such incurrence, issuance and
application had occurred at the beginning of the four-quarter reference period
and (ii) any acquisitions that have been made by the Company or any of its
Subsidiaries, including through mergers or consolidations and including any
related financing transactions, during such four-quarter reference period or
subsequent thereto and prior to the Calculation Date as if they occurred on the
first day of such four-quarter reference period. In addition, the Consolidated
Cash Flow for any such four-quarter reference period shall be calculated (i) to
include the Consolidated Cash Flow of the acquired entities (adjusted to include
any expense or cost reductions for which pro forma treatment would be permitted
under Article 11 of Regulation S-X promulgated under the Securities Act as of
the date of this Agreement), (ii) without giving effect to clause (iii) of the
proviso set forth in the definition of Consolidated Net Income, and (iii) to
exclude the Consolidated Cash Flow attributable to discontinued operations, as
determined in accordance with GAAP, and to operations or businesses disposed of
prior to the Calculation Date. In calculating the Fixed Charges as of any
Calculation Date, the Fixed Charges attributable to discontinued operations, as
determined in accordance with GAAP, and to operations or businesses disposed of
prior to the Calculation Date shall be excluded, but only to the extent that the
obligations giving rise to such Fixed Charges will not be obligations of the
referent Person or any of its Subsidiaries following the Calculation Date.
(b) The foregoing provisions shall not apply to: (i) the incurrence
by the Company (and Guarantees thereof by the Guarantors) of Indebtedness (A)
for working capital purposes and letters of credit pursuant to the Credit
Agreement (with letters of credit being deemed to have a principal amount equal
to the maximum potential liability of the Company and its Subsidiaries
thereunder) in an aggregate principal amount not to exceed as of any date of
incurrence the greater of (1) $25.0 million and (2) the amount of the Borrowing
Base; (ii) the incurrence by the Company and its Subsidiaries of the Existing
Indebtedness; (iii) the incurrence by the Company and its Subsidiaries of the
Indebtedness represented by the Notes, and the Subsidiary Guarantees thereof;
(iv) the incurrence by the Company or any of its Subsidiaries of Indebtedness
represented by Capital Lease Obligations, mortgage financings or purchase money
obligations, in each case, incurred for the purpose of financing all or any part
of the purchase price or cost of construction or improvement of property, plant
or equipment used in the business of the Company or such Subsidiary, in
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an aggregate principal amount not to exceed $5.0 million at any time
outstanding; (v) the incurrence by the Company or any of its Subsidiaries of
Permitted Refinancing Indebtedness in exchange for, or the net proceeds of which
are used to extend, refinance, renew, replace, defease or refund, Indebtedness
that was permitted by this Agreement to be incurred; (vi) the incurrence by the
Company or any of its Subsidiaries of intercompany Indebtedness between or among
the Company and any of its Wholly Owned Subsidiaries; provided, however, that
(i) if the Company is the obligor on such Indebtedness, such Indebtedness is
expressly subordinate to the payment in full of all Obligations with respect to
the Notes and (ii)(A) any subsequent issuance or transfer of Equity Interests
that results in any such Indebtedness being held by a Person other than the
Company or a Wholly Owned Subsidiary and (B) any sale or other transfer of any
such Indebtedness to a Person that is not either the Company or a Wholly Owned
Subsidiary shall be deemed, in each case, to constitute an incurrence of such
Indebtedness by the Company or such Subsidiary, as the case may be; (vii) the
incurrence by the Company or any of its Subsidiaries of Hedging Obligations that
are incurred for the purpose of fixing or hedging interest rate risk with
respect to any floating rate Indebtedness that is permitted by the terms of this
Agreement to be outstanding; (viii) the incurrence by the Company or any of its
Subsidiaries of Indebtedness (in addition to Indebtedness permitted by any other
clause of this paragraph) in an aggregate principal amount (or accreted value,
as applicable) at any time outstanding not to exceed $10.0 million; (ix) the
incurrence by the Company or any of its Subsidiaries of Earn-out Obligations in
an aggregate amount not to exceed $5.0 million at any time outstanding; and (x)
the incurrence by the Company of any term loans under the Credit Agreement not
to exceed $90 million to the extent the proceeds thereof are used to repurchase
Senior Notes put to it pursuant to the Change of Control Offer (as defined in
the Senior Note Indenture) made as a result of the Merger.
(c) For purposes of determining compliance with this Section 8.4,
in the event that an item of Indebtedness meets the criteria of more than one of
the categories of Indebtedness described in clauses (i) through (ix) of the
immediately preceding paragraph, the Company shall, in its sole discretion,
classify such item of Indebtedness in any manner that complies with this Section
8.4 and will only be required to include the amount and type of such
Indebtedness in one of such clauses or pursuant to Section 8.4(a). Accrual of
interest, accretion of accreted value and issuance of securities paid-in-kind
shall not be deemed to be an incurrence of Indebtedness for purposes of this
Section 8.4.
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(d) Notwithstanding the foregoing, the Company shall not permit any
of its Subsidiaries to Guarantee any Indebtedness of the Company that by its
terms is pari passu or subordinated in right of payment to the Notes unless such
Guarantee is subordinated in right of payment at least to the same extent as the
Subsidiary Guarantees.
8.5. Asset Sales.
-----------
(a) The Company shall not, and shall not permit any of its
Subsidiaries to: (i) sell, lease, convey or other dispose of any assets
(including, without limitation, by way of a sale and leaseback) other than sales
of inventory in the ordinary course of business consistent with past practices
(provided that the sale, lease, conveyance or otherwise disposition of all or
substantially all of the assets of the Company and its Subsidiaries taken as a
whole shall be governed by the provisions of Section 7.1 and/or Section 8.11
hereof and not by the provisions of this Section 8.5), or (ii) issue or sell
Equity Interests of any of the Company's Subsidiaries, in the case of either
clause (i) or (ii), whether in a single transaction or a series of related
transactions (A) that have a fair market value in excess of $1.0 million or (B)
for Net Proceeds in excess of $1.0 million (each of the foregoing, an "Asset
-----
Sale"), unless (i) the Company (or the Subsidiary, as the case may be) receives
- ----
consideration at the time of such Asset Sale at least equal to the fair market
value (evidenced by a resolution of the Board of Directors set forth in an
officers' certificate delivered to the Holders) of the assets or Equity
Interests issued or sold or otherwise disposed of and (ii) at least 80% of the
consideration therefor received by the Company or such Subsidiary is in the form
of cash; provided, however, that the amount of (x) any liabilities (as shown on
the Company's or such Subsidiary's most recent balance sheet) of the Company or
any Subsidiary (other than contingent liabilities and liabilities that are by
their terms subordinated to the Notes or any Guarantee thereof) that are assumed
by the transferee of any such assets pursuant to any arrangement releasing the
Company or such Subsidiary from further liability and (y) any notes or other
obligations received by the Company or any such Subsidiary from such transferee
that are immediately converted by the Company or such Subsidiary into cash (to
the extent of the cash received), shall be deemed to be cash for purposes of
this provision. Notwithstanding the foregoing, Asset Sales shall not be deemed
to include (i) a transfer of assets by the Company to a Wholly Owned Subsidiary
that is a Guarantor, or by a Wholly Owned Subsidiary to the Company or to
another Wholly Owned Subsidiary that is a Guarantor, (ii) an issuance of Equity
Interests by a Wholly Owned Subsidiary to the Company or to another Wholly Owned
Subsidiary that is a Guarantor, (iii) a Restricted Payment or Permitted
Investment that is permitted by the provisions
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of Section 8.2 hereof and (iv) any conversion of Cash Equivalents into any other
form of Cash Equivalents.
(b) Within 360 days after the receipt of any Net Proceeds from an
Asset Sale, the Company may apply such Net Proceeds (a) to permanently reduce
Senior Indebtedness or Indebtedness that ranks pari passu with the Notes (and to
correspondingly reduce commitments with respect thereto) or (b) to the
acquisition of a controlling interest in another business, the making of a
capital expenditure or the acquisition of other long-term assets, in each case,
in the same or a similar line of business as the Company was engaged in on the
date of this Agreement. Pending the final application of any such Net Proceeds,
the Company may temporarily reduce revolving credit Indebtedness under the
Credit Agreement or otherwise invest such Net Proceeds in any manner that is not
prohibited by this Agreement. Any Net Proceeds from Asset Sales that are not
applied or invested as provided in the first sentence of this paragraph shall be
deemed to constitute "Excess Proceeds". When the aggregate amount of Excess
---------------
Proceeds exceeds $5.0 million, the Company shall make an Asset Sale Offer
pursuant to Section 7.8 hereof to purchase the maximum principal amount of Notes
that may be purchased out of the Excess Proceeds, at an offer price in cash in
an amount equal to 100% of the principal amount thereof, plus accrued and unpaid
interest and Special Interest, if any, thereon to the date of purchase, in
accordance with the procedures set forth in Section 7.8 hereof. To the extent
that the aggregate principal amount of Notes tendered pursuant to an Asset Sale
Offer is less than the Excess Proceeds, the Company may use any remaining Excess
Proceeds for general corporate purposes. If the aggregate principal amount of
Notes surrendered by Holders thereof exceeds the amount of Excess Proceeds, the
Company shall select the Notes to be purchased on a pro rata basis. Upon
completion of such offer to purchase, the amount of Excess Proceeds shall be
reset at zero.
8.6. Transactions with Affiliates. The Company shall not, and shall
----------------------------
not permit any of its Subsidiaries to, make any payment to, or sell, lease,
transfer or otherwise dispose of any of its properties or assets to, or purchase
any property or assets from, or enter into or make or amend any contract,
agreement, understanding, loan, advance or Guarantee with, or for the benefit
of, any Affiliate (each of the foregoing, an "Affiliate Transaction"), unless
---------------------
(i) such Affiliate Transaction is on terms that are no less favorable to the
Company or the relevant Subsidiary than those that would have been obtained in a
comparable transaction by the Company or such Subsidiary with an unrelated
Person and (ii) the Company delivers to the Holders (A) with respect to any
Affiliate Transaction or series of related Affiliate Transactions involving
aggregate consideration in excess of $1.0 million, a resolution of the Board of
Directors set forth in an
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Officers' Certificate certifying that such Affiliate Transaction complies with
clause (i) above and that such Affiliate Transaction has been approved by a
majority of disinterested members of the Board of Directors and (B) with respect
to any Affiliate Transaction or series of related Affiliate Transactions
involving aggregate consideration in excess of $5.0 million, an opinion as to
the fairness to the Holders of such Affiliate Transaction from a financial point
of view issued by an accounting, appraisal or investment banking firm of
national standing; provided, however, that the following shall not be deemed to
be an Affiliate Transactions: (a) the payment of Earn-out Obligations pursuant
to agreements entered into at such time as the recipient of such payments was
not an Affiliate of the Company or such Subsidiary, (b) any employment agreement
entered into by the Company or any of its Subsidiaries in the ordinary course of
business and consistent with the past practice of the Company or such
Subsidiary, (c) transactions between or among the Company and/or its
Subsidiaries, (d) Restricted Payments and Permitted Investments that are
permitted by the provisions of Section 8.2 hereof, (e) the payment of the fees,
expenses and other amounts payable by the Company and its Subsidiaries in
connection with the Transactions that were disclosed to, and approved by, the
Required Holders in writing prior to the Closing Date, (f) the payment of
reasonable and customary regular fees to, and indemnity provided on behalf of,
officers, directors, and employees of the Company or any Subsidiary of the
Company, (g) the payment of fees and other amounts payable by the Company and
its Subsidiaries under the Management Services Agreement (or any agreement
extending or replacing the Management Services Agreement which contains the same
terms with respect to fees and other terms no less favorable to the Company and
its Subsidiaries), (h) payments, advances or loans to officers and employees
that are reasonable and customary and approved by a majority of the
disinterested members of the Board in good faith and (i) the performance of any
of the Financing Documents as in effect as of the date of this Agreement or any
transaction contemplated thereby (including pursuant to any amendment thereto so
long as any such amendment is not disadvantageous to the Holders of the Notes in
any material respect). Notwithstanding anything in this Agreement to the
contrary, neither the Company nor any of its Subsidiaries shall pay any fees to
Leonard Green & Partners, L.P. or any of its Affiliates other than fees provided
for in, and paid in accordance with, Section 2 of the Management Services
Agreement (or the corresponding provisions of any agreement extending or
replacing the Management Services Agreement which contains the same terms with
respect to fees and other terms no less favorable to the Company and its
Subsidiaries).
8.7. Limitation on Ranking of Certain Indebtedness. The Company
---------------------------------------------
shall not incur any Indebtedness which by its terms is both (i) subordinate in
right of payment to any Senior Indebtedness and (ii) senior in right of payment
to the
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Notes (it being understood that Indebtedness shall not be deemed subordinate in
right of payment to other Indebtedness solely by reason of such other
Indebtedness having the benefit of a security interest in property of the
Company).
8.8. Limitation on Liens Securing Company Subordinated Indebtedness.
--------------------------------------------------------------
The Company may not, and may not permit any Subsidiary of the Company, to incur
or suffer to exist any Lien on or with respect to any property or assets now
owned or hereafter acquired to secure any Indebtedness of the Company that is
expressly by its terms subordinate or junior in right of payment to any other
Indebtedness of the Company without making, or causing such Subsidiary to make,
effective provision for securing the Notes (a) equally and ratably with such
Indebtedness as to such property or assets for so long as such Indebtedness will
be so secured or (b) in the event such Indebtedness is subordinate in right of
payment to the Notes, prior to such Indebtedness as to such property or assets
for so long as such Indebtedness will be so secured.
8.9. Limitation on Issuances and Sales of Capital Stock of
-----------------------------------------------------
Subsidiaries. The Company (a) shall not, and shall not permit any Subsidiary of
- ------------
the Company to, transfer, convey, sell, lease or otherwise dispose of any
Capital Stock of any Subsidiary of the Company to any Person (other than the
Company or a Wholly Owned Subsidiary of the Company), unless (i) such transfer,
conveyance, sale, lease or other disposition is of all the Capital Stock of such
Subsidiary and (ii) the Net Proceeds from such transfer, conveyance, sale, lease
or other disposition are applied in accordance with the provisions of Section
8.5 hereof; provided, however, that this clause (a) shall not apply to any
pledge of Capital Stock of any Subsidiary of the Company securing Indebtedness
under the Credit Agreement, and (b) shall not permit any Subsidiary of the
Company to issue any of its Equity Interests (other than, if necessary, shares
of its Capital Stock constituting directors' qualifying shares) to any Person
other than to the Company or a Wholly Owned Subsidiary of the Company.
8.10. Payments for Consents. Neither the Company nor any of its
---------------------
Subsidiaries shall, directly or indirectly, pay or cause to be paid any
consideration, whether by way of interest, fee or otherwise, to any Holder of
any Notes in consideration for or as an inducement to any consent, waiver or
amendment of any of the terms or provisions of this Agreement or the Notes
unless such consideration is concurrently offered to be paid or is concurrently
paid to all Holders of the Notes that consent, waive or agree to amend in the
time frame set forth in the solicitation documents relating to such consent,
waiver or agreement.
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8.11. Merger, Consolidation, or Sale of Assets. The Company shall not
----------------------------------------
consolidate or merge with or into (whether or not the Company is the surviving
corporation), or directly and/or indirectly through its Subsidiaries sell,
assign, transfer, lease, convey or otherwise dispose of all or substantially all
of the properties and assets of the Company and its Subsidiaries taken as a
whole in one or more related transactions, to any other Person unless (a) (i)
the Company is the surviving corporation or (ii) the entity or the Person formed
by or surviving any such consolidation or merger (if other than the Company) or
to which such sale, assignment, transfer, lease, conveyance or other disposition
shall have been made (the entity or Person described in this clause (ii), the
"Successor Company") is a corporation organized or existing under the laws of
- ------------------
the United States, any state thereof or the District of Columbia; (b) the
Successor Company assumes all the obligations of the Company under the Notes and
this Agreement pursuant an amendment or supplement to this Agreement and each
other instrument, document or agreement entered into by the Company in
connection therewith, in each case in a form reasonably satisfactory to the
Required Holders; (c) immediately after such transaction no Default or Event of
Default exists; and (d) the Company or the Successor Company (i) will have
Consolidated Net Worth immediately after the transaction equal to or greater
than the Consolidated Net Worth of the Company immediately preceding the
transaction and (ii) will, at the time of such transaction and after giving pro
forma effect thereto as if such transaction had occurred at the beginning of the
applicable four-quarter period, be permitted to incur at least $1.00 of
additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test set
forth in Section 8.4(a) hereof.
8.12. Successor Company Substituted. Upon any consolidation of the
-----------------------------
Company with, or merger of the Company into, any other Person or any transfer,
conveyance, sale, lease or other disposition of all or substantially all of the
properties and assets of the Company and its Subsidiaries taken as a whole in
one or more related transactions in accordance with Section 8.11, the Successor
Company shall succeed to, and be substituted for, and may exercise every right
and power of, the Company under this Agreement and the Notes with the same
effect as if such Successor Company had been named as the Company herein, and
thereafter, except in the case of a lease, the predecessor Company shall be
relieved of all obligations and covenants under this Agreement and the Notes.
8.13. Additional Subsidiary Guarantees. If the Company or any of its
--------------------------------
Subsidiaries shall acquire or create another domestic Subsidiary after the date
of this Agreement, then such newly acquired or created Subsidiary shall (A)
execute and deliver to the Holders a Subsidiary Guarantee of the Notes in the
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form of Exhibit C hereto and a supplemental agreement substantially in the form
---------
of Exhibit D hereto pursuant to which such Subsidiary shall unconditionally
---------
guarantee all of the Company's obligations under the Notes on the terms set
forth in such supplemental agreement; provided, however, that the foregoing
provision shall not apply to any Subsidiary to the extent that (i) in the
opinion of counsel to the Company, such Subsidiary is unable to execute a
Subsidiary Guarantee by reason of any legal or regulatory prohibition or
restriction and (ii) such Subsidiary is not, directly or indirectly, an obligor
under the Credit Agreement or any other bank facility.
SECTION 9
PROVISIONS RELATING TO RESALES OF NOTES
---------------------------------------
9.1. Private Offerings. The Company and the Purchasers agree that
-----------------
the following provisions will apply to any Private Offerings:
(a) Offers and Sales only to Institutional Accredited Investors or
--------------------------------------------------------------
Qualified Institutional Buyers. Offers and sales of the Notes will be made only
- ------------------------------
by the Purchasers or Affiliates thereof qualified to do so in the jurisdictions
in which such offers or sales are made. Each such offer or sale shall only be
made (i) to persons whom the offeror or seller reasonably believes to be
Qualified Institutional Buyers, (ii) to a limited number of other institutional
accredited investors (as such term is defined in Rule 501(a)(1), (2), (3) or (7)
of Regulation D) that the offeror or seller reasonably believes to be and, with
respect to sales and deliveries, that are Accredited Investors ("Institutional
-------------
Accredited Investors") or (iii) non-U.S. persons outside the United States to
- --------------------
whom the offeror or seller reasonably believes offers and sales of the Notes may
be made in reliance upon Regulation S under the Securities Act.
(b) No General Solicitation. The Notes will be offered by
-----------------------
approaching prospective Subsequent Purchasers on an individual basis. No
general solicitation or general advertising (within the meaning of Rule 502(c)
under the Securities Act) will be used in the United States and no directed
selling efforts (as defined in Regulation S) will be made outside the United
States in connection with the offering of the Notes.
(c) Purchases by Non-Bank Fiduciaries. In the case of a non-bank
---------------------------------
Subsequent Purchaser of a Note acting as a fiduciary for one or more third
parties, in connection with an offer and sale to such purchaser pursuant to
Section 9.1, each third party shall, in the judgment of the applicable
Purchaser, be
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an Institutional Accredited Investor or a Qualified Institutional Buyer or a
non-U.S. person outside the United States.
(d) Restrictions on Transfer. Upon original issuance by the
------------------------
Company, and until such time as the same is no longer required under the
applicable requirements of the Securities Act, the Notes (and all securities
issued in exchange therefor or in substitution thereof, other than the Exchange
Notes) shall bear such legend as is required under Section 10.4 of this
Agreement or, if applicable, the corresponding section of the Indenture.
(e) No Future Liability. Following the sale of the Notes by the
-------------------
Purchasers to Subsequent Purchasers pursuant to the terms hereof, the Purchasers
shall not be liable or responsible to the Company for any losses, damages or
liabilities suffered or incurred by the Company, including any losses, damages
or liabilities under the Securities Act, arising from or relating to any resale
or transfer of any Note previously sold by the Purchaser in compliance with this
Section 9.1.
9.2. Offering Memorandum.
-------------------
(a) At the request of the Required Holders at any time after one
year from the Closing Date, in order to facilitate the consummation of a Private
Offering or any resales by the Purchasers of the Exchange Notes following the
completion of the Exchange Offer, the Company will prepare and deliver to each
Purchaser copies of an Offering Memorandum describing the terms of the Notes or
Exchange Notes proposed to be sold and of the Offering contemplated by such
resales and containing such other information customarily included in offering
memoranda for similar transactions. The Offering Memorandum for any Offering
will not, as of its date and as of the closing of such Offering, include an
untrue statement of a material fact or omit to state a material fact necessary
in order to make the statements therein, in the light of the circumstances under
which they were made, not misleading; provided, however, that the foregoing
shall not apply to statements in or omissions from the Offering Memorandum made
in reliance upon and in conformity with information furnished to the Company in
writing by any Purchaser expressly for use in the Offering Memorandum. Without
limiting the foregoing, the Offering Memorandum for any Offering will contain
all the information specified in, and meeting the requirements of, subsection
(d)(4) of Rule 144A and all other applicable regulations. The Company will not
distribute any offering material in connection with any offering and sale of the
Notes or Exchange Notes other than the Offering Memorandum or any other offering
material required or permitted to be distributed by the Commission.
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(b) Prior to distributing, amending or supplementing the Offering
Memorandum (including any amendment or supplement effected through incorporation
by reference of any report under the Exchange Act) in connection with any
Offering, the Company shall furnish to the Purchasers for review a copy of each
such proposed Offering Memorandum, or amendment or supplement thereto, and the
Company shall not distribute, use or file the Offering Memorandum or any such
proposed amendment or supplement to which any Purchaser selling Notes or
Exchange Notes pursuant to such Offering Memorandum (each, a "Selling
-------
Purchaser") may object.
(c) The Offering Memorandum for any Offering as delivered from time
to time shall contain all information that is required to be included in such
Offering Memorandum by the Commission and that is customarily included in
offering materials of such type.
9.3. Amendments and Supplements to the Offering Memorandum. If,
-----------------------------------------------------
prior to the completion of the sale of the Notes or Exchange Notes by the
Purchasers to the Subsequent Purchasers (as evidenced by a notice in writing
from the Purchasers to the Company) in any Offering, any event shall occur or
condition exist as a result of which it is necessary to amend or supplement the
related Offering Memorandum in order to make the statements therein not contain
a misstatement of a material fact or an omission of a material fact required to
make the statements therein, in the light of the circumstances when the Offering
Memorandum is delivered to a Selling Purchaser or a Subsequent Purchaser and at
the closing of the sales of the Notes or Exchange Notes covered thereby, not
misleading or if, in the opinion of the Selling Purchasers or counsel for the
Selling Purchasers, it is otherwise necessary to amend or supplement the
Offering Memorandum to comply with Applicable Law, then the Company agrees to
promptly prepare (subject to Section 9.2 hereof), and furnish at its own expense
to the Selling Purchasers, amendments or supplements to the Offering Memorandum
so that the statements in the Offering Memorandum as so amended or supplemented
will not contain a misstatement of a material fact or an omission of a material
fact required to make the statements therein, in the light of the circumstances
when the Offering Memorandum is delivered to a Selling Purchaser or a Subsequent
Purchaser and at the closing of the sales of such Notes or Exchange Notes, not
be misleading or so that the Offering Memorandum, as amended or supplemented,
will comply with Applicable Law.
Following the consummation of the Exchange Offer or the effectiveness
of an applicable shelf registration statement with respect to the Securities and
during the period that the registration statement relating to the Exchange Offer
and/or the shelf registration statement is required to remain
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effective pursuant to Section 2(a) and/or 2(b), as applicable, of the Exchange
and Registration Rights Agreement if, in the judgment of any Purchaser, such
Purchaser is required to deliver a prospectus in connection with sales of such
securities, the Company agrees (A) to periodically amend the applicable
registration statement so that the information contained therein complies with
the requirements of Section 10(a) of the Securities Act, (B) to amend the
applicable registration statement or amend or supplement the related prospectus
or the documents incorporated therein when necessary to reflect any material
changes in the information provided therein so that the registration statement
and the prospectus will not contain any untrue statement of a material fact or
omit to state any material fact required to be included or necessary in order to
make the statements therein, in the light of the circumstances existing as of
the date the prospectus is so delivered, not misleading and (C) to provide such
Purchaser with copies of each amendment or supplement filed and such other
documents as such Purchaser may reasonably request.
The Company hereby expressly acknowledges the indemnification and
contribution provisions of Sections 15.2 and 15.3 hereof are specifically
applicable and relate to each Offering Memorandum and registration statement
prepared pursuant to Section 9.2 and this Section 9.3.
9.4. Copies of the Offering Memorandum. The Company agrees to
---------------------------------
furnish to the Selling Purchasers, without charge, as many copies of the
Offering Memorandum in connection with any Offering and any amendments and
supplements thereto as they may reasonably request.
9.5. Blue Sky Compliance. In connection with any public or private
-------------------
distribution of the Notes or Exchange Notes, the Company shall cooperate with
the Selling Purchasers and counsel for the Selling Purchasers to qualify or
register the Notes or Exchange Notes, as applicable, for sale under (or to
obtain exemptions from the application of) the Blue Sky or state securities laws
of those jurisdictions designated by the Selling Purchasers, shall comply with
such laws and shall continue such qualifications, registrations and exemptions
in effect so long as required for the distribution of the Notes or Exchange
Notes, as applicable. The Company shall not be required to qualify as a foreign
corporation or to take any action that would subject it to general service of
process in any such jurisdiction where it is not then qualified or to taxation
as a foreign corporation. The Company will advise the Selling Purchasers
promptly of the suspension of the qualification or registration of (or any such
exemption relating to) the Notes or Exchange Notes for offering, sale or trading
in any jurisdiction or any initiation or threat of any proceeding for any such
purpose, and in the event of the issuance of any order suspending such
qualification,
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registration or exemption, the Company shall, with the cooperation of the
Selling Purchasers, use its best efforts to obtain the withdrawal thereof at the
earliest possible moment.
9.6. Ratings of the Notes. In connection with any Offering of (i)
--------------------
the Notes pursuant to the Demand Registration Statement or the Shelf
Registration Statement, (ii) the Notes pursuant to any Offering pursuant to Rule
144A in which a rating is customarily obtained or (iii) the Exchange Notes, the
Company shall, at the Company's expense, if so requested by the Purchasers, take
all reasonable action necessary to enable Standard & Poor's Ratings Services,
Inc. and Moody's Investors Service, Inc. to provide their respective credit
ratings of the Notes or the Exchange Notes.
9.7 The Depositary. The Company will cooperate with the Purchasers
--------------
and use its best efforts to permit the Notes or Exchange Notes, when issued, to
be eligible for clearance and settlement through the facilities of the
Depositary.
9.8. Additional Company Information. For the benefit of holders and
------------------------------
beneficial owners from time to time of Notes or Exchange Notes, the Company
shall, upon the request of any such holder, furnish, at its expense, to holders
and beneficial owners of Notes or Exchange Notes and prospective purchasers of
such securities information ("Additional Company Information") satisfying the
------------------------------
requirements of subsection (d)(4) of Rule 144A.
9.9. Agreement Not to Offer or Sell Additional Securities. During
----------------------------------------------------
the period of 90 days following the later of (a) the date of the Offering
Memorandum in connection with any Offering pursuant to the Exchange Offer
Registration Statement, Demand Registration Statement, Shelf Registration
Statement or any Offering of Notes for an aggregate purchase price of at least
$25,000,000 pursuant to Rule 144A in which the application of this Section 9.9
is necessary in the judgment of a sales agent and (b) the date of the
consummation of such Offering, the Company will not, without the prior written
consent of the Selling Purchasers (which consent may be withheld at the sole
discretion of the Selling Purchasers), directly or indirectly, sell, offer,
contract or grant any option to sell, pledge, transfer or establish an open "put
equivalent position" within the meaning of Rule 16a-1(h) under the Exchange Act,
or otherwise dispose of or transfer, or announce the offering of, or file any
registration statement under the Securities Act in respect of, any debt
securities of the Company or securities exchangeable for or convertible into
debt securities of the Company (other than as contemplated by this Agreement and
other than to register the Exchange Notes).
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9.10. Exchange and Registration Rights Agreement. The Company shall
------------------------------------------
comply with all provisions and obligations of the Exchange and Registration
Rights Agreement and shall comply with all applicable federal and state
securities laws in connection therewith.
9.11. No Integration. The Company agrees that it will not and (to
--------------
the extent within its control) it will cause its Affiliates not to make any
offer or sale of securities of any class of the Company if, as a result of the
doctrine of "integration" referred to in Rule 502 under the Securities Act, such
offer or sale would render invalid (for the purpose of (a) the sale of the Notes
by the Company to the Purchasers, (b) the resale of Notes or Exchange Notes by
the Purchasers to Subsequent Purchasers or (c) the resale of Notes or Exchange
Notes by such Subsequent Purchasers to others) any applicable exemption from the
registration requirements of the Securities Act provided by Section 4(2) thereof
or by Rule 144A or Regulation S thereunder or otherwise.
9.12. Restriction on Repurchases. Until the expiration of two years
--------------------------
after the original issuance of the Notes, the Company will not, and will cause
its Affiliates not to, purchase or agree to purchase or otherwise acquire any
Notes or Exchange Notes which are "restricted securities" (as such term is
defined under Rule 144(a)(3) under the Securities Act), whether as beneficial
owner or otherwise unless, immediately upon any such purchase, the Company or
any Affiliate shall cause such Notes or Exchange Notes to be canceled or shall
not resell such Notes until the expiration of such period.
9.13. DTC Agreement. The Company will, promptly following the
-------------
request of and with the cooperation of the Required Holders, use its best
efforts to cause the Notes or Exchange Notes to be registered in book-entry form
in the name of Cede & Co., as nominee of The Depository Trust Company (the
"Depositary") pursuant to an agreement among the Company and the Depositary in
----------
the form then required by the Depositary.
9.14. PORTAL. The Company will, promptly following the request of
------
and with the cooperation of the holders of a majority of the aggregate principal
amount of the Notes and Exchange Notes, use its best efforts to cause the Notes
and Exchange Notes to be eligible for the National Association of Securities
Dealers, Inc. PORTAL market (the "PORTAL Market").
-------------
9.15. Form D. The Company will file with the Commission, not later
------
than 15 days after each Closing Date, five copies of a notice on Form D under
the Securities Act (one of which will be manually signed by a person duly
authorized by the Company) with respect to the Notes, will otherwise comply with
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the requirements of Rule 503 under the Securities Act, and will furnish promptly
to the Purchasers evidence of each such required timely filing (including a copy
thereof).
9.16. Syndication.
-----------
(a) At any time after one year from the Initial Closing Date, the
Company will, if reasonably requested by the Required Holders, assist the
Purchasers in completing any private or, at any time following the earlier to
occur of an IPO and the first anniversary of the Closing Date, public resale by
the Purchasers of the Notes or Exchange Notes or any portion thereof (including
any such resales of the Notes pursuant to any Offering and any resales of the
Exchange Notes following the completion of the Exchange Offer) in accordance
with the Purchasers' intended method of distribution. Such assistance may, in
each case, include the following:
(i) the Company's using commercially reasonable efforts to
ensure that the distribution efforts benefit materially from the Company's
existing lending relationships;
(ii) direct contact between the Company's senior management
and advisors and prospective purchasers;
(iii) responding to reasonable inquiries of, and providing
answers to, each prospective purchaser who so requests concerning the
Company and its Subsidiaries (to the extent such information is available
or can be acquired and made available to prospective purchasers without
unreasonable effort or expense and to the extent the provision thereof is
not prohibited by Applicable Law or applicable confidentiality
restrictions) and the terms and conditions of the applicable distribution;
(iv) if requested by the Required Holders in connection with
any Offering, (A) preparing an Offering Memorandum to the extent required
by Sections 9.2 and 9.3 and other materials to be used in connection with
the distribution (including assistance in completion of the Purchasers',
any sales or placement agent's, if any, or in the case of an underwritten
offering, the lead managers' and co-managers' reasonable due diligence
review of the Company and its Subsidiaries as an aid to such preparation)
and (B) complying with the procedures set forth in Section 6(d) of the
Exchange and Registration Rights Agreement (other than registration under
the Securities Act of the Notes or Exchange Notes
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being distributed) that would be applicable to such Offering if such
Offering were being made pursuant to a Shelf Registration Statement;
(v) hosting of one or more meetings of prospective
purchasers; and
(vi) promptly preparing and providing to the Purchasers (or
any sales or placement agent therefor and any underwriter thereof) all
information with respect to the Company, including projections, as the
Purchasers (or any sales or placement agent therefor and any underwriter
thereof) may reasonably request. Any such projections that will so be made
available to the Purchasers (or each placement or sales agent, if any,
therefor and each underwriter, if any, thereof) by the Company or any of
its representatives will be prepared in good faith based upon reasonable
assumptions; provided, however, that in no event shall the Company be
required to give any representations or warranties with respect to such
projections.
(b) The Company will allow the Required Holders (or any sales or
placement agent therefor or, in the case of an underwritten offering, the lead
manager and co-managers thereof, in each case, as may be selected by the
Purchasers and is reasonably acceptable to the Company), in consultation with
the Company, to manage all aspects of the distribution, including decisions as
to the selection of institutions to be approached and when they will be
approached, when their commitment will be accepted, which institutions will
participate, the allocations of the commitments among the prospective purchasers
and the amount and distribution of fees among the prospective purchasers.
9.17. Exchange Right. Upon the request of the Required Holders at
--------------
any time or from time to time, the Company will (a) exchange all or any portion
(pro rata among all the Holders) of the outstanding Notes for any other
evidences of indebtedness or debt securities of the Company ("Replacement
-----------
Notes") in the same aggregate principal amount as the then principal amount of
- -----
the Notes being exchanged and (b) enter into any such agreements, whether in the
form of an amendment hereto or to any other Financing Document, an indenture, a
note purchase agreement or otherwise (the "New Documents") as the Purchaser
-------------
shall deem necessary or desirable in connection with a resale of the Notes,
whether as a private placement, registered public offering or otherwise. The
Replacement Notes will have identical terms as the Notes for which they are
exchanged except for any changes to the relative ranking, interest rate or yield
for such Replacement Notes which shall be approved by all the Holders; provided,
however, that the aggregate principal amount of all Notes
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and Replacement Notes outstanding and the aggregate cash interest and premium
expense to the Company of all Notes and Replacement Notes outstanding after
giving effect to any such exchange shall not exceed such principal amount or
cash interest and premium expense of the Notes and any Replacement Notes
outstanding immediately before such exchange. Each Replacement Note shall be
subject to the requirements of Sections 10.6 and 10.7 hereof or, if applicable,
the corresponding section of the Indenture. Notwithstanding the foregoing, the
New Documents will (a) contain such additional terms and provisions as are
customarily contained in such documents governing the issuance of debt,
including provisions governing the rights of indenture trustees and/or
administrative agents and bank set-off and sharing provisions, as applicable,
and such other additional terms and provisions as are reasonably requested by
the Purchasers in order to effectuate the resale of the Replacement Notes and
(b) be in such form and will contain such terms and provisions as are necessary
to comply with all Applicable Laws, including in the case of an indenture the
TIA. All Notes and Replacement Notes will vote together as one series on all
matters requiring the vote of the Notes or Replacement Notes except for matters
affecting one series of Notes or Replacement Notes and not affecting another
series of Notes or Replacement Notes. Unless the context otherwise requires, all
references to the Notes herein includes the Replacement Notes and all references
to the Purchasers herein includes any trustee for any indenture pursuant to
which the Replacement Notes are issued.
SECTION 10
THE NOTES
---------
10.1. Form and Execution. The Notes shall be in the form of
------------------
Exhibit A hereto. The Notes shall be executed on behalf of the Company by its
- ---------
President or one of its Vice Presidents, under its corporate seal reproduced
thereon attested by its Secretary or one of its Assistant Secretaries. The
signature of any of these officers on the Notes may be manual or facsimile.
Notes bearing the manual or facsimile signatures of individuals who
were at any time the proper officers of the Company shall bind the Company,
notwithstanding that such individuals or any of them have ceased to hold such
offices prior to the authentication and delivery of such Notes or did not hold
such offices at the date of such Notes.
10.2. Terms of the Notes. The terms of the Notes shall be as set
------------------
forth in Exhibit A. Without limiting the foregoing:
---------
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(a) Stated Maturity. The Stated Maturity of the Notes shall be
---------------
December 31, 2006.
(b) Interest. The Notes will bear interest and Special Interest,
--------
if any, on their principal amount and overdue interest and Special Interest as
provided in Exhibit A.
---------
10.3. Denominations. The Notes shall be issuable only in registered
-------------
form without coupons and only in denominations of U.S. $1,000 and any integral
multiple thereof.
10.4. Form of Legend for the Notes. Unless otherwise permitted by
----------------------------
Section 10.7, every Note issued and delivered hereunder shall bear a legend in
substantially the following form:
THE SECURITY REPRESENTED BY THIS CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR QUALIFIED UNDER APPLICABLE STATE
SECURITIES LAWS. SUCH SHARES MAY BE OFFERED, SOLD OR TRANSFERRED ONLY IN
COMPLIANCE WITH THE REQUIREMENTS OF SUCH ACT AND OF ANY APPLICABLE STATE
SECURITIES LAWS AND SUBJECT TO THE PROVISIONS OF THE PURCHASE AGREEMENT, DATED
AS OF DECEMBER 18, 1998, BETWEEN DOLLAR FINANCIAL GROUP, INC., GS MEZZANINE
PARTNERS, L.P., GS MEZZANINE PARTNERS OFFSHORE, L.P., STONE STREET FUND 1998,
L.P., BRIDGE STREET FUND 1998, L.P., ARES LEVERAGED INVESTMENT FUND L.P., AND
ARES LEVERAGED INVESTMENT FUND II, L.P. A COPY OF SUCH PURCHASE AGREEMENT IS
AVAILABLE AT THE OFFICES OF THE COMPANY.
10.5. Payments and Computations. All payments of interest on the
-------------------------
Notes shall be paid to the persons in whose names such Notes are registered on
the Security Register at the close of business on the date fifteen days prior
to the related Interest Payment Date(the "Regular Record Date") and all
-------------------
payments of principal on the Notes shall be paid to the persons in whose names
such Notes are registered on the applicable Redemption Date or at Maturity, as
applicable. Principal on any Note shall be payable only against surrender
therefor, while payments of interest on Notes shall be made, in accordance with
this Agreement and subject to applicable laws and regulations, by check mailed
on or before the due date for such payment to the person entitled thereto at
such person's address appearing on the Security Register (or, in the case of a
Holder holding not less than $1,000,000 aggregate principal amount of Notes, by
wire transfer to such account as such Holder shall
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designate by written instructions received by the Company no less than 15 days
prior to any applicable Interest Payment Date, which wire instruction shall
continue in effect until such time as the Holder otherwise notifies the Company
or such Holder no longer is the registered owner of such Note or Notes).
Interest will be computed on the basis of a 360-day year of twelve 30-
day months.
10.6. Registration, Registration of Transfer and Exchange.
---------------------------------------------------
(a) Security Register. The Company shall maintain a register (the
-----------------
"Security Register") for the registration or transfer of the Notes. The name
- ------------------
and address of the Holder of each Note, records of any transfers of the Notes
and the name and address of any transferee of a Note shall be entered in the
Security Register and the Company shall, promptly upon receipt thereof, update
the Security Register to reflect all information received from a Holder. There
shall be no more than one Holder for each Note, including all beneficial
interests therein.
(b) Registration of Transfer. Upon surrender for registration of
------------------------
transfer of any Note at the office or agency of the Company, the Company shall
execute and deliver, in the name of the designated transferee or transferees,
one or more new Notes, of any authorized denominations and like aggregate
principal amount.
(c) Exchange. At the option of the Holder, Notes may be exchanged
--------
for other Notes, of any authorized denominations and of like aggregate principal
amount, upon surrender of the Notes to be exchanged at such office or agency.
Whenever any Notes are so surrendered for exchange, the Company shall execute
and deliver the Notes which the Holder making the exchange is entitled to
receive.
(d) Effect of Registration of Transfer or Exchange. All Notes
----------------------------------------------
issued upon any registration of transfer of exchange of Notes shall be the valid
obligations of the Company, evidencing the same debt, and entitled to the same
benefits under this Agreement, as the Notes surrendered upon such registration
of transfer or exchange.
(e) Requirements; Charges. Every Note presented or surrendered for
---------------------
registration of transfer or for exchange shall (if so required by the Company)
be duly endorsed, or be accompanied by a written instrument of transfer in form
satisfactory to the Company duly executed, by the Holder thereof
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or his attorney duly authorized in writing. No service charge shall be made for
any registration of transfer or exchange of Notes, but the Company may require
payment of a sum sufficient to cover any tax or other governmental charge that
may be imposed in connection with any registration of transfer or exchange of
Notes, other than exchanges pursuant to Section 8.11 not involving any transfer.
(f) Certain Limitations. If the Notes are to be redeemed in part,
-------------------
the Company shall not be required (i) to issue, register the transfer of or
exchange any Note during a period beginning at the opening of business 15 days
before the day of the mailing of a notice of redemption of any such Notes
selected for redemption under Section 12.2 and ending at the close of business
on the day of such mailing, or (ii) to register the transfer of or exchange any
Note so selected for redemption in whole or in part, except the unredeemed
portion of any Note being redeemed in part.
10.7. Transfer Restrictions.
---------------------
(a) No Note may be sold, transferred or otherwise disposed of (any
such sale, transfer or other disposition is herein referred to as a "sale"),
----
except in compliance with this Section 10.7.
(b) A Holder may sell Notes to a transferee that is an Accredited
Investor or a Qualified Institutional Buyer; provided, however, that each of the
following conditions is satisfied:
(i) such Holder or transferee represents that it is acquiring
the Note or Notes for its own account and that it is not acquiring such
Note or Notes with a view to, or for offer or sale in connection with, any
distribution thereof (within the meaning of the Securities Act) that would
be in violation of the securities laws of the United States or any state
thereof, but subject, nevertheless, to the disposition of its property
being at all times within its control; and
(ii) such transferee agrees to be bound by the provisions of
this Section 10.7 with respect to any resale of the Notes.
(c) A Holder may sell its Notes to a transferee in accordance with
Regulation S under the Securities Act; provided, however, that each of the
following conditions is satisfied:
(i) if such Holder would be deemed to be the Company, a
distributor or any of their respective affiliates or any person acting on
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behalf of any of the foregoing for purposes of Regulation S under the
Securities Act:
(A) the Company is a "reporting issuer" as such term is defined
in Rule 902(l) under the Securities Act;
(B) any distributor (as defined in Rule 902(c) under the
Securities Act) involved in a sale of Notes has agreed in writing that
all offers and sales of Notes shall be made only in accordance with
the provisions of Rule 903 or Rule 904 under the Securities Act;
(C) all offering materials and documents (other than press
releases) used in connection with offers and sales of the Notes shall
conform to the requirements of Rule 902(h)(2) under the Securities
Act; and
(D) each distributor (as defined in (2) above) selling Notes
to a distributor, dealer (as defined in Section 2(12) of the
Securities Act), or a person receiving a selling concession, fee or
other remuneration in respect of the Notes sold sends a confirmation
or other notice to the purchaser stating that the purchaser is subject
to the same restrictions on offers and sales that apply to a
distributor prescribed by Regulation S under the Securities Act.
(ii) if such exercise and/or sale by a Holder is not governed
by (i) above:
(A) the offer of Notes is not made to a person in the United
States;
(B) either:
(1) at the time the buy order is originated, the
transferee is outside the United States or the Holder and any person
acting on its behalf reasonably believes that the transferee is
outside the United States, or
(2) the transaction is executed in, on or through the
facilities of a designated offshore securities market and neither the
Holder nor any person acting on its behalf knows that the transaction
was pre-arranged with a buyer in the United States;
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(C) no directed selling efforts are made in contravention of
the requirements of Rule 903(b) or 904(b) of Regulation S under the
Securities Act, as applicable; and
(D) the transaction is not part of a plan or scheme to evade
the registration requirements of the Securities Act.
(d) In the event of a proposed exercise or sale that does not
qualify under either Section 10.7(b) or 10.7(c) above, a Holder may sell
its Notes only if:
(i) such Holder gives written notice to the Company of its
intention to exercise or effect such sale, which notice (A) shall describe
the manner and circumstances of the proposed transaction in reasonable
detail and (B) shall designate the counsel for such Holder, which counsel
shall be reasonably satisfactory to the Company;
(ii) counsel for the Holder shall render an opinion, to the
effect that such proposed sale may be effected without registration under
the Securities Act or under applicable Blue Sky laws; and
(iii) such Holder or transferee complies with Sections
10.7(b)(i) and 10.7(b)(ii).
10.8. Mutilated, Destroyed, Lost and Stolen Notes. If any mutilated
-------------------------------------------
Note is surrendered to the Company, the Company shall executed and deliver in
exchange therefor a new Notes of the same principal amount and bearing a number
not contemporaneously outstanding.
If there shall be delivered to the Company (a) evidence to its
satisfaction of the destruction, loss or theft of any Note and (b) such security
or indemnity as may be required by then to save each of it and any agent
harmless, then, in the absence of notice that such Note has been acquired by a
bona fide purchaser, the Company shall execute and deliver, in lieu of any such
destroyed, lost or stolen Note, a new Note of a like principal amount and
bearing a number not contemporaneously outstanding.
In case any such mutilated, destroyed, lost or stolen Note has become
or is about to become due and payable, the Company in its discretion may,
instead of issuing a new Note, pay such Note.
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Upon the issuance of any new Note this Section, the Company may
require the payment of a sum sufficient to cover any tax or other governmental
charge that may be imposed in relation thereto and any other expenses connected
therewith.
Every new Note issued pursuant to this Section in lieu of any
destroyed, lost or stolen Note shall constitute an original additional
contractual obligation of the Company, whether or not the destroyed, lost or
stolen Note shall be at any time enforceable by anyone, and shall be entitled to
all the benefits of this Agreement equally and proportionately with any and all
other Notes duly issued hereunder.
The provisions of this Section are exclusive and shall preclude (to
the extent lawful) all other rights and remedies with respect to the replacement
or payment of mutilated, destroyed, lost or stolen Notes.
10.9. Persons Deemed Owners. Prior to due presentment of a Note for
---------------------
registration of transfer, the Company and any agent of the Company may treat the
Person in whose name such Note is registered as the owner of such Note for the
purpose of receiving payment of principal of and interest on such Note and for
all other purposes whatsoever, whether or not such Note be overdue and neither
the Company nor any agent of the Company shall be affected by notice to the
contrary.
10.10. Cancellation. All Notes surrendered for payment, redemption,
------------
registration of transfer or exchange shall, if surrendered to any Person other
than the Company, be delivered to the Company and shall be promptly canceled by
it. The Company shall cancel any Notes previously issued and delivered
hereunder which the Company may have reacquired.
10.11. Home Office Payment. So long as any Purchaser or its nominee
-------------------
shall be the holder of any Note, and notwithstanding anything contained in this
Agreement or such Note to the contrary, the Company will pay all sums becoming
due on such Note for principal, premium, if any, and interest by such method and
at such address as such Purchaser shall have from time to time specified to the
Company in writing for such purpose, without the presentation or surrender of
such Note or the making of any notation thereon, except that upon written
request of the Company made concurrently with or reasonably promptly after
payment or prepayment in full of any Note, such Purchaser shall surrender such
Note for cancellation reasonably promptly after any such request, to the Company
at its principal executive office. Prior to any sale or other disposition of
any Note held by such Purchaser or its nominee such Purchaser will, at its
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election, either endorse thereon the amount of principal paid thereon and the
last date to which interest has been paid thereon or surrender such Note to the
Company in exchange for a new Note or Notes pursuant to Section 10.6. The
Company will afford the benefits of this Section 10.11 to any Institutional
Investor that is the direct or indirect transferee of any Note purchased by such
Purchaser under this Agreement and that has made the same agreement relating to
such Note as such Purchaser made in this Section 10.11.
SECTION 11
EVENTS OF DEFAULT
-----------------
11.1. Events of Default. An Event of Default shall exist upon the
-----------------
occurrence of any of the following specified events (each an "Event of
--------
Default"):
(a) the Company defaults in the payment when due of interest or
Special Interest, if any, on the Notes and such default continues for a period
of 30 days;
(b) the Company defaults in the payment when due of principal of or
premium, if any, on the Notes when the same becomes due and payable at its
Maturity;
(c) the Company fails to comply with any of the provisions of
Section 7.7, 7.9 or 8.2 through 8.11, inclusive, hereof or Section 7.8 of the
Holdings Purchase Agreement, or the Merger is not consummated by the Closing
Date;
(d) the Company fails to observe or perform any other covenant or
other agreement in this Agreement or the Notes and such failure continues for a
period of 60 days after the Company has received a notice of such failure from
any Holder, which notice must specify the failure, demand that it be remedied
and state that the notice is a "Notice of Default";
(e) any representation, warranty, certification or statement made
or deemed to have been made by or on behalf of Holdings, the Company or any
Subsidiary of Holdings or by any officer of Holdings, the Company or any
Subsidiary of Holdings in respect of any Transaction Document or in any
statement or certificate at any time given by or on behalf of Holdings, the
Company or any Subsidiary of Holdings or by any officer of Holdings, the Company
or any Subsidiary of Holdings in writing pursuant hereto or in
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connection herewith or therewith shall be false in any material respect on the
date as of which made;
(f) a default occurs under any mortgage, indenture or instrument under
which there may be issued or by which there may be secured or evidenced any
Indebtedness for money borrowed by the Company or any of its Subsidiaries (or
payment of which is Guaranteed by the Company or any of its Subsidiaries),
whether such Indebtedness or Guarantee now exists, or is created after the date
of this Agreement, which default (i) constitutes a failure to pay any portion of
the principal of or premium, if any, or interest on such Indebtedness when due
and payable after the expiration of any applicable grace period provided in such
Indebtedness on the date of such default (a "Payment Default") or (ii) shall
---------------
have resulted in such Indebtedness being accelerated or otherwise becoming or
being declared due and payable prior to its stated maturity and, in each case,
the principal amount of any such Indebtedness, together with the principal
amount of any other such Indebtedness under which there has been a Payment
Default or the maturity of which has been so accelerated, aggregates $5.0
million or more;
(g) a final judgment or final judgments for the payment of money
are entered by a court or courts of competent jurisdiction against the Company
or any of its Subsidiaries and such judgment or judgments remain unpaid and
undischarged for a period (during which execution shall not be effectively
stayed) of 60 days, provided that the aggregate of all such undischarged
judgments exceeds $5.0 million;
(h) the Company or any of its Significant Subsidiaries or any group
of Subsidiaries that, taken as a whole, would constitute a Significant
Subsidiary pursuant to or within the meaning of Bankruptcy Law:
(i) commences a voluntary case or proceeding,
(ii) consents to the entry of a decree or order for relief
against it in an involuntary case or proceeding or to the commencement of
any case or proceeding against it,
(iii) consents to the filing of a petition or to the
appointment of or taking possession by a Custodian of it or for all or any
substantial part of its property,
(iv) makes or consents to the making of a general assignment
for the benefit of its creditors,
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(v) generally is not paying, or admits in writing that it is
not able to pay, its debts as they become due, or
(vi) a court of competent jurisdiction enters an order or
decree under any Bankruptcy Law that:
(A) is for relief against the Company or any of its
Significant Subsidiaries or any group of Subsidiaries that, taken as a
whole, would constitute a Significant Subsidiary, in an involuntary
case or proceeding;
(B) appoints a Custodian of the Company or any of its
Significant Subsidiaries or any group of Subsidiaries that, taken as a
whole, would constitute a Significant Subsidiary, or for all or any
substantial part of the property of the Company or any of its
Significant Subsidiaries or any group of Subsidiaries that, taken as a
whole, would constitute a Significant Subsidiary, or approves as
properly filed a petition seeking reorganization, arrangement,
adjustment or composition of or in respect of any of the foregoing; or
(C) orders the winding up or liquidation of the Company or
any of its Significant Subsidiaries or any group of Subsidiaries that,
taken as a whole, would constitute a Significant Subsidiary, or
adjudges any of them a bankrupt or insolvent;
and any such order or decree remains unstayed and in effect for 60
consecutive days.
The term "Custodian" means any custodian, receiver, trustee, assignee,
---------
liquidator, sequestrator or similar official under any Bankruptcy Law.
11.2. Remedies. If an Event of Default (other than an Event of
--------
Default specified in Section 11.1(h)) occurs and is continuing, then and in
every such case the Holders of (i) more than 50% in principal amount of the
Notes at the time outstanding until the earlier of (x) the Exchange Offer having
been consummated by the Company or (y) a registration statement permitting the
resales of the Notes having been declared effective by the Commission, and (ii)
thereafter, 25% or more in principal amount of the then outstanding Notes may
declare the principal amount of all the Notes to be due and payable immediately,
by a notice in writing to the Company, and upon any such declaration such
principal amount and any accrued interest and Special Interest,
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if any, shall become immediately due and payable. For the avoidance of doubt, if
any Payment Default or acceleration that constitutes an Event of Default under
Section 11.1(f) shall have occurred and prior to any acceleration under this
Section 11.2 such Payment Default shall have been cured or waived or such
acceleration shall have been rescinded, then from and after such cure, waiver or
rescission, such Event of Default shall no longer be deemed to be continuing. If
an Event of Default specified in Section 11.1(h) occurs and is continuing, the
principal amount of and any accrued interest and Special Interest, if any, on
the outstanding Notes shall automatically, and without any declaration or other
action on the part of any Holder, become immediately due and payable.
At any time after such a declaration of acceleration has been made and
before a judgment or decree for payment of the money due has been obtained, the
Holders of a majority in principal amount of the outstanding Notes, by written
notice to the Company, may rescind and annul such declaration and its
consequences if:
(a) the Company has paid a sum sufficient to pay
(i) all overdue interest and Special Interest on all Notes;
(ii) the principal of (and premium, if any, on) any Notes
which have become due otherwise than by such declaration of acceleration
(including any Notes required to have been purchased pursuant to an offer
to purchase that the Company is required to make hereunder) and any
interest and Special Interest thereon at the rate borne by the Notes; and
(iii) to the extent that payment of such interest is lawful,
interest upon overdue interest and overdue Special Interest at the rate
provided therefor in the Notes;
and
(b) all Events of Default, other than the nonpayment of the
principal amount of Notes and interest and Special Interest thereon which have
become due solely by such declaration of acceleration, have been cured or waived
as provided in Section 11.3.
11.3. Waiver of Past Defaults. The Required Holders may on behalf of
-----------------------
the Holders of all the Notes waive any past default hereunder and its
consequences, except a default:
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(a) in the payment of the principal (or premium, if any) or
interest or Special Interest on any Note (including any Note which is required
to have been purchased pursuant to an offer to purchase that the Company is
required to make hereunder), or
(b) in respect of a covenant or provision hereof which under
Section 16.4 cannot be modified or amended without the consent of the Holder of
each outstanding Note affected.
Upon any such waiver, such default shall cease to exist, and any Event
of Default arising therefrom shall be deemed to have been cured, for every
purpose of this Agreement; provided, however, no such waiver shall extend to any
subsequent or other default or impair any right consequent thereon.
SECTION 12
REDEMPTION
----------
12.1. Right of Redemption. The Notes may be redeemed at the election
-------------------
of the Company at such times, in such amounts and at the Redemption Prices
(together with any applicable accrued interest and any Special Interest to the
Redemption Date) specified in the form of Note attached as Exhibit A hereto.
---------
12.2. Partial Redemptions. In case the Company elects to redeem less
-------------------
than all of the Notes, the Company shall redeem the Notes pro rata from each
Holder. For all purposes of this Agreement, unless the context otherwise
requires, all provisions relating to the redemption of Notes shall relate, in
the case of any Notes redeemed or to be redeemed only in part, to the portion of
the principal amount of such Notes which has been or is to be redeemed.
12.3. Notice of Redemption. Notice of redemption shall be given by
--------------------
first-class mail, postage prepaid, mailed not less than 30 nor more than 60 days
prior to the Redemption Date, to each Holder of Notes to be redeemed, at his
address appearing in the Security Register.
All notices of redemption shall state:
(a) the Redemption Date,
(b) the Redemption Price,
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(c) if less than all the Outstanding Notes are to be redeemed, the
portion of each Note to be redeemed,
(d) that on the Redemption Date the Redemption Price will become
due and payable upon each such Note to be redeemed and that interest and any
Special Interest thereon will cease to accrue on and after said date, and
(e) the place or places where such Notes are to be surrendered for
payment of the Redemption Price.
Notice of redemption of Notes to be redeemed at the election of the
Company shall be given by the Company and at the expense of the Company.
12.4. Deposit of Redemption Price. Prior to any Redemption Date, the
---------------------------
Company shall segregate and hold in trust an amount of money sufficient to pay
the Redemption Price of, and (except if the Redemption Date shall be an Interest
Payment Date) any applicable accrued interest and Special Interest on, all the
Notes which are to be redeemed on that date.
12.5. Notes Payable on Redemption Date. If notice of redemption shall
--------------------------------
have been given as provided above, the Notes so to be redeemed shall, on the
Redemption Date, become due and payable at the Redemption Price therein
specified, and from and after such date (unless the Company shall default in the
payment of the Redemption Price and any applicable accrued interest and Special
Interest) such Notes shall not bear interest. Upon surrender of any such Note
for redemption in accordance with said notice, such Note shall be paid by the
Company at the Redemption Price, together with any applicable accrued interest
and Special Interest to the Redemption Date; provided, however, that instalments
of interest or Special Interest whose Stated Maturity is on or prior to the
Redemption Date shall be payable to the Holders of such Notes, or one or more
Predecessor Notes, registered as such at the close of business on the relevant
Record Dates according to their terms and the provisions of this Agreement.
If any Note called for redemption shall not be so paid upon surrender
thereof for redemption, the principal (and premium, if any) shall, until paid,
bear interest from the Redemption Date at the rate provided by the Note.
12.6. Notes Redeemed in Part. Any Note which is to be redeemed only
----------------------
in part shall be surrendered at the principal offices of the Company (with, if
the Company so requires, due endorsement by, or a written instrument of transfer
in form satisfactory to the Company duly executed by, the Holder thereof
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or his attorney duly authorized in writing), and the Company shall execute and
deliver to the Holder of such Note without service charge, a new Note or Notes,
of any authorized denomination as requested by such Holder, in aggregate
principal amount equal to and in exchange for the unredeemed portion of the
principal of the Note so surrendered.
SECTION 13
SUBORDINATION OF NOTES
----------------------
13.1. Notes Subordinate to Senior Indebtedness. The Company covenants
----------------------------------------
and agrees, and each Holder of a Note, by his acceptance thereof, likewise
covenants and agrees, that, to the extent and in the manner hereinafter set
forth in this Section 13, the payment of the principal of (and premium, if any)
and interest and any Special Interest on each and all of the Notes are hereby
expressly made subordinate and subject in right of payment to the prior payment
in full of all Senior Indebtedness of the Company. The provisions of this
Section 13 shall continue to be effective or be reinstated, as the case may be,
if at any time any payment of any of the Senior Indebtedness is rescinded or
must otherwise be returned by a holder of Senior Indebtedness upon any
Proceeding or otherwise, all as though such payment had not been made.
13.2. Payment Over of Proceeds Upon Dissolution, Etc. In the event
-----------------------------------------------
of (a) any insolvency or bankruptcy case or proceeding, or any receivership,
liquidation, reorganization or other similar case or proceeding in connection
therewith, relative to the Company or to its creditors, as such, or to its
assets, or (b) any liquidation, dissolution or other winding up of the Company,
whether voluntary or involuntary and whether or not involving insolvency or
bankruptcy, or (c) any assignment for the benefit of creditors or any other
marshalling of assets and liabilities of the Company, then and in any such event
specified in clause (a), (b) or (c) above (each such event, if any, herein
sometimes referred to as a "Proceeding") the holders of Senior Indebtedness
----------
shall be entitled to receive or retain payment in full in cash or Cash
Equivalents of all amounts due or to become due on or in respect of all Senior
Indebtedness, before the Holders of the Notes are entitled to receive any
payment or distribution of any kind or character, whether in cash, property or
securities, on account of principal of (or premium, if any) or interest or any
Special Interest on or other obligations in respect of the Notes (including any
interest accruing on or after the filing of any Proceeding relating to the
Company, whether or not allowed in such Proceeding) or on account of any
purchase or other acquisition of Notes by the Company or any Subsidiary of the
Company (all such payments, distributions, purchases and
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acquisitions herein referred to, individually and collectively, as a "Notes
-----
Payment"), and to that end the holders of Senior Indebtedness shall be entitled
- -------
to receive, for application to the payment thereof, any Notes Payment which may
be payable or deliverable in respect of the Notes in any such Proceeding.
In the event that, notwithstanding the foregoing provisions of this
Section 13.2, the Holder of any Note shall have received any Notes Payment
before all Senior Indebtedness of the Company is paid in full in cash or Cash
Equivalents, then and in such event such Notes Payment shall be paid over or
delivered forthwith to the trustee in bankruptcy or other person making payment
or distribution of assets of the Company for the application to the payment of
all Senior Indebtedness remaining unpaid, to the extent necessary to pay the
Senior Indebtedness in full in cash or Cash Equivalents, after giving effect to
any concurrent payment or distribution to or for the holders of Senior
Indebtedness.
For purposes of this Section 13 only, the words "any payment or
distribution of any kind or character, whether in cash, property or securities"
shall not be deemed to include a payment or distribution of stock or securities
of the Company provided for by a plan of reorganization or readjustment
authorized by an order or decree of a court of competent jurisdiction in a
reorganization proceeding under any applicable bankruptcy law or of any other
corporation provided for by such plan of reorganization or readjustment which
stock or securities are subordinated in right of payment to all then outstanding
Senior Indebtedness to substantially the same extent as, or to a greater extent
than, the Notes are so subordinated as provided in this Section 13. The
consolidation of the Company with, or the merger of the Company into, another
Person or the liquidation or dissolution of the Company following the conveyance
or transfer of all or substantially all of its properties and assets as an
entirety to another Person upon the terms and conditions set forth in Section
8.11 shall not be deemed a Proceeding for the purposes of this Section 13.2 if
the Person formed by such consolidation or into which the Company is merged or
the Person which acquires by conveyance or transfer such properties and assets,
as the case may be, shall, as a part of such consolidation, merger, conveyance
or transfer, complies with the conditions set forth in Section 8.11.
13.3. No Payment When Senior Indebtedness in Default. In the event
----------------------------------------------
that any Senior Payment Default (as defined below) shall have occurred and be
continuing, then no Notes Payment shall be made unless and until such Senior
Payment Default shall have been cured or waived or shall have ceased to exist or
all amounts then due and payable in respect of Senior Indebtedness shall have
been paid in full in cash or Cash Equivalents. "Senior Payment Default" means
----------------------
any default in the payment of principal of (or premium, if any) or
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interest on Designated Senior Indebtedness when due, whether at the due date of
any such payment or by declaration of acceleration, call for redemption.
Upon the occurrence of a Senior Nonmonetary Default and receipt of
written notice by the Company of the occurrence of such Senior Nonmonetary
Default from any holder of Designated Senior Indebtedness (or any trustee, agent
or other representative for such holder) which is the subject of such Senior
Nonmonetary Default, no payments on account of principal of, premium, if any, or
Notes Payment may be made during a period (the "Payment Blockage Period")
-----------------------
commencing on the date of the receipt by the Company of such notice and ending
the earlier of (i) the date on which such Senior Nonmonetary Default shall have
been cured or waived or ceased to exist or all Designated Senior Indebtedness
which was the subject of such Senior Nonmonetary Default shall have been paid in
full in cash or Cash Equivalents and (ii) the 179th day after the date of the
receipt of such notice. No Senior Nonmonetary Default that existed or was
continuing on the date of the commencement of a Payment Blockage Period may be
made the basis of the commencement of a subsequent Payment Blockage Period
whether or not within a period of 360 consecutive days, unless such Senior
Nonmonetary Default shall have been cured for a period of not less than 90
consecutive days; provided, however, any breach of any financial covenant for a
period commencing after the expiration of a Payment Blockage Period that would
give rise to a new event of default, even though such breach is a breach of a
provision under which a prior event of default previously existed, shall
constitute a new event of default for this purpose. In any event,
notwithstanding the foregoing, no more than one Payment Blockage Period may be
commenced during any 360-day period and there shall be a period of at least 181
days during each 360-day period when no Payment Blockage Period is in effect.
"Senior Nonmonetary Default" means the occurrence or existence and continuance
- ---------------------------
of an event of default with respect to Senior Indebtedness, other than a Senior
Payment Default, that permits the holders of the Designated Senior Indebtedness
(or a trustee or other agent on behalf of the holders thereof) then to declare
such Designated Senior Indebtedness due and payable prior to the date on which
it would otherwise become due and payable.
The failure to make any payment on the Notes by reason of the
provisions of this Section 13.3 will not be construed as preventing the
occurrence of an Event of Default with respect to the Notes arising from any
such failure to make payment. Upon termination of any period of Payment Blockage
Period the Company shall resume making any and all required payments in respect
of the Notes, including any missed payments.
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In the event that, notwithstanding the foregoing, the Company shall
make any Notes Payment to any Holder prohibited by the foregoing provisions of
this Section 13.3, then and in such event such Notes Payment shall be paid over
and delivered forthwith to the holders of the Senior Indebtedness of the Company
in the same form received and, until so turned over, the same shall be held in
trust by such Holder as the property of the holders of the Senior Indebtedness.
By reason of such subordination, in the event of insolvency by the
Company, unsubordinated creditors of the Company who are not holders of Senior
Indebtedness or of the Notes may recover less, ratably, than holders of Senior
Indebtedness and more, ratably, than Holders of the Notes.
The provisions of this Section 13.3 shall not apply to any Notes
Payment with respect to which Section 13.2 would be applicable.
13.4. Payment Permitted If No Default. Nothing contained in this
-------------------------------
Section 13 or elsewhere in this Agreement or in any of the Notes shall prevent
the Company, at any time except during the pendency of any Proceeding referred
to in Section 13.2 or under the conditions described in Section 13.3, from
making Notes Payments.
13.5. Subrogation to Rights of Holders of Senior Indebtedness. Only
-------------------------------------------------------
after the payment in full in cash or Cash Equivalents of all amounts due or to
become due on or in respect of Senior Indebtedness of the Company and, unless
the holders of Senior Indebtedness shall have the ability to terminate such
commitments, the termination of all commitments in respect thereof, the Holders
of the Notes shall be subrogated to the rights of the holders of Senior
Indebtedness to receive payments and distributions of cash, property and
securities applicable to such Senior Indebtedness until the principal of (and
premium, if any) and interest and any Special Interest on the Notes shall be
paid in full. For purposes of such subrogation, no payments or distributions to
the holders of the Senior Indebtedness of the Company of any cash, property or
securities to which the Holders of the Notes would be entitled except for the
provisions of this Section 13, and no payments over pursuant to the provisions
of this Section 13 to the holders of Senior Indebtedness by Holders of the
Notes, shall, as among the Company, its creditors other than holders of Senior
Indebtedness and the Holders of the Notes, be deemed to be a payment or
distribution by the Company to or on account of the Senior Indebtedness of the
Company.
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13.6. Provisions Solely to Define Relative Rights. The provisions of
-------------------------------------------
this Section 13 are and are intended solely for the purpose of defining the
relative rights of the Holders on the one hand and the holders of Senior
Indebtedness on the other hand. Nothing contained in this Section 13 or
elsewhere in this Agreement or in the Notes is intended to or shall (a) impair,
as among the Company, its creditors other than holders of Senior Indebtedness
and the Holders of the Notes, the obligation of the Company, which is absolute
and unconditional (and which, subject to the rights under this Section 13 of the
holders of Senior Indebtedness, is intended to rank equally with all other
general unsecured obligations of the Company), to pay to the Holders of the
Notes the principal of (and premium, if any) and interest and any Special
Interest on the Notes as and when the same shall become due and payable in
accordance with their terms; or (b) affect the relative rights against the
Company of the Holders of the Notes and creditors of the Company other than the
holders of Senior Indebtedness; or (c) prevent the Holder of any Note from
exercising all remedies otherwise permitted by applicable law upon default under
this Agreement, subject to the rights, if any, under this Section 13 of the
holders of Senior Indebtedness to receive cash, property and securities
otherwise payable or deliverable to such Holder.
13.7. No Waiver of Subordination Provisions. No right of any present
-------------------------------------
or future holder of any Senior Indebtedness to enforce subordination as herein
provided shall at any time in any way be prejudiced or impaired by any act or
failure to act on the part of the Company or by any act or failure to act, in
good faith, by any such holder, or by any noncompliance by the Company with the
terms, provisions and covenants of this Agreement, regardless of any knowledge
thereof any such holder may have or be otherwise charged with.
Without in any way limiting the generality of the foregoing paragraph,
the holders of Senior Indebtedness may, at any time and from time to time,
without the consent of or notice to the Holders of the Notes, without incurring
responsibility to the Holders of the Notes and without impairing or releasing
the subordination provided in this Section 13 or the obligations hereunder of
the Holders of the Notes to the holders of Senior Indebtedness, do any one or
more of the following: (i) change the manner, place or terms of payment or
extend the time of payment of, or renew or alter, Senior Indebtedness, or
otherwise amend or supplement in any manner Senior Indebtedness or any
instrument evidencing the same or any agreement under which Senior Indebtedness
is outstanding; (ii) sell, exchange, release or other wise deal with any
property pledged, mortgaged or otherwise securing Senior Indebtedness; (iii)
release any Person liable in any manner for the collection of Senior
Indebtedness; (iv) settle or compromise any such Senior Indebtedness or
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any other liability of any obligor of such Senior Indebtedness to such holder or
any security therefor or any liability issued in respect thereof and apply any
sums by whomsoever paid and however realized to any liability (including,
without limitation, payment of any of the Senior Indebtedness) in any manner or
order; (v) fail to take or to record or otherwise perfect, for any reason or for
no reason, any lien or security interest securing such Senior Indebtedness by
whomsoever granted, exercise or delay in or refrain from exercising any right or
remedy against any obligor or any guarantor or any other Person, elect any
remedy and otherwise deal freely with any obligor and any security for such
Senior Indebtedness or any liability of any obligor to the holders of such
Senior Indebtedness or any liability issued in respect of such Senior
Indebtedness; and (vi) exercise or refrain from exercising any rights against
the Company and any other Person.
13.8. Reliance on Judicial Order or Certificate of Liquidating Agent.
--------------------------------------------------------------
Upon any payment or distribution of assets or securities of the Company referred
to in this Section 13, the Holders of the Notes shall be entitled to rely upon
any order or decree entered by any court of competent jurisdiction in which such
Proceeding is pending, or a certificate of the trustee in bankruptcy, receiver,
liquidating trustee, custodian, assignee for the benefit of creditors, agent or
other Person making such payment or distribution, delivered to the Holders of
Notes, for the purpose of ascertaining the Persons entitled to participate in
such payment or distribution, the holders of the Senior Indebtedness and other
Indebtedness of the Company, the amount thereof or payable thereon, the amount
or amounts paid or distributed thereon and all other facts pertinent thereto or
to this Section 13.
13.9. Reliance by Holders of Senior Indebtedness on Subordination
-----------------------------------------------------------
Provisions. Each Holder of a Note, by accepting such Note, acknowledges and
- ----------
agrees that the foregoing subordination provisions are, and are intended to be,
an inducement and a consideration to each holder of any Senior Indebtedness,
whether such Senior Indebtedness was created or acquired before or after the
issuance of the Note, to acquire and continue to hold, or to continue to hold,
such Senior Indebtedness, and such holder of such Senior Indebtedness shall be
deemed conclusively to have relied on such subordination provisions in acquiring
and continuing to hold, or in continuing to hold, such Senior Indebtedness.
If a proper claim or proof of debt in the form required in such
proceeding is not filed by or on behalf of all Holders prior to 30 days before
the expiration of the time to file such claims or proofs, then the holders or a
representative of any Senior Indebtedness are hereby authorized, and shall have
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the right (without any duty), to file an appropriate claim on behalf of the
Holders of the Notes.
SECTION 14
SUBSIDIARY GUARANTEES
---------------------
14.1. Subsidiary Guarantees. Each of the Guarantors hereby, jointly
---------------------
and severally, unconditionally guarantees, on a senior subordinated basis, to
each Holder of a Note executed and delivered by the Company, irrespective of the
validity and enforceability of this Agreement, the Notes or the obligations of
the Company hereunder or thereunder, that: (a) the principal of and premium and
interest, including any Special Interest, if any, on the Notes shall be promptly
paid in full when due, whether at Stated Maturity, by acceleration, redemption
or otherwise, and interest on the overdue principal of (and any premium) and
interest and Special Interest on the Notes, if any, if lawful, and all other
obligations of the Company to the Holders hereunder or thereunder shall be
promptly paid in full or performed, all in accordance with the terms hereof and
thereof; and (b) in case of any extension of time of payment or renewal of any
Notes or any of such other obligations, that the same shall be promptly paid in
full when due or performed in accordance with the terms of the extension or
renewal, whether at Stated Maturity, by acceleration or otherwise. Failing
payment when due of any amount so guaranteed or any performance so guaranteed
for whatever reason, the Guarantors shall be jointly and severally obligated to
pay the same immediately. The Guarantors hereby agree that their obligations
hereunder shall be unconditional, irrespective of the validity, regularity or
enforceability of the Notes or this Agreement, the absence of any action to
enforce the same, any waiver or consent by any Holder with respect to any
provisions hereof or thereof, the recovery of any judgment against the Company,
any action to enforce the same or any other circumstance which might otherwise
constitute a legal or equitable discharge or defense of a guarantor. Each
Guarantor hereby waives diligence, presentment, demand of payment, filing of
claims with a court in the event of insolvency or bankruptcy of the Company, any
right to require a proceeding first against the Company, protest, notice and all
demands whatsoever and covenant that this Subsidiary Guarantee shall not be
discharged except by complete performance of the obligations contained in the
Notes and this Agreement. If any Holder is required by any court or otherwise
to return to the Company or Guarantors, or any Custodian, trustee, liquidator or
other similar official acting in relation to either the Company or Guarantors,
any amount paid by such Holder, this Subsidiary Guarantee, to the extent
theretofore discharged, shall be reinstated in full force and effect.
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Each Guarantor agrees that it shall not be entitled to any right of subrogation
in relation to the Holders of Notes in respect of any obligations guaranteed
hereby until payment in full of all obligations guaranteed hereby. Each
Guarantor further agrees that, as between the Guarantors, on the one hand, and
the Holders, on the other hand, (a) the Maturity of the obligations guaranteed
hereby may be accelerated as provided in Section 11 for the purposes of this
Subsidiary Guarantee, notwithstanding any stay, injunction or other prohibition
preventing such acceleration in respect of the obligations guaranteed hereby and
(b) in the event of any declaration of acceleration of such obligations as
provided in Section 11, such obligations (whether or not due and payable) shall
forthwith become due and payable by the Guarantors for the purpose of this
Subsidiary Guarantee. The Guarantors shall have the right to seek contribution
from any non-paying Guarantor so long as the exercise of such right does not
impair the rights of the Holders under the Subsidiary Guarantees.
14.2. Execution and Delivery of Subsidiary Guarantees. To evidence
-----------------------------------------------
its Subsidiary Guarantee set forth in Section 14.1, each Guarantor hereby agrees
that this Agreement shall be executed on behalf of such Guarantor by its
President or one of its Vice Presidents and, to the extent not a party to this
Agreement on the date hereof, each Guarantor shall execute and deliver to the
Holders a Subsidiary Guarantee in the form of Exhibit C hereto and a
---------
supplemental agreement substantially in the form of Exhibit D hereto, pursuant
---------
to which such Subsidiary shall become a Guarantor under this Section 14 and
shall guarantee the Obligations of the Company under this Agreement and the
Notes. Concurrently with the execution and delivery of such Subsidiary
Guarantee and such supplemental agreement, such Guarantor shall deliver to the
Holders an opinion of counsel reasonably acceptable to the Purchasers that the
foregoing have been duly authorized, executed and delivered by such Guarantor
and that such Guarantor's Subsidiary Guarantee is a valid and legally binding
obligation of such Guarantor, enforceable against such Guarantor in accordance
with its terms.
If an officer whose signature is on this Agreement or on a Subsidiary
Guarantee no longer holds that office at the time the Company executes and
delivers the Note on which a Subsidiary Guarantee is endorsed, the Subsidiary
Guarantee shall be valid nevertheless. The execution and delivery of any Note by
the Company shall constitute due delivery of the Subsidiary Guarantee set forth
in this Agreement on behalf of the Guarantors.
14.3. Guarantors May Consolidate, Etc. On Certain Terms. No Guarantor
-------------------------------------------------
may consolidate with or merge with or into (whether or not such
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Guarantor is the surviving Person), another corporation, Person or entity (other
than the Company or another Guarantor) unless:
(a) subject to the provisions of Section 14.4 hereof, the Person
formed by or surviving any such consolidation or merger (if other than such
Guarantor) unconditionally assumes all the obligations of such Guarantor under
the Notes and this Agreement pursuant to a supplemental agreement, in form and
substance reasonably satisfactory to the Holders;
(b) immediately after giving effect to such transaction, no Default
or Event of Default exists;
(c) such Guarantor, or any Person formed by or surviving any such
consolidation or merger, would have Consolidated Net Worth (immediately after
giving effect to transaction), equal to or greater than the Consolidated Net
Worth of such Guarantor immediately preceding the transaction; and
(d) the Company would be permitted immediately after giving effect to
such transaction, to incur at least $1.00 of additional Indebtedness pursuant to
the Fixed Charge Coverage Ratio test set forth in Section 8.4 hereof.
Notwithstanding the foregoing, no Guarantor shall be permitted to consolidate
with or merge with or into (whether or not such Guarantor is the surviving
Person), another corporation, Person or entity pursuant to the preceding
sentence if such consolidation or merger would not be permitted by Section 8.11
hereof.
In case of any such consolidation or merger and upon the assumption by the
successor corporation, by supplemental agreement, executed and delivered to the
Holders and satisfactory in form to the Holders, of the Subsidiary Guarantee
endorsed upon the Notes and the due and punctual performance of all of the
covenants and conditions of this Agreement to be performed by the Guarantor,
such successor corporation shall succeed to and be substituted for the Guarantor
with the same effect as if it had been named herein as a Guarantor. Such
successor corporation thereupon may cause to be signed any or all of the
Subsidiary Guarantees to be endorsed upon all of the Notes issuable hereunder
which theretofore shall not have been signed by the Company. All the Subsidiary
Guarantees so issued shall in all respects have the same legal rank and benefit
under this Agreement as the Subsidiary Guarantees theretofore and thereafter
issued in accordance with the terms of this Agreement as though all of such
Subsidiary Guarantees had been issued at the date of the execution hereof.
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<PAGE>
Except as set forth in Section 8 hereof, nothing contained in this
Agreement or in any of the Notes shall prevent any consolidation or merger of a
Guarantor with or into the Company, or shall prevent any sale or conveyance of
the property of a Guarantor as an entirety or substantially as an entirety to
the Company.
14.4. Releases of Subsidiary Guarantees. In the event of (i) a sale
---------------------------------
or other disposition of all of the assets of any Guarantor, by way of merger,
consolidation or otherwise, (ii) a sale or other disposition of all of the
capital stock of any Guarantor or (iii) a distribution of all of the capital
stock of any Guarantor to stockholders of the Company in a transaction that
complies with the provisions of Section 8.2 hereof, such Guarantor (in the event
of a sale or other disposition, by way of such a merger, consolidation,
distribution or otherwise, of all of the capital stock of such Guarantor) or the
corporation acquiring the property (in the event of a sale or other disposition
of all of the assets of such Guarantor) will be released and relieved of any
obligations under its Subsidiary Guarantee; provided that the Net Proceeds of
such sale or other disposition shall be applied in accordance with the
provisions of Section 8.5 hereof. Any Guarantor not released from its
obligations under its Subsidiary Guarantee shall remain liable for the full
amount of principal of and interest on the Notes and for the other obligations
of any Guarantor under this Agreement as provided in this Section 14.
14.5. Subordination of Subsidiary Guarantees. The Obligations of each
--------------------------------------
Guarantor under its Subsidiary Guarantee pursuant to this Section 14 shall be
junior and subordinated to the Guarantor Senior Indebtedness of such Guarantor
on the same basis as the Notes are junior and subordinated to Senior
Indebtedness of the Company. For the purposes of the foregoing sentence, the
Holders shall have the right to receive and/or retain payments by any of the
Guarantors only at such times as they may receive and/or retain payments in
respect of the Notes pursuant to this Agreement, including Section 13 hereof.
14.6. Limitation on Guarantor Liability. Each Guarantor, and by its
---------------------------------
acceptance of the Notes, each Holder, hereby confirms that it is the intention
of all such parties that the Subsidiary Guarantee of such Guarantor not
constitute a fraudulent transfer or conveyance for purposes of Bankruptcy Law,
the Uniform Fraudulent Conveyance Act, the Uniform Fraudulent Transfer Act or
any similar federal or state law to the extent applicable to any Subsidiary
Guarantee. To effectuate the foregoing intention, the Holders and the Guarantors
hereby irrevocably agree that the obligations of such Guarantor under its
Subsidiary Guarantee and this Section 14 shall be limited to the maximum amount
as will, after giving effect to such maximum amount and all other contingent and
fixed
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<PAGE>
liabilities of such Guarantor that are relevant under such laws, and after
giving effect to any collections from, rights to receive contribution from or
payments made by or on behalf of any other Guarantor in respect of the
obligations of such other Guarantor under this Section 14, result in the
obligations of such Guarantor under its Subsidiary Guarantee not constituting a
fraudulent transfer or conveyance.
14.7. Endorsement of Subsidiary Guarantees. To evidence its Subsidiary
------------------------------------
Guarantee set forth in Section 14.01, each Guarantor hereby agrees that a
notation of such Subsidiary Guarantee substantially in the form of Exhibit F
---------
to this Agreement shall be endorsed by an officer of such Guarantor on each Note
authenticated and delivered by the Company.
Each Guarantor hereby agrees that its Subsidiary Guarantee set forth
in Section 14.1 shall remain in full force and effect notwithstanding any
failure to endorse on each Note a notation of such Subsidiary Guarantee.
SECTION 15
EXPENSES, INDEMNIFICATION AND CONTRIBUTION
------------------------------------------
15.1. Expenses. Whether or not the transactions contemplated hereby
--------
are consummated, the Company will pay all costs and expenses (including
reasonable and documented attorneys' and accountants' fees and disbursements)
incurred by the Purchasers or any holder of a Security or Exchange Note in
connection with the Transactions and in connection with any amendments, waivers
or consents under or in respect of this Agreement, the Financing Documents or
the Securities (whether or not such amendment, waiver or consent becomes
effective), including, without limitation: (a) the Purchaser's reasonable and
documented out-of-pocket expenses in connection with the Purchaser's
examinations and appraisals of the Company's properties, books and records, (b)
the costs and expenses incurred in enforcing, defending or declaring (or
determining whether or how to enforce, defend or declare) any rights or remedies
under this Agreement, the Financing Documents or the Securities or Exchange
Notes or in responding to any subpoena or other legal process or informal
investigative demand issued in connection with this Agreement, the Financing
Documents or the Securities, or by reason of being a holder of any Security or
Exchange Note; (c) the costs and expenses, including reasonable and documented
consultants' and advisors' fees, incurred in connection with the insolvency or
bankruptcy of the Company or any Subsidiary of the Company or in connection with
any work-out or restructuring of the
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<PAGE>
transactions contemplated hereby, by the Financing Documents or by the
Securities. The Company will pay, and will save the Purchasers and each other
holder of a Security harmless from, all claims in respect of any fees, costs or
expenses if any, of brokers and finders in relation to the Transactions.
15.2. Indemnification.
---------------
(a) Indemnification by the Company. The Company agrees to indemnify
------------------------------
and hold harmless (i) each Purchaser and each Person who participates as a
placement or sales agent or as an underwriter in any Offering, including but not
limited to Goldman, Sachs & Co., (ii) each Person, if any, who controls (within
the meaning of Section 15 or Section 20 of the Exchange Act) any such Person
referred to in clause (i) (any of the Persons referred to in this clause (ii)
being referred to herein as a "Controlling Person") and (iii) the respective
------------------
officers, directors, managing directors, stockholders, partners, employees,
representatives, trustees, fiduciaries, and agents of any Person referred to in
clause (i) or any such Controlling Person (any such Person referred to in clause
(i), (ii) or (iii), a "Purchaser Indemnified Person") against any losses,
----------------------------
claims, damages or liabilities, joint or several, to which such Purchaser
Indemnified Person may become subject, under the Securities Act or otherwise,
insofar as such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon (i) any untrue statement or alleged
untrue statement of a material fact contained in any Offering Memorandum, or any
amendment or supplement thereto, or arise out of or are based upon the omission
or alleged omission to state therein a material fact necessary to make the
statements therein, not misleading, (ii) in whole or in part upon any inaccuracy
in any of the representations and warranties of the Company contained herein as
of the date hereof or on and as of the Closing Date as if made on such date,
(iii) in whole or in part upon any failure of the Company to perform its
obligations hereunder or under Applicable Law, including any violation of
Applicable Law resulting from any Offering, (iv) any act or failure to act or
any alleged act or failure to act by any Purchaser Indemnified Person in
connection with, or relating in any manner to, each Offering contemplated
hereby, and which is included as part of or referred to in any loss, claim,
damage or liability (or actions in respect thereof) arising out of or based upon
any matter covered by clause (i) above, (v) the failure of any of the
consolidated balance sheets included in the Company Financial Statements
(including the related notes and schedules) to fairly represent the consolidated
financial position of the Company and its Subsidiaries as of its date, or
failure of any of the consolidated statements of income, stockholders' equity
and cash flows of the Company and its Subsidiaries included in the Company
Financial Statements (including any related notes and schedules) to fairly
represent the results of operations and
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income, retained earning and stockholders' equity or cash flows, as the case may
be, of the Company and its Subsidiaries for the periods set forth therein, in
each case in accordance with GAAP consistently applied during the periods
involved, except as may be noted therein and subject in the case of any interim
financial statements, to normal year-end adjustments that are not material in
amount or effect; (vi) any change in the financial condition, operations,
business, properties or prospects of the Company and its Subsidiaries during the
period from the Audit Date to the Closing Date, inclusive, that, individually or
in the aggregate, has had or could reasonably be expected to have a Material
Adverse Effect that has not been disclosed in writing to the Purchaser
Indemnified Persons; or (vii) the Transactions or the Purchasers' financing
thereof, and will reimburse each such Purchaser Indemnified Person for any legal
and other expenses reasonably incurred by such Purchaser Indemnified Person in
connection with investigating or defending any such action or claims as such
expenses are incurred; provided, however, that the Company shall not be liable
in any such case to the extent that any such loss, claim, damage or liability
arises out of or is based upon any untrue statement or alleged untrue statement
or omission or alleged omission made in any Offering Memorandum, or any
amendment or supplement thereto, in reliance upon and in conformity with written
information furnished to the Company by such Purchaser Indemnified Person
expressly for use therein. The indemnity agreement set forth in this Sec tion
15.2(a) shall be in addition to any liabilities that the Company may otherwise
have.
(b) Indemnification by the Purchasers. Each Purchaser agrees,
---------------------------------
severally and not jointly, to indemnify and hold harmless (i) the Company, (ii)
each Controlling Person of the Company and (iii) the respective officers,
directors, employees, representatives and agents of the Company or any such
Controlling Person (any such Person referred to in clause (i), (ii) or (iii), a
"Company Indemnified Person") against any losses, claims, damages or
--------------------------
liabilities, joint or several, to which such Company Indemnified Person may
become subject, under the Securities Act or otherwise insofar as such losses,
claims, damages or liabilities (or actions in respect thereof) arise out of or
are based upon any untrue or alleged untrue statement of a material fact
contained in any Offering Memorandum, or any amendment or supplement thereto, or
arise out of or are based upon the omission or alleged omission to state therein
a material fact necessary to make the statements therein not misleading, in each
case to the extent, but only to the extent, that such untrue statement or
alleged untrue statement or omission or alleged omission was made in any
Offering Memorandum, or any amendment or supplement thereto, in reliance upon
and in conformity with written information furnished to the Company by such
Purchaser expressly for use therein; and will reimburse the Company Indemnified
Persons
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for any legal and other expenses reasonably incurred by the Company
Indemnified Persons in connection with investigating or defending any such
actions or claims as such expenses are incurred; provided, however, that the
liability of any Purchaser pursuant to this clause 15.2(b) shall not exceed the
net proceeds that such Purchaser receives in any sale of the Securities or
Exchange Notes pursuant to the Offering in which such Offering Memorandum was
delivered. The indemnity agreement set forth in this Section 15.2(b) shall be
in addition to any liabilities that each Purchaser may otherwise have.
(c) Notifications and Other Indemnification Procedures. Promptly after
--------------------------------------------------
receipt by a Purchaser Indemnified Person or a Company Indemnified Person (each,
an "Indemnified Person") of notice of the commencement of any action, such
------------------
Indemnified Person shall, if a claim in respect thereof is to be made against an
indemnifying party under Section 15.2(a) or 15.2(b), as applicable, notify such
indemnifying party in writing of the commencement thereof, but the omission so
to notify the indemnifying party will not relieve it from any liability which it
may have to any Indemnified Person otherwise than under Section 15.2(a) or
15.2(b), as applicable, or to the extent it is not prejudiced as a proximate
result of such failure. In case any such action is brought against any
Indemnified Person and it shall notify an indemnifying party of the commencement
thereof, the indemnifying party will be entitled to participate therein and, to
the extent that it shall elect within 30 days after receiving any such
notification, jointly with any other indemnifying party similarly notified, to
assume the defense thereof, with counsel satisfactory to such Indemnified Person
(who shall not, except with the consent of the Indemnified Person, which consent
shall not be unreasonably withheld, be counsel to the indemnifying party), and,
after notice from the indemnifying party to such Indemnified Person of its
election so to assume the defense thereof, the indemnifying party shall not be
liable to such Indemnified Person under such paragraph for any legal expenses of
other counsel or any other expenses, in each case subsequently incurred by such
Indemnified Person, in connection with the defense thereof other than reasonable
costs of investigation. Notwithstanding the foregoing, any Indemnified Person
shall have the right to employ separate counsel in any such action and
participate in the defense thereof, but the fees and expenses of such counsel
shall be at the expense of the Indemnified Person unless the Indemnified Person
shall have been advised by counsel that representation of the Indemnified Person
by counsel provided by the indemnifying party would be inappropriate due to
actual or potential conflicting interests between the indemnifying party and the
Indemnified Person, including situations in which there are one or more legal
defenses available to the Indemnified Person that are different from or
additional to those available to the indemnifying party; provided, however, that
the indemnifying party shall not,
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in connection with any one such action or proceeding or separate but
substantially similar actions or proceedings arising out of the same general
allegations, be liable for the fees and expenses of more than one separate firm
of attorneys at any time for all Indemnified Persons, except to the extent that
local counsel, in addition to their regular counsel, is required in order to
effectively defend against such action or proceeding. No indemnifying party
shall, without the written consent of the Indemnified Person, effect the
settlement or compromise of, or consent to the entry of any judgment with
respect to, any pending or threatened action or claim in respect of which
indemnification or contribution may be sought hereunder (whether or not the
Indemnified Person is an actual or potential party to such action or claim)
unless such settlement, compromise or judgment (i) includes an unconditional
release of the Indemnified Person from all liability arising out of such action
or claim and (ii) does not include a statement as to or an admission of fault,
culpability or a failure to act, by or on behalf of any Indemnified Person.
15.3. Contribution. If the indemnification provided for in Section
------------
15.2 is unavailable to or insufficient to hold harmless an Indemnified Person
under paragraph (a), (b) or (c) of Section 15.2 in respect of any losses,
claims, damages or liabilities (or actions in respect thereof) referred to
therein, then each indemnifying party shall contribute to the amount paid or
payable by such Indemnified Person as a result of such losses, claims, damages
or liabilities (or actions in respect thereof) in such proportion as is
appropriate to reflect the relative fault of the indemnifying party on the one
hand and the Indemnified Person on the other in connection with the statements
or omissions which resulted in such losses, claims, damages or liabilities (or
actions in respect thereof), as well as any other relevant equitable
considerations. The relative fault shall be determined by reference to, among
other things, whether the untrue or alleged untrue statement of a material fact
or the omission or alleged omission to state a material fact relates to
information supplied by the indemnifying party on the one hand or the
Indemnified Person on the other and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such statement or
omission. The parties agree that it would not be just and equitable if
contributions pursuant to this Section 15.3 were determined by pro rata
allocation (even if the Indemnified Persons were treated as one entity for such
purpose) or by any other method of allocation which does not take account of the
equitable considerations referred to above in this Section 15.3. The amount
paid or payable by an Indemnified Person as a result of the losses, claims,
damages or liabilities (or actions in respect thereof) referred to above in this
Section 15.3 shall be deemed to include any legal or other expenses reasonably
incurred by such Indemnified Person in connection with investigating or
defending any such action or claim. Notwithstanding the
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<PAGE>
provisions of this Section 15.3, no Purchaser shall be required to contribute
any amount which, when taken together with any amounts paid by such Purchaser
under Section 15.2(b) exceeds the net proceeds that such Purchaser receives in
any sale of the Securities or Exchange Notes pursuant to any Offering. No person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Securities Act) shall be entitled to contribution from any person who was
not guilty of such fraudulent misrepresentation.
The obligations of the Company and the Purchasers under this Section
15.3 shall be in addition to any liability which the Company and the respective
Purchasers may otherwise have.
15.4. Survival. The obligations of the Company under this Section 15
--------
will survive the payment or transfer of any Note or Exchange Note, the
enforcement, amendment or waiver of any provision of this Agreement and the
termination of this Agreement.
SECTION 16
MISCELLANEOUS
-------------
16.1. Notices. Except as otherwise expressly provided herein, all
-------
notices and other communications shall have been duly given and shall be
effective (a) when delivered, (b) when transmitted via telecopy (or other
facsimile device) to the number set out below if the sender on the same day
sends a confirming copy of such notice by a recognized overnight delivery
service (charges prepaid), (c) the day following the day on which the same has
been delivered prepaid to a reputable national overnight air courier service or
(d) the third Business Day following the day on which the same is sent by
certified or registered mail, postage prepaid, in each case to the respective
parties at the address set forth below, or at such other address as such party
may specify by written notice to the other party hereto:
(i) if to a GSMP Purchaser or its nominee, to the Purchaser or
its nominee at the address specified for such communications in Schedule A,
----------
with a copy to Sullivan & Cromwell, 125 Broad Street, New York, New York
10004, attention: Duncan C. McCurrach, or at such other address as the
Purchaser or its nominee shall have specified to the Company in writing;
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<PAGE>
(ii) if to Ares, to it at 1999 Avenue of the Stars, Suite 1900,
Los Angeles, CA 90067, attention: Jeff Serota, with a copy to Cahill Gordon
& Reindel, 80 Pine Street, New York, NY 10005 or at such other address as
Ares shall have specified to the Company in writing;
(ii) if to any other Holder of any Note, to such Holder at the
address of such Holder appearing in the Security Register or such other
address as such other holder shall have specified to the Company in
writing; or
(iv) if to the Company, to the Company at 1436 Lancaster Avenue,
Suite 210, Berwyn, PA 19312, attention: Chief Executive Officer, President
and Chief Financial Officer, with a copy to GEI, c/o Leonard Green &
Partners, L.P., 11111 Santa Monica Blvd., Suite 2000, Los Angeles, CA
90025, attention: Greg Annick and Irell & Manella LLP, 333 South Hope
Street, Suite 3300, Los Angeles, CA 90071, attention: Edmund Kaufman, or at
such other address as the Company shall have specified to the holder of
each Note in writing.
16.2. Benefit of Agreement; Assignments and Participations. Except as
----------------------------------------------------
otherwise expressly provided herein, all covenants, agreements and other
provisions contained in this Agreement by or on behalf of any of the parties
hereto shall bind, inure to the benefit of and be enforceable by their
respective successors and assigns (including, without limitation, any subsequent
holder of a Note or Exchange Note) whether so expressed or not; provided,
however, that the Company may not assign and transfer any of its rights or
obligations without the prior written consent of the other parties hereto and
each such holder.
Nothing in this Agreement or in the Notes or Exchange Notes, express
or implied, shall give to any Person other than the parties hereto, their
successors and assigns and the holders from time to time of the Notes or
Exchange Notes any benefit or any legal or equitable right, remedy or claim
under this Agreement.
16.3. No Waiver; Remedies Cumulative. No failure or delay on the part
------------------------------
of any party hereto or any Holder in exercising any right, power or privilege
hereunder or under the Notes or Exchange Notes and no course of dealing between
the Company and any other party or Holder shall operate as a waiver thereof; nor
shall any single or partial exercise of any right, power or privilege hereunder
or under the Notes or Exchange Notes preclude any other or further exercise
thereof or the exercise of any other right, power or privilege hereunder or
thereunder. The rights and remedies provided herein and in the Notes and
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<PAGE>
Exchange Notes are cumulative and not exclusive of any rights or remedies which
the parties or Holders would otherwise have. No notice to or demand on the
Company in any case shall entitle the Company to any other or further notice or
demand in similar or other circumstances or constitute a waiver of the rights of
the other parties hereto or the Holders to any other or further action in any
circumstances without notice or demand.
16.4. Amendments, Waivers and Consents. This Agreement may be
--------------------------------
amended, and the observance of any term hereof may be waived (either
retroactively or prospectively) with (and only with) the written consent of the
Company and the Required Holders; provided, however, that no such amendment or
waiver may, without the prior written consent of the Holder of each Note and
Exchange Note then outstanding and affected thereby (i) subject any Holder to
any additional obligation, (ii) reduce the principal of (or premium, if any) or
rate of interest or Special Interest on any Note or Exchange Note, (iii)
postpone the date fixed for any payment of principal of (or premium, if any) or
interest or Special Interest on any Note or Exchange Note, (iv) change the
ranking or the priority of the Notes or the percentage of the aggregate
principal amount of the Notes the Holders of which shall be required to consent
or take any other action under this Section 16.4 or any other provision of this
Agreement, (v) amend or waive the provisions of Sections 7.7, 7.8 or 8.5 or any
of the definitions used in such Sections. No amendment or waiver of this
Agreement will extend to or affect any obligation, covenant, agreement, Default
or Event of Default not expressly amended or waived or thereby impair any right
consequent thereon. As used herein, the term this "Agreement" and references
---------
thereto shall mean this Agreement as it may from time to time be amended or
supplemented.
16.5. Counterparts. This Agreement may be executed in any number of
------------
counterparts, each of which when so executed and delivered shall be an original,
but all of which shall constitute one and the same instrument. It shall not be
necessary in making proof of this Agreement to produce or account for more than
one such counterpart. Each counterpart may consist of a number of copies
hereof, each signed by less than all, but together signed by all, of the parties
hereto.
16.6. Reproduction. This Agreement, the other Transaction Documents
------------
and all documents relating, hereto and thereto, including, without limitation,
(a) consents, waivers and modifications that may hereafter be executed, (b)
documents received by the Purchasers at the Closing (except the Securities
themselves), and (c) financial statements, certificates and other information
previously or hereafter furnished in connection herewith, may be reproduced by
any photographic, photostatic, microfilm, microcard, miniature
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<PAGE>
photographic or other similar process and any original document so reproduced
may be destroyed. The Company agrees and stipulates that, to the extent
permitted by Applicable Law, any such reproduction shall be admissible in
evidence as the original itself in any judicial or administrative proceeding
(whether or not the original is in existence and whether or not such
reproduction was made in the regular course of business) and any enlargement,
facsimile or further reproduction of such reproduction shall likewise be
admissible in evidence. This Section 16.06 shall not prohibit the Company, any
other party hereto or any holder of Securities from contesting any such
reproduction to the same extent that it could contest the original, or from
introducing evidence to demonstrate the inaccuracy of any such reproduction.
16.7. Headings. The headings of the sections and subsections hereof
--------
are provided for convenience only and shall not in any way affect the meaning or
construction of any provision of this Agreement.
16.8. Survival of Covenants and Indemnities. All covenants and
-------------------------------------
indemnities set forth herein shall survive the execution and delivery of this
Agreement, the issuance of the Notes and Exchange Notes, and, except as
otherwise expressly provided herein with respect to covenants, the payment of
principal of the Notes and the Exchange Notes and any other obligations
hereunder.
16.9. Governing Law; Submission to Jurisdiction; Venue.
------------------------------------------------
(a) THIS AGREEMENT AND THE NOTES SHALL BE CONSTRUED AND ENFORCED IN
ACCORDANCE WITH, AND THE RIGHTS OF THE PARTIES SHALL BE GOVERNED BY, THE LAW OF
THE STATE OF NEW YORK, EXCLUDING CHOICE-OF-LAW PRINCIPLES OF THE LAW OF SUCH
STATE THAT WOULD REQUIRE THE APPLICATION OF THE LAWS OF A JURISDICTION OTHER
THAN SUCH STATE.
(b) If any action, proceeding or litigation shall be brought by any
Purchaser or any holder of a Security in order to enforce any right or remedy
under this Agreement or any of the Securities, the Company hereby consents and
will submit, and will cause each of its Subsidiaries to submit, to the
jurisdiction of any state or federal court of competent jurisdiction sitting
within the area comprising the Southern District of New York on the date of this
Agreement. The Company hereby irrevocably waives any objection, including, but
not limited to, any objection to the laying of venue or based on the grounds of
forum non conveniens, which it may now or hereafter have to the bringing of any
- --------------------
such action, proceeding or litigation in such jurisdiction. The Company further
agrees
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<PAGE>
that it shall not, and shall cause its Subsidiaries not to, bring any action,
proceeding or litigation arising out of this Agreement or the Securities in any
state or federal court other than any state or federal court of competent
jurisdiction sitting within the area comprising the Southern District of New
York on the date of this Agreement.
(c) The Company hereby irrevocably designates CT Corporation System
at an address in New York City designated at the Closing as the designee,
appointee and agent of the Company to receive, for and on behalf of the Company,
service of process in such jurisdiction in any action, proceeding or litigation
with respect to this Agreement, the Notes or any of the other Transaction
Documents. It is understood that a copy of such process served on such agent
will be promptly forwarded by mail to the Company at its address set forth
opposite its signature below, but the failure of the Company to have received
such copy shall not affect in any way the service of such process. The Company
further irrevocably consents to the service of process of any of the
aforementioned courts in any such action, proceeding or litigation by the
mailing of copies thereof by registered or certified mail, postage prepaid, to
the Company at its said address, such service to become effective thirty (30)
days after such mailing.
(d) Nothing herein shall affect the right of any holder of a Security
to serve process in any other manner permitted by law or to commence legal
proceedings or otherwise proceed against the Company in any other jurisdiction.
If service of process is made on a designated agent it should be made by either
(i) personal delivery or (ii) mailing a copy of summons and complaint to the
agent via registered or certified mail, return receipt requested.
(e) THE COMPANY HEREBY WAIVES ANY AND ALL RIGHTS IT MAY HAVE TO A
TRIAL BY JURY IN RESPECT OF ANY ACTION, PROCEEDING OR LITIGATION DIRECTLY OR
INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH, THIS AGREEMENT OR ANY OF
THE SECURITIES.
16.10. Severability. If any provision of this Agreement is
------------
determined to be illegal, invalid or unenforceable, such provision shall be
fully severable to the extent of such illegality, invalidity or unenforceability
and the remaining provisions shall remain in full force and effect and shall be
construed without giving effect to the illegal, invalid or unenforceable
provisions.
16.11. Entirety. This Agreement together with the other Transaction
--------
Documents represents the entire agreement of the parties hereto
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<PAGE>
and thereto, and supersedes all prior agreements and understandings, oral or
written, if any, relating to the Transaction Documents or the transactions
contemplated herein or therein.
16.12. Survival of Representations and Warranties. All representations
------------------------------------------
and warranties made by the Company herein shall survive the execution and
delivery of this Agreement, the issuance and transfer of all or any portion of
the Notes and Exchange Notes and the payment of principal of the Notes and the
Exchange Notes and any other obligations hereunder issuance and delivery of the
Notes hereunder, regardless of any investigation made at any time by or on
behalf of the Purchasers or any other holder that is Affiliated with the
Purchasers. All statements contained in any certificate delivered by or on
behalf of the Company pursuant to this Agreement shall be deemed representations
and warranties of the Company under this Agreement.
16.13. Construction. Each covenant contained herein shall be
------------
construed (absent express provision to the contrary) as being independent of
each other covenant contained herein, so that compliance with any one covenant
shall not (absent such an express contrary provision) be deemed to excuse
compliance with any other covenant. Where any provision herein refers to action
to be taken by any Person, or which such Person is prohibited from taking, such
provision shall be applicable whether such action is taken directly or
indirectly by such Person, whether or not expressly specified in such provision.
16.14. Incorporation. All Exhibits and Schedules attached hereto are
-------------
incorporated as part of this Agreement as if fully set forth herein.
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<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused a
counterpart of this Agreement to be duly executed and delivered as of the date
first above written.
DOLLAR FINANCIAL GROUP, INC.
By: /s/ Richard Dorfman
-------------------------------
Name: Richard Dorfman
Title: Chief Financial Officer
GS MEZZANINE PARTNERS, L.P.
By: GS Mezzanine Advisors, L.P.,
its general partner
By: GS Mezzanine Advisors, Inc.,
its general partner
By: /s/ Melina Higgins
---------------------------------
Name: Melina Higgins
Title: Attorney-in-fact
GS MEZZANINE PARTNERS OFFSHORE, L.P.
By: GS Mezzanine Advisors (Cayman), L.P.,
its general partner
By: GS Mezzanine Advisors, Inc.,
its general partner
By: /s/ Melina Higgins
---------------------------------
Name: Melina Higgins
Title: Attorney-in-fact
STONE STREET FUND 1998, L.P.
By: Stone Street Advantage Corp.
General Partner
By: /s/ Melina Higgins
---------------------------------
Name: Melina Higgins
Title: Attorney-in-fact
<PAGE>
BRIDGE STREET FUND 1998, L.P.
By: Stone Street Advantage Corp.
Managing General Partner
By: /s/ Melina Higgins
---------------------------------
Name: Melina Higgins
Title: Attorney-in-fact
ARES LEVERAGED INVESTMENT FUND, L.P.
By: ARES Management, L.P.
By: ARES Operating Member, LLC,
its General Partner
By: /s/ Jeff Serota
--------------------------------
Name: Jeff Serota
Title: Vice President
ARES LEVERAGED INVESTMENT
FUND II, L.P.
By: ARES Management II, L.P.
By: ARES Operating Member II, LLC,
its General Partner
By: /s/ Jeff Serota
--------------------------------
Name: Jeff Serota
Title: Vice President
<PAGE>
EXHIBIT A
---------
[Form of Face of Note]
--------------------
THE NOTES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR ANY STATE
SECURITIES LAWS AND MAY NOT BE TRANSFERRED, SOLD OR OTHERWISE DISPOSED OF EXCEPT
WHILE A REGISTRATION STATEMENT IS IN EFFECT OR PURSUANT TO AN AVAILABLE
EXEMPTION FROM REGISTRATION UNDER SUCH ACT AND APPLICABLE STATE SECURITIES LAWS.
THE HOLDER OF THIS NOTE IS SUBJECT TO THE TERMS OF THE PURCHASE AGREEMENT, DATED
AS OF DECEMBER 18, 1998 (THE "AGREEMENT"), AMONG DOLLAR FINANCIAL GROUP, INC.,
---------
GS MEZZANINE PARTNERS, L.P., GS MEZZANINE PARTNERS OFFSHORE, L.P., STONE STREET
FUND 1998, L.P., BRIDGE STREET FUND 1998, L.P., ARES LEVERAGED INVESTMENT FUND,
L.P. AND ARES LEVERAGED INVESTMENT FUND II, L.P.
10 7/8% SENIOR SUBORDINATED NOTES DUE 2006
No. __________ $________
Dollar Financial Group, Inc., a corporation duly organized and
existing under the laws of New York (herein called the "Company", which term
includes any successor Person under the Agreement), for value received, hereby
promises to pay to __________________, or registered assigns, the principal sum
of _____________________ Dollars on December 31, 2006 (the "Stated Maturity
---------------
Date"), and to pay interest thereon from _________, 199 __* or from the most
recent Interest Payment Date to which interest has been paid or duly provided
for, semi-annually in arrears on December 30 and June 30 in each year commencing
__________** and, if different, the date of the Stated Maturity of this Note
(each, an "Interest Payment Date") at the rate of 10 7/8% per annum, until the
---------------------
principal hereof is paid or made available for payment; provided, however, that
(to the extent that the payment of such interest shall be legally enforceable)
any principal of, or premium or installment of interest or Special Interest on,
this Note which is overdue shall bear interest at the rate of 11 7/8% per annum
from the date such amounts are due until they are paid or made available for
payment, and such interest shall be payable on demand; and provided, further,
that if (a) a registration statement under the Securities Act of
- ---------------------
* Insert original issue date.
** Insert first Interest Payment Date after original issue date.
A-1
<PAGE>
1933, as amended (the "Securities Act"), registering this Note for resale (a
--------------
"Resale Registration Statement") shall not have been filed with the Securities
- ------------------------------
and Exchange Commission (the "Commission") or a registration statement under
----------
the Securities Act (the "Exchange Offer Registration Statement") registering
-------------------------------------
a note substantially identical to this Note (an "Exchange Note") pursuant to
-------------
an exchange offer (the "Exchange Offer") upon the terms and conditions set
--------------
forth in the Exchange and Registration Rights Agreement, dated December 18,
1998 (the "Exchange and Registration Rights Agreement"), among the Company
-------------------------------------------
and GS Mezzanine Partners, L.P., GS Mezzanine Partners Offshore, L.P., Stone
Street Fund 1998, L.P., Bridge Street Fund, 1998, L.P., Ares Leveraged
Investment Fund, L.P. and Ares Leveraged Investment Fund II, L.P. (collectively,
the "Purchasers") shall not have been filed with the Commission, in each case by
----------
the date which is 45 days after the date on which a written request therefore by
the Purchasers in accordance with the terms of the Exchange and Registration
Rights Agreement (the "Request Date"), (b) the Resale Registration Statement has
------------
not become or been declared effective by the date which is 120 days after the
Request Date or the Exchange Offer Registration Statement has not been declared
effective by the date which is 120 days after the Request Date,(c) the Exchange
Offer has not been consummated within 45 business days after the initial
effective date of the Exchange Offer Registration Statement (if the Exchange
Offer is then required to be made) or (d) any Resale Registration Statement or
Exchange Offer Registration Statement required by Section 2(a) or 2(b) of the
Exchange and Registration Rights Agreement is filed and declared effective but
shall thereafter cease to be effective or usable for transfers of Notes during
the periods referred to in such Section 2(a) or 2(b), as applicable, without
being succeeded immediately by an additional registration statement filed and
declared effective (each such event referred to in clauses (a) through (d), a
"Registration Default"), then the Company shall pay, in addition to the interest
- ---------------------
provided for above, cash interest on the principal amount of this Note ("Special
-------
Interest") to the Holder hereof in an amount equal to 0.5% per annum, which
- --------
amount shall increase to 1.0% per annum after the first 120-day period following
the occurrence of the first Registration Default, for the period from and
including the date of occurrence of the first Registration Default until such
time as no Registration Default is in effect (after which such Special Interest
shall cease to be payable). Accrued Special Interest shall be paid semi-
annually on the Interest Payment Dates; and the amount of accrued Special
Interest shall be determined on the basis of the number of days actually
elapsed. Upon the issuance of an Exchange Note in exchange for this Note, any
accrued and unpaid interest (including Special Interest) on this Note shall
cease to be payable to the Holder hereof but such accrued and unpaid interest
(including Special Interest) shall be payable on the next Interest Payment Date
for such Exchange Note to the Holder thereof on the related Regular Record Date.
The interest so payable, and punctually paid or duly provided for, on any
Interest Payment Date will, as provided in the Note Purchase Agreement, be paid
to the Person in whose name this Note (or one or more Predecessor Notes) is
registered at the close of business on the "Regular Record Date" for such
-------------------
interest, which shall be
A-2
<PAGE>
the fifteenth calendar day (whether or not a Business
Day) immediately preceding such Interest Payment Date. Notwithstanding the
foregoing if this Note is issued after a Regular Record Date and prior to an
Interest Payment Date, the record date for such Interest Payment Date shall be
the original issue date.
Payment of the principal of (and premium, if any) and any such
interest or Special Interest on this Note will be made at the principal place of
business of the Company, in such coin or currency of the United States of
America as at the time of payment is legal tender for payment of public and
private debts; provided, however, that at the option of the Company payment of
interest and Special Interest may be made by check mailed to the address of the
Person entitled thereto as such address shall appear in the Security Register.
Reference is hereby made to the further provisions of this Note set
forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.
IN WITNESS WHEREOF, the Company has caused this instru ment to be
duly executed under its corporate seal.
Dated:
DOLLAR FINANCIAL GROUP, INC.
By:_______________________
Name: Richard Dorfman
Title: Chief Financial Officer
A-3
<PAGE>
[Form of Reverse of Note]
-----------------------
This Note is one of a duly authorized issue of Securities of the
Company designated as its 10 % Senior Subordinated Notes Due 2006 (herein called
the "Notes"), limited in aggregate principal amount to $20,000,000, issued and
to be issued pursuant to the Purchase Agreement, dated as of December 18, 1998
(herein called the "Agreement"), among the Company, GS Mezzanine Partners, L.P.,
---------
GS Mezzanine Partners Offshore, L.P., Stone Street Fund 1998, L.P., Bridge
Street Fund 1998, L.P., Ares Leveraged Investment Fund, L.P. and Ares Leveraged
Investment Fund II, L.P. (collectively, the "Purchasers"), to which Purchase
----------
Agreement and all amendments thereto reference is hereby made for a statement of
the respective rights, limitations of rights, duties and immunities thereunder
of the Company and the Holders of the Notes and of the terms upon which the
Notes are, and are to be, issued and delivered.
The Notes are subject to redemption, upon not less than 30 nor more
than 60 days' notice by mail, as a whole or in part, at any time on or after
December 31, 2001 at the election of the Company, at the following Redemption
Prices (expressed as percentages of the principal amount): If redeemed during
the 12-month period beginning December 31 of the years indicated,
<TABLE>
<CAPTION>
Year Redemption Price
------- -----------------
--------------------------
<S> <C>
2001 105.500%
--------------------------
2002 103.667%
--------------------------
2003 101.833%
--------------------------
2004 100.000%
--------------------------
2005 100.000%
--------------------------
</TABLE>
, together in the case of any such redemption with accrued interest and any
Special Interest to the Redemption Date, but interest instalments whose Stated
Maturity is on or prior to such Redemption Date will be payable to the Holders
of such Notes, or one or more Predecessor Notes, of record at the close of
business on the relevant Record Dates referred to on the face hereof, all as
provided in the Purchase Agreement.
Notwithstanding the foregoing, at any time prior to December 31, 2001
the Company may redeem, in one or more redemptions, up to an aggregate of $6
million principal amount of the Notes from the proceeds of an IPO, upon not less
than 30 nor more than 60 days' notice by mail, at a Redemption Price equal to
110.875% of their principal amount, together with any
A-4
<PAGE>
accrued and unpaid interest and Special Interest to the Redemption Date, but
interest instalments whose Stated Maturity is on or prior to such Redemption
Date will be payable to the Holders of such Notes, or one or more Predecessor
Notes, of record at the close of business on the relevant Record Dates referred
to on the face hereof, all as provided in the Purchase Agreement.
If less than all the Notes are to be redeemed, the Notes shall be
redeemed pro rata from each Holder.
The Notes do not have the benefit of any sinking fund obligations.
In the event of redemption or purchase pursuant to an Offer to
Purchase of this Note in part only, a new Note or Notes for the unredeemed or
unpurchased portion hereof will be issued in the name of the Holder hereof upon
the cancellation hereof.
The indebtedness evidenced by this Note is, to the extent provided in
the Agreement, subordinate and subject in right of payment to the prior payment
in full of all Senior Indebtedness, and this Note is issued subject to the
provisions of the Agreement with respect thereto. Each Holder of this Note, by
accepting the same, agrees to and shall be bound by such provisions.
If an Event of Default shall occur and be continuing, the principal of
all the Notes may be declared due and payable in the manner and with the effect
provided in the Agreement. Upon payment of (i) the principal so declared due
and payable and any overdue installment of interest, (ii) any overdue principal
and premium payable upon redemption or repurchase of this Note, and (iii) as
provided on the face hereof, interest on any overdue principal of, and any
premium, interest and Special Interest on, this Note (in each case to the extent
that the payment of such interest shall be legally enforceable), all of the
Company's obligations in respect of the payment of the principal of, and
interest and Special Interest on, this Note shall terminate.
The Agreement provides that, subject to certain conditions, if (i)
certain Excess Proceeds are available to the Company as a result of Asset Sales
or (ii) a Change of Control occurs the Company shall be required to make an
Offer to Purchase for all or a specified portion of the Notes.
The Agreement permits, with certain exceptions as therein provided,
the amendment thereof and the modification of the rights and obligations of the
Company and certain rights of the Holders of the Notes under the Agreement at
any time by the Company with the consent of the Holders of a majority in
aggregate principal amount of the Notes at the time outstanding. The Agreement
also contains provisions permitting the Holders of specified percentages in
aggregate principal amount of the Notes at the time outstanding, on behalf of
the Holders of all the Notes, to waive compliance by the Company
A-5
<PAGE>
with certain provisions of the Agreement and certain past defaults under the
Agreement and their consequences. Any such consent or waiver by the Holder of
this Note shall be conclusive and binding upon such Holder and upon all future
Holders of this Note and of any Note issued upon the registration of transfer
hereof or in exchange herefor or in lieu hereof, whether or not notation of such
consent or waiver is made upon this Note.
As provided in the Agreement and subject to certain limitations
therein set forth, the transfer of this Note is registrable in the Security
Register, upon surrender of this Note for registration of transfer at the
principal offices of the Company, duly endorsed by, or accompanied by a written
instrument of transfer in form satisfactory to the Company duly executed by, the
Holder hereof or his attorney duly authorized in writing, and thereupon one or
more new Notes, of authorized denominations and for the same aggregate principal
amount, will be issued to the designated transferee or transferees.
The Notes are issuable only in registered form without coupons in
denominations of $1,000 and any integral multiple thereof. As provided in the
Agreement and subject to certain limitations therein set forth, Notes are
exchangeable for a like aggregate principal amount of Notes of a different
authorized denomination, as requested by the Holder surrendering the same.
No service charge shall be made for any such registration of transfer
or exchange, but the Company may require payment of a sum sufficient to cover
any tax or other governmental charge payable in connection therewith.
Prior to due presentment of this Note for registration of transfer,
the Company and any agent of the Company may treat the Person in whose name this
Note is registered as the owner hereof for all purposes, whether or not this
Note be overdue, and neither the Company nor any such agent shall be affected by
notice to the contrary.
Interest on this Note shall be computed on the basis of a 360-day year
of twelve 30-day months.
All terms used in this Note which are defined in the Agreement shall
have the meanings assigned to them in the Agreement.
THE AGREEMENT AND THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, EXCLUDING CHOICE-OF-LAW
PRINCIPLES OF THE LAW OF SUCH STATE THAT WOULD REQUIRE THE APPLICATION OF THE
LAWS OF A JURISDICTION OTHER THAN SUCH STATE.
A-6
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Note purchased in its entirety by
the Company pursuant to Section 7.7 or 7.8 of the Agreement, check the box:
[_]
If you want to elect to have only a part of the principal amount of
this Note purchased by the Company pursuant to Section 7.7 of the Agreement,
state the portion of such amount: $_________
Dated: Your Signature:____________________
(Sign exactly as name appears
on the other side of this Note)
Signature Guarantee:___________________________________
(Signature must be guaranteed by a financial institution
that is a member of the Securities Transfer Agent Medallion
Program ("STAMP"), the Stock Exchange Medallion Program
-----
("SEMP"), the New York Stock Exchange, Inc. Medallion
----
Signature Program ("MSP") or such other signature guarantee
---
program as may be determined by the Security Registrar in
addition to, or in substitution for, STAMP, SEMP or MSP, all
in accordance with the Securities Exchange Act of 1934, as
amended.)
A-7
<PAGE>
Exhibit B - Exchange and Registration Rights Agreement to come
B-1
<PAGE>
EXHIBIT C
FORM OF SUBSIDIARY GUARANTEE
THE OBLIGATIONS OF THE GUARANTORS TO THE HOLDERS OF NOTES PURSUANT TO
THIS SUBSIDIARY GUARANTEE AND THE PURCHASE AGREEMENT, DATED AS OF DECEMBER 18,
1998, AMONG THE COMPANY, GS MEZZANINE PARTNERS, L.P., GS MEZZANINE PARTNERS
OFFSHORE, L.P., STONE STREET FUND 1998, L.P., BRIDGE STREET FUND 1998, L.P.,
ARES LEVERAGED INVESTMENT FUND, L.P. AND ARES LEVERAGED INVESTMENT FUND II, L.P.
(THE "PURCHASE AGREEMENT") ARE EXPRESSLY SET FORTH IN SECTION 14 OF THE PURCHASE
AGREEMENT, AND REFERENCE IS HEREBY MADE TO SUCH PURCHASE AGREEMENT FOR THE
PRECISE TERMS OF THIS SUBSIDIARY GUARANTEE. THE TERMS OF SECTION 14 OF THE
PURCHASE AGREEMENT ARE INCORPORATED HEREIN BY REFERENCE.
Each of the Guarantors hereby, jointly and severally, unconditionally
guarantees, on a senior subordinated basis, to each Holder of a Note executed
and delivered by the Company, irrespective of the validity and enforceability of
the Purchase Agreement, the Notes or the obligations of the Company hereunder or
thereunder, that (a) the principal of and premium and interest, including any
Special Interest, if any, on the Notes shall be promptly paid in full when due,
whether at Stated Maturity, by acceleration, redemption or otherwise, and
interest on the overdue principal of (and any premium) and interest and Special
Interest on the Notes, if any, if lawful, and all other obligations of the
Company to the Holders hereunder or thereunder shall be promptly paid in full or
performed, all in accordance with the terms hereof and thereof; and (b) in case
of any extension of time of payment or renewal of any Notes or any of such other
obligations, that same shall be promptly paid in full when due or performed in
accordance with the terms of the extension or renewal, whether at Stated
Maturity, by acceleration or otherwise. Failing payment when due of any amount
so guaranteed or any performance so guaranteed for whatever reason, the
Guarantors shall be jointly and severally obligated to pay the same immediately.
Each Guarantor hereby agrees that its obligations hereunder shall be
unconditional, irrespective of the validity, regularity or enforceability of the
Notes or the Purchase Agreement, the absence of any action to enforce the same,
any waiver or consent by any Holder with respect to any provisions thereof, the
recovery of any judgment against the Company, any action to enforce the same or
any other circumstance which might otherwise constitute a legal or equitable
discharge or defense of a guarantor. Each Guarantor hereby waives diligence,
presentment, demand of payment, filing of claims with a court in the event of
insolvency or bankruptcy of the Company, any right to require a proceeding first
against the Company, protest, notice and all demands whatsoever and covenants
that, subject to Section 14 of the Purchase Agreement, this Subsidiary Guarantee
shall not be discharged
C-1
<PAGE>
except by complete performance of the obligations contained in the Notes and the
Purchase Agreement.
If any Holder is required by any court or otherwise to return to the
Company or Guarantors, or any Custodian, trustee, liquidator or other similar
official acting in relation to either the Company or Guarantors, any amount paid
by such Holder, this Subsidiary Guarantee, to the extent theretofore discharged,
shall be reinstated in full force and effect. Each Guarantor agrees that it
shall not be entitled to any right of subrogation in relation to the Holders of
Notes in respect of any obligations guaranteed hereby. Each Guarantor further
agrees that, as between the Guarantors, on the one hand, and the Holders, on the
other hand, (a) the Maturity of the obligations guaranteed hereby may be
accelerated as provided in Section 11 of the Purchase Agreement for the purposes
of this Subsidiary Guarantee, notwithstanding any stay, injunction or other
prohibition preventing such acceleration in respect of the obligations
guaranteed hereby and (b) in the event of any declaration of acceleration of
such obligations as provided in Section 11 of the Purchase Agreement, such
obligations (whether or not due and payable) shall forthwith become due and
payable by the Guarantors for the purpose of this Subsidiary Guarantee. The
Guarantors shall have the right to seek contribution from any non-paying
Guarantor so long as the exercise of such right does not impair the rights of
the Holders under the Subsidiary Guarantee.
The obligations of each Guarantor under this Subsidiary Guarantee are
junior and subordinated to the Guarantor Senior Indebtedness of such Guarantor
on the same basis as the Notes are junior and subordinated to Senior
Indebtedness of the Company. For the purposes of the foregoing sentence, the
Trustee and the Holders shall have the right to receive and/or retain payments
by any of the Guarantors only at such times as they may receive and/or retain
payments in respect of the Notes pursuant to the Purchase Agreement, including
Section 13 thereof.
Each Guarantor, and by its acceptance of Notes, each Holder, hereby
confirms that it is the intention of all such parties that this Subsidiary
Guarantee not constitute a fraudulent transfer or conveyance for purposes of
Bankruptcy Law, the Uniform Fraudulent Conveyance Act, the Uniform Fraudulent
Transfer Act or any similar federal or state law to the extent applicable to any
Subsidiary Guarantee. To effectuate the foregoing intention, the Holders and
the Guarantors hereby irrevocably agree that the obligations of each Guarantor
under this Subsidiary Guarantee and Section 14 of the Purchase Agreement shall
be limited to the maximum amount as will, after giving effect to such maximum
amount and all other contingent and fixed liabilities of such Guarantor that are
relevant under such laws, and after giving effect to any collections from,
rights to receive contribution from or payments made by or on behalf of any
other Guarantor in respect of the obligations of such other Guarantor under
Section 14 of the Purchase Agreement, result in the obligations
C-2
<PAGE>
of such Guarantor under this Subsidiary Guarantee not constituting a fraudulent
transfer or conveyance.
This is a continuing Subsidiary Guarantee and shall remain in full
force and effect and shall be binding upon each Guarantor and its respective
successors and assigns to the extent set forth in the Purchase Agreement until
full and final payment of all of the Company's obligations under the Notes and
the Purchase Agreement and shall inure to the benefit of the Holders of Notes
and their successors and assigns and, in the event of any transfer or assignment
of rights by any Holder of Notes, the rights and privileges herein conferred
upon that party shall automatically extend to and be vested in such transferee
or assignee, all subject to the terms and conditions hereof and of Section 14 of
the Purchase Agreement. Notwithstanding the foregoing, any Guarantor that
satisfies the provisions of Section 14.4 of the Purchase Agreement shall be
released of its obligations hereunder. This is a Subsidiary Guarantee of
payment and not a guarantee of collection.
The terms of this Subsidiary Guarantee shall be governed by and
construed in accordance with the internal laws of the State of New York.
Capitalized terms used herein have the same meanings given in the
Purchase Agreement unless otherwise indicated.
[Guarantor]
By: __________________________________
Name:
Title:
C-3
<PAGE>
EXHIBIT D
FORM OF SUPPLEMENTAL AGREEMENT
SUPPLEMENTAL AGREEMENT (this "Supplemental Agreement"), dated as of
_______________, between ____________________ (the "Guarantor"), a direct or
indirect subsidiary of Dollar Financial Group, Inc. (or its successor), a New
York corporation (the "Company"), GS Mezzanine Partners, L.P., a limited
partnership organized under the laws of Delaware ("GS Mezzanine"), GS Mezzanine
------------
Partners Offshore, L.P., an exempted limited partnership organized under the
laws of the Cayman Islands ("GS Mezzanine Offshore"), Stone Street Fund 1998,
---------------------
L.P., a limited partnership organized under the laws of Delaware ("Stone
-----
Street"), and Bridge Street Fund 1998, L.P., a limited partnership organized
- ------
under the laws of Delaware (collectively with GS Mezzanine, GS Mezzanine
Offshore and Stone Street, the "GSMP Purchasers"), Ares Leveraged Investment
---------------
Fund, L.P., a limited partnership organized under the laws of Delaware ("Ares
----
I") and Ares Leveraged Investment Fund II, L.P., a limited partnership organized
- -
under the laws of Delaware ("Ares II" and, collectively with Ares I, "Ares" and,
------- ----
collectively with the GSMP Purchasers, the "Purchasers").
----------
W I T N E S S E T H
WHEREAS, the Company and the Purchasers have each heretofore executed
and delivered to each other a Purchase Agreement (the "Purchase Agreement"),
dated as of December 18, 1998, providing for the issuance and sale by the
Company to the Purchasers of an aggregate principal amount of up to $20,000,000
of 10 % Senior Subordinated Notes Due 2006 (the "Notes"); and
WHEREAS, Section 14.2 of the Purchase Agreement provides that under
certain circumstances the Company is required to cause the Guarantor to execute
and deliver to the Trustee a supplemental agreement pursuant to which the
Guarantor shall unconditionally guarantee all of the Company's obligations under
the Notes pursuant to a Subsidiary Guarantee on the terms and conditions set
forth herein;
NOW THEREFORE, in consideration of the foregoing and for other good
and valuable consideration, the receipt of which is hereby acknowledged, the
Guarantor covenants and agrees for the equal and ratable benefit of the Holders
of the Notes as follows:
1. CAPITALIZED TERMS. Capitalized terms used herein without
definition shall have the meanings assigned to them in the Purchase Agreement.
D-1
<PAGE>
2. AGREEMENT TO GUARANTEE. The Guarantor hereby agrees, jointly and
severally with all other Guarantors, to unconditionally guarantee the Company's
obligations under the Notes on the terms and subject to the conditions set forth
in Section 14 of the Purchase Agreement and to be bound by all other applicable
provisions of the Purchase Agreement.
3. NO RECOURSE AGAINST OTHERS. No director, officer, employee,
incorporator or stockholder of the Guarantor, as such, shall have any liability
for any obligations of the Company or any Guarantor under the Notes, any
Subsidiary Guarantees, the Purchase Agreement or this Supplemental Agreement or
for any claim based on, in respect of, or by reason of, such obligations or
their creation. Each Holder of Notes by accepting a Note waives and releases
all such liability. The waiver and release are part of the consideration for
issuance of the Notes. Such waiver may not be effective to waive liabilities
under the federal securities laws and it is the view of the Securities and
Exchange Commission that such a waiver is against public policy.
4. EFFECTIVENESS. This Supplemental Agreement shall be effective
upon execution by the parties hereto.
5. RECITALS. The recitals contained herein shall be taken as the
statements of the Company and the Guarantors assume no responsibility for their
correctness.
6. NEW YORK LAW TO GOVERN. THE INTERNAL LAWS OF THE STATE OF NEW
YORK SHALL GOVERN AND BE USED TO CONSTRUE THIS SUPPLEMENTAL AGREEMENT.
7. COUNTERPARTS. The parties may sign any number of copies of this
Supplemental Agreement. Each signed copy shall be an original, but all of them
together represent the same agreement.
8. EFFECT OF HEADINGS. The Section headings herein are for
convenience only and shall not affect the construction hereof.
[Guarantor]
By: __________________________________
Name:
Title:
D-2
<PAGE>
EXHIBIT E
Management Services Agreement
E-1
<PAGE>
EXHIBIT F
FORM OF NOTATION OF SUBSIDIARY GUARANTEE
The undersigned have guaranteed this Note on a subordinated basis as
provided in the Agreement.
[Name of Subsidiary Guarantors]
By: ____________________________
Name:
Title:
F-1
<PAGE>
SCHEDULE A
----------
INFORMATION RELATING TO PURCHASERS
----------------------------------
<TABLE>
<CAPTION>
Percentage of
Aggregate Principal
Amount of the Notes
to
Name and Address of Purchaser be Purchased
----------------------------- ---------------------
<S> <C>
GS MEZZANINE PARTNERS, L.P. 50.2288%
85 Broad Street
New York, New York 10004
Telecopy: (212) 902-3000
Attention: Ben Adler, Esq.
GS MEZZANINE PARTNERS 26.9721%
OFFSHORE, L.P.
c/o GS Mezzanine Partners L.P.
85 Broad Street
New York, New York 10004
Telecopy: (212) 902-3000
Attention: Ben Adler, Esq.
STONE STREET FUND 1998, L.P. 2.1502%
85 Broad Street
New York, New York 10004
Telecopy: (212) 902-3000
Attention: Ben Adler, Esq.
BRIDGE STREET FUND 1998, L.P. 0.6489%
85 Broad Street
New York, New York 10004
Telecopy: (212) 902-3000
Attention: Ben Adler, Esq.
ARES LEVERAGED INVESTMENT 10.0000%
FUND, L.P.
1999 Avenue of the Stars
Suite 1900
Los Angeles, California 90067
Telecopy: (310) 201-4170
Attention: Jeff Serota
</TABLE>
<PAGE>
<TABLE>
<CAPTION> Percentage of
Aggregate Principal
Amount of the Notes
to
Name and Address of Purchaser be Purchased
----------------------------- ---------------------
<S> <C>
ARES LEVERAGED INVESTMENT 10.0000%
FUND II, L.P.
1999 Avenue of the Stars
Suite 1900
Los Angeles, California 90067
Telecopy: (310) 201-4170
Attention: Jeff Serota
</TABLE>
<PAGE>
EXHIBIT 10.21
EXCHANGE AND REGISTRATION RIGHTS AGREEMENT
EXCHANGE AND REGISTRATION RIGHTS AGREEMENT, dated as of December 18, 1998, by
and among Dollar Financial Group, Inc., a New York corporation (the "Company"),
and GS Mezzanine Partners, L.P., a Delaware limited partnership, GS Mezzanine
Partners Offshore, L.P., a Cayman Islands limited partnership, Stone Street Fund
1998, L.P., a Delaware limited partnership, Bridge Street Fund 1998, L.P., a
Delaware limited partnership, Ares Leveraged Investment Fund, L.P., a Delaware
limited partnership and Ares Leveraged Investment Fund II, L.P., a Delaware
limited partnership (collectively, the "Initial Purchasers"), as the purchasers
of the 10-7/8% Senior Subordinated Notes Due 2006 of the Company.
1. Certain Definitions.
For purposes of this Agreement, the following terms shall have the following
respective meanings:
(a) "Closing Date" shall mean the date on which the Securities are
initially issued.
(b) "Commission" shall mean the Securities and Exchange Commission, or any
other successor federal agency at the time administering the Exchange Act or
the Securities Act, whichever is the relevant statute for the particular
purpose.
(c) "Common Stock" shall mean, collectively, shares of Class A Common
Stock, par value $.001 per share, and shares of Class B Common Stock, par
value $.001 per share, of Holdings.
(d) "Effective Time" in the case of an Exchange Offer, shall mean the date
on which the Commission declares the Exchange Offer registration statement
effective or on which such registration statement otherwise becomes effective
and, in the case of a Shelf Registration, shall mean the date on which the
Commission declares the Shelf Registration effective or on which the Shelf
Registration otherwise becomes effective.
(e) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
(f) "Exchange Offer" shall have the meaning assigned thereto in Section 2.
(g) "Exchange Securities" shall have the meaning assigned thereto in
Section 2. Exchange Securities have terms that are identical to Registrable
Securities; provided, however, that in accordance with the provisions of
Section 9.17 of the Purchase Agreement, a different series of Exchange
Securities may be issued, which series may differ as to relative ranking,
interest rate or yield, so long as the aggregate cost of the issuance to the
Company is not increased.
(h) The term "holder" shall mean the Initial Purchasers for so long as they
own any Registrable Securities and any other person who is a holder or
beneficial owner of any Registrable Securities, for so long as such person
owns any Registrable Securities.
<PAGE>
(i) "Holdings" shall mean DFG Holdings, Inc., a Delaware corporation and
stockholder of the Company.
(j) "Indenture" have the meaning set forth in Section 2(a).
(k) "IPO" means the initial underwritten public offering of Holdings
pursuant to which any of the Common Stock becomes registered under Section 12
of the Exchange Act.
(l) "NASD" shall have the meaning set forth in Section 3(c)(xvii).
(m) The term "person" shall mean a corporation, limited liability company,
association, partnership, organization, business, individual, trust,
government or political subdivision thereof or governmental agency.
(n) "Purchase Agreement" shall mean the Purchase Agreement, dated as of
the date hereof, between the Company and the Initial Purchasers with respect
to the purchase by the Initial Purchasers of the Securities.
(o) "Registrable Securities" shall mean the Securities; provided, however,
that such Securities shall cease to be Registrable Securities when (i) in the
circumstances contemplated by Section 2(a), such Securities have been
exchanged for Exchange Securities in an Exchange Offer as contemplated in
Section 2(a) by a person other than a broker-dealer, (ii) in the case of a
broker-dealer, following the exchange of such Securities for Exchange
Securities by such broker-dealer, the date on which such Exchange Securities
have been sold to a purchaser who receives from such broker-dealer on or prior
to the date of such sale a copy of the prospectus for use in connection with
resales by broker-dealers referred to in Section 2(a); (iii) in the
circumstances contemplated by Section 2(b), a registration statement
registering such Securities under the Securities Act has been declared or
becomes effective and such Securities have been sold or otherwise transferred
by the holder thereof pursuant to such effective registration statement; (iv)
such Securities are sold pursuant to Rule 144 under circumstances in which any
legend borne by such Securities relating to restrictions on transferability
thereof, under the Securities Act or otherwise, is removed by the Company or
such Securities are eligible to be sold pursuant to paragraph (k) of Rule 144;
or (iv) such Securities shall cease to be outstanding.
(p) "Registration Default" shall have the meaning set forth in Section
2(c).
(q) "Registration Expenses" shall have the meaning assigned thereto in
Section 4 hereof.
(r) "Request Date" shall have the meaning set forth in Section 2(a).
(s) "Restricted Holder" shall mean (i) a holder that is an affiliate of the
Company within the meaning of Rule 405 under the Securities Act, (ii) a holder
who acquires Exchange Securities outside the ordinary course of such holder's
business or (iii) a holder who has arrangements or understandings with any
person to participate in the Exchange Offer for the purpose of distributing
Exchange Securities.
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(t) "Rule 144", "Rule 405" and "Rule 415" shall mean, in each case, such
rule promulgated under the Securities Act.
(u) "Rules of Conduct" shall have the meaning set forth in Section
3(c)(xvii).
(v) "Securities" shall mean, collectively, the $20 million aggregate
principal amount of 10-7/8% Senior Subordinated Notes of the Company, due on
the earlier of the 8th anniversary of the Closing Date or December 31, 2006,
to be issued and sold to the Initial Purchasers and securities issued in
exchange therefor.
(w) "Securities Act" shall mean the Securities Act of 1933, as amended.
(x) "Shelf Registration" shall have the meaning assigned thereto in Section
2(b).
(y) "Special Interest" shall have the meaning set forth in Section 2(c).
(z) "Trust Indenture Act" shall mean the Trust Indenture Act of 1939, as
amended.
Unless the context otherwise requires, any reference herein to a "Section" or
"clause" refers to a Section or clause, as the case may be, of this Agreement,
and the words "herein," "hereof" and "hereunder" and other words of similar
import refer to this Agreement as a whole and not to any particular Section or
other subdivision. Unless the context otherwise requires, any reference to a
statute, rule or regulation refers to the same (including any successor statute,
rule or regulation thereto) as it may be amended from time to time.
2. Registration Under the Securities Act.
(a) The Company shall at the written request of any holders of Registrable
Securities aggregating at least 51% in aggregate principal amount of the
Registrable Securities at the time outstanding, which request may be made at any
time after the earlier of (x) the first anniversary of the Closing Date and (y)
three (3) months after the occurrence of an IPO (the date such request is made,
the "Request Date"), file with the Commission a registration statement relating
to an offer to exchange (the "Exchange Offer") any and all of the Securities for
a like aggregate principal amount of debt securities of the Company which are
substantially identical to the Securities (and which are entitled to the
benefits of a trust indenture which has been qualified under the Trust Indenture
Act (the "Indenture")) except that they have been registered pursuant to an
effective registration statement under the Securities Act and will not contain
provisions for the special interest contemplated by Section 2(c) hereof or
provisions restricting transfer; provided, however, that at the request of
holders of all of the Securities, such debt securities may differ as to relative
ranking, interest rate or yield, so long as the aggregate cost of the issuance
to the Company is not increased (such new debt securities hereinafter called
"Exchange Securities"). The Company agrees to use its best efforts to cause such
registration statement to be filed not later than 45 days after such request and
to become effective under the Securities Act as soon as practicable, but no
later than 120 days after the Request Date. The Exchange Offer will be
registered under the Securities Act on the appropriate form and will comply with
all applicable tender offer rules and regulations under the Exchange Act. The
Company further agrees to use its best efforts to commence and complete the
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Exchange Offer promptly after such registration statement has become effective,
hold the Exchange Offer open for at least 30 business days and exchange the
Exchange Securities for all Registrable Securities that have been tendered and
not withdrawn on or prior to the expiration of the Exchange Offer. The Exchange
Offer will be deemed to have been completed only if the Exchange Securities
received by holders other than Restricted Holders in the Exchange Offer for
Registrable Securities are, upon receipt, transferable by each such holder
without restriction under the Securities Act and without material restrictions
under the blue sky or securities laws of a substantial majority of the States of
the United States of America, it being understood that broker-dealers receiving
Exchange Securities will be subject to certain prospectus delivery requirements
with respect to resale of the Exchange Securities. The Exchange Offer shall be
deemed to have been completed upon the earlier to occur of (i) the Company
having exchanged the Exchange Securities for all outstanding Registrable
Securities pursuant to the Exchange Offer and (ii) the Company having exchanged,
pursuant to the Exchange Offer, Exchange Securities for all Registrable
Securities that have been properly tendered and not withdrawn before the
expiration of the Exchange Offer, which shall be on a date that is at least 30
business days following the commencement of the Exchange Offer. The Company
agrees (i) to include in the registration statement a prospectus for use in any
resales by any holder of Securities that is a broker-dealer and (ii) to keep
such registration statement effective for a period ending on the earlier of the
180th day after the Exchange Offer has been completed or such time as such
broker-dealers no longer own any Registrable Securities. With respect to such
regis tration statement such holders shall have the benefit of the rights of
indemnification and contribution set forth in Section 6 hereof.
(b) In addition to conducting the Exchange Offer contemplated by Section 2(a)
above, upon the request in writing of any holders of Registrable Securities
aggregating at least 51% in aggregate principal amount of the Registrable
Securities at the time outstanding, which request may be made at any time after
the earlier of (x) the first anniversary of the Closing Date and (y) three (3)
months after the occurrence of an IPO, the Company shall file under the
Securities Act as soon as practicable a "shelf" registration statement (to the
extent the Company then qualifies for such filing) providing for the
registration of, and the sale on a continuous or delayed basis by the holders
of, all of the Registrable Securities, pursuant to Rule 415 under the Securities
Act and/or any similar rule that may be adopted by the Commission (the "Shelf
Registration"). The Company agrees to use its best efforts to file the
registration statement relating to the Shelf Registration not later than 45 days
after such request obligation arises and to cause the Shelf Registration to
become or be declared effective no later than 120 days after such obligation
arises, and to keep such Shelf Registration continuously effective until the
earlier of (i) two (2) years from the effective date thereof or (ii) such time
as there are no longer any Registrable Securities outstanding, subject to the
Securities Act and the rules and regulations thereunder. The Company further
agrees to supplement or make amendments to the Shelf Registration, as and when
required by the rules, regulations or instructions applicable to the
registration form used by the Company for such Shelf Registration or by the
Securities Act or rules and regulations thereunder for shelf registration, and
the Company agrees to furnish to the holders of the Registrable Securities
copies of any such supplement or amendment prior to its being used and/or filed
with the Commission.
(c) In the event that (i) the Company has not filed (a) the registration
statement relating to the Exchange Offer on or before the date such statement is
required to be filed pursuant to
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Section 2(a) or (b) the Shelf Registration on or before the date such statement
is required to be filed pursuant to Section 2(b) or (ii) either such
registration statement has not become effective or been declared effective by
the Commission on or before the date such statement is required to be declared
to be effective pursuant to Section 2(a) and Section 2(b), respectively, or
(iii) the Exchange Offer has not been completed within 45 business days (or such
necessary longer period, if any, pending any necessary approval or non-objection
by or, any filing with, any governmental or regulatory authority being sought in
good faith by appropriate proceedings promptly initiated and diligently
conducted) after the initial effective date of the registration statement (if
the Exchange Offer is then required to be made) or (iv) any registration
statement required by Section 2(a) or 2(b) is filed and declared effective but
shall thereafter ceases to be effective or usable for transfers of Registrable
Securities during the periods referred to in Sections 2(a) and 2(b) without
being succeeded immediately by an additional registration statement filed and
declared effective (each such event referred to in clauses (i) through (iv), a
"Registration Default"), then the Company shall pay in cash a special
incremental increase of the interest rate on the Securities ("Special Interest")
to each holder thereof in an amount of 0.50% (or 50 basis points) per annum for
the first 120 days following the occurrence of the first Registration Default
Period and in an amount of 1.0% (or 100 basis points) per annum thereafter and
for so long as any Registration Default is in effect (after which such Special
Interest shall cease to be payable). In the event that any Special Interest
becomes payable, the Company shall promptly notify the trustee designated by the
Indenture of such event, including any subsequent increase in the amount of
Special Interest, and the beginning and ending dates therefor.
3. Registration Procedures.
If the Company files a registration statement pursuant to Section 2(a) or
Section 2(b), the following provisions shall apply:
(a) At or before the Effective Time of the Exchange Offer or the Shelf
Registration, as the case may be, the Company shall qualify the Indenture under
the Trust Indenture Act.
(b) In the event that such qualification would require the appointment of a
new trustee under the Indenture, the Company shall appoint a new trustee
thereunder pursuant to the applicable provisions of the Indenture.
(c) In connection with the Company's obligations with respect to the Shelf
Registration, if appli cable, the Company shall use its best efforts to effect
or cause the Shelf Registration to permit the sale of the Registrable Securities
by the holders thereof in accordance with the intended method or methods of
distribution thereof described in the Shelf Registration. In connection
therewith, the Company shall:
(i) as soon as reasonably possible, prepare and file with the Commission
a registration statement with respect to the Shelf Registration on any form
which may be utilized by the Company and which shall permit the disposition of
the Registrable Securities in accordance with the intended method or methods
thereof, as specified in writing by the holders of the Registrable Securities,
and use its best efforts to cause such registration statement to become
effective as soon as reasonably possible thereafter in accordance with Section
2(b);
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(ii) as soon as reasonably possible, prepare and file with the
Commission such amendments and supplements to such registration statement
and the prospectus included therein as may be necessary to effect and
maintain the effectiveness of such registration statement for the period
specified in Section 2(b) hereof and as may be required by the applicable
rules and regulations of the Commission and the instructions applicable to
the form of such registration statement, and furnish to the holders of the
Registrable Securities copies of any such supplement or amendment prior to
its being used and/or filed with the Commission;
(iii) as soon as reasonably possible, comply with the provisions of the
Securities Act with respect to the disposition of all of the Registrable
Securities covered by such registration statement in accordance with the
intended methods of disposition by the holders thereof set forth in such
registration statement;
(iv) provide (A) the holders of the Registrable Securities to be
included in such registration statement, (B) the underwriters (which term,
for purposes of this Agreement, shall include a person deemed to be an
underwriter within the meaning of Section 2(11) of the Securities Act) if
any, thereof, (C) the sales or placement agent therefor, if any, (D)
counsel for such underwriters or agent, and (E) not more than one counsel
for all the holders of such Registrable Securities the opportunity to
participate in the preparation of such registration statement, each
prospectus included therein or filed with the Commission, and each
amendment or supplement thereto;
(v) for a reasonable period prior to the filing of such registration
statement, and throughout the period specified in Section 2(b), make
available at reasonable times at the Company's principal place of business
or such other reasonable place for inspection by the parties referred to in
Section 3(c)(iv) who shall certify to the Company that they have a current
intention to sell the Registrable Securities pursuant to the Shelf
Registration such financial and other information and books and records of
the Company, and cause the officers, employees, counsel and independent
certified public accountants of the Company to respond to such inquiries,
as shall be reasonably necessary, in the reasonable judgment of the
respective counsel referred to in such Section, to conduct a reasonable
investigation within the meaning of Section 11 of the Securities Act;
provided, however, that each such party shall be required to maintain in
confidence and not to disclose to any other person any information or
records reasonably designated by the Company in writing as being
confidential, until such time as (A) such information becomes a matter of
public record, other than by an impermissible disclosure by such party
(whether by virtue of its inclusion in such registration statement or
otherwise), or (B) such person shall be required, or shall deem it
advisable, so to disclose such information pursuant to the subpoena or
order of any court or other governmental agency or body having jurisdiction
over the matter (subject to the requirements of such order, and only after
such person shall have given the Company prompt prior written notice
thereof), or (C) such information is required to be set forth in such
registration statement or the prospectus included therein or in an
amendment to such registration statement or an amendment or supplement to
such prospectus in order that such registration statement, prospectus,
amendment or supplement, as the case may be, does not contain an untrue
statement of a material fact or omit to state therein a material fact
required to be stated therein or necessary to make the statements therein
not misleading in light of the circumstances then existing;
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(vi) promptly notify the selling holders of Registrable Securities, the
sales or placement agent, if any, therefor and the managing underwriter or
underwriters, if any, thereof and confirm such advice in writing, (A) when
such registration statement or the prospectus included therein or any
prospectus amendment or supplement or post-effective amendment has been
filed, and, with respect to such registration statement or any post-
effective amendment, when the same has become effective, (B) of any
comments by the Commission, the Blue Sky or securities commissioner or
regulator of any state with respect thereto or any request by the
Commission for amendments or supplements to such registration statement or
prospectus or for additional information, (C) of the issuance by the
Commission of any stop order suspending the effective ness of such
registration statement or the initiation or threatening of any proceedings
for that purpose, (D) if at any time the representations and warranties of
the Company contemplated by Section 3(c)(xv) or Section 5 cease to be true
and correct in all material respects, (E) of the receipt by the Company of
any notification with respect to the suspension of the qualification of the
Registrable Securities for sale in any jurisdiction or the initiation or
threatening of any proceeding for such purpose, or (F) at any time when a
prospectus is required to be delivered under the Securities Act, that such
registration statement, prospectus, prospectus amendment or supplement or
post-effective amendment, or any document incorporated by reference in any
of the foregoing, contains an untrue statement of a material fact or omits
to state any material fact required to be stated therein or necessary to
make the statements therein not misleading in light of the circumstances
then existing;
(vi) use its best efforts to obtain the withdrawal of any order
suspending the effectiveness of such registration statement or any post-
effective amendment thereto at the earliest practicable date;
(vi) if requested by any managing underwriter or underwriters, any
placement or sales agent or any holder of Registrable Securities, promptly
incorporate in a prospectus supplement or post-effective amendment such
information as is required by the applicable rules and regulations of the
Commission and as such managing underwriter or underwriters, such agent or
such holder specifies should be included therein relating to the terms of
the sale of such Registrable Securities, including, without limitation,
information with respect to the principal amount of Registrable Securities
being sold by such holder or agent or to any underwriters, the name and
description of such holder, agent or underwriter, the offering price of
such Registrable Securities and any discount, commission or other
compensation payable in respect thereof, the purchase price being paid
therefor by such underwriters and with respect to any other terms of the
offering of the Registrable Securities to be sold by such holder or agent
or to such underwriters; and make all required filings of such prospectus
supplement or post-effective amendment promptly after notification of the
matters to be incorporated in such prospectus supplement or post-effective
amendment;
(ix) furnish to each holder of Registrable Securities, each placement or
sales agent, if any, therefor, each underwriter, if any, thereof and the
respective counsel referred to in Section 3(c)(iv) an executed copy of such
registration statement, each such amendment and supplement thereto (in each
case including all exhibits thereto and documents incorporated by reference
therein) and such number of copies of such registration statement
(excluding exhibits thereto and documents incorporated by reference therein
unless specifically and reasonably so requested
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<PAGE>
by such holder, agent or underwriter, as the case may be) and of the
prospectus included in such registration statement (including each preliminary
prospectus and any summary prospectus), in conformity with the requirements of
the Securities Act, and such other documents, as such holder, agent, if any,
and underwriter, if any, may reasonably request in order to facilitate the
offering and disposition of the Registrable Securities owned by such holder,
offered or sold by such agent or underwritten by such underwriter and to
permit such holder, agent and underwriter to satisfy the prospectus delivery
requirements of the Securities Act; and the Company hereby consents to the use
of such prospectus (including such preliminary and summary prospectus) and any
amendment or supplement thereto by each such holder and by any such agent and
underwriter, if any, in each case in the form most recently provided to such
party by the Company, in connection with the offering and sale of the
Registrable Securities covered by the prospectus (including such preliminary
and summary prospectus) or any supplement or amendment thereto;
(x) use its best efforts to (A) register or qualify the Registrable
Securities to be included in such registration statement under such
securities laws or blue sky laws of such jurisdictions as any holder of
such Registrable Securities and each placement or sales agent, if any,
therefor and underwriter, if any, thereof shall reasonably request, (B)
keep such registrations or qualifications in effect and comply with such
laws so as to permit the continuance of offers, sales and dealings therein
in such jurisdictions during the period the Shelf Registration is required
to remain effective under Section 2(b) above and for so long as may be
necessary to enable any such holder, agent or underwriter, if any, to
complete its distribution of Securities pursuant to such registration
statement and (C) take any and all other actions as may be reasonably
necessary or advisable to enable each such holder, agent, if any, and
underwriter, if any, to consummate the disposition in such jurisdictions of
such Registrable Securities; provided, however, that the Company shall not
be required for any such purpose to (1) qualify as a foreign corporation in
any jurisdiction wherein it would not otherwise be required to qualify but
for the requirements of this Section 3(c)(x), (2) consent to general
service of process or taxation in any such jurisdiction or (3) make any
changes to its articles of incorporation or by-laws or any agreement
between it and its stockholders;
(xi) use its best efforts to obtain the consent or approval of each
governmental agency or authority, whether federal, state, provincial or
local, which may be required to effect the Shelf Registration or the
offering or sale in connection therewith or to enable the selling holder or
holders to offer, or to consummate the disposition of, their Registrable
Securities; provided, however, that the Company shall not be required for
any such purpose to (1) qualify as a foreign corporation in any
jurisdiction wherein it would not otherwise be required to qualify but for
the requirements of this Section 3(c)(xi), (2) consent to general service
of process or taxation in any such jurisdiction or (3) make any changes to
its articles of incorporation or by-laws or any agreement between it and
its stockholders;
(xii) cooperate with the holders of the Registrable Securities and the
managing underwriters, if any, to facilitate the timely preparation and
delivery of certificates representing Registrable Securities to be sold,
which certificates shall not bear any restrictive legends;
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(xiii) provide a CUSIP number for all Registrable Securities, not later
than the effective date of the Shelf Registration;
(xiv) enter into one or more reasonable forms of underwriting
agreements, engagement letters, agency agreements, "best efforts"
underwriting agreements or similar agreements, as appropriate, including
(without limitation) customary provisions relating to indemnification and
contribution, and take such other actions in connection therewith as any
holders of Registrable Securities aggregating at least 51% in aggregate
principal amount of the Registrable Securities to be included in such Shelf
Registration shall reasonably request in order to expedite or facilitate
the disposition of such Registrable Securities; provided, however, that the
Company shall not be required to enter into any such agreement more than
twice with respect to all of the Registrable Securities and may delay
entering into such agreement until the consummation of any underwritten
public offering which the Company shall have then engaged;
(xv) whether or not an agreement of the type referred to in Section
(3)(c)(xiv) hereof is entered into and whether or not any portion of the
offering contemplated by such registration statement is an underwritten
offering or is made through a placement or sales agent or any other entity,
(A) make such representations and warranties to the holders of such
Registrable Securities and the placement or sales agent, if any, therefor
and the underwriters, if any, thereof in form, substance and scope as are
customarily reasonably made in connection with an offering of debt
securities pursuant to any appropriate agreement and/or to a registration
statement filed on the form applicable to the Shelf Registration; (B)
obtain an opinion or opinions of counsel to the Company in customary form
and covering such other matters of the type customarily covered by such an
opinion, as the managing underwriters, if any, and as any holders of at
least 51% in aggregate principal amount of the Registrable Securities to be
included in such Shelf Registration may reasonably request, addressed to
such holder or holders and the placement or sales agent, if any, therefor
and the underwriters, if any, thereof and dated the effective date of such
registration statement (and if such registration statement contemplates an
underwritten offering of a part or all of the Registrable Securities, dated
the date of the closing under the underwriting agreement relating thereto)
(it being agreed that such opinion shall be in substantially the same form
as is required pursuant to Section 3.04 of the Purchase Agreement, with
such differences as is appropriate to reflect a registered transaction and
the particular form on which such Shelf Registration is filed); (C) obtain
a "cold comfort" letter or letters from the independent certified public
accountants of the Company addressed to the selling holders of Registrable
Securities and the placement or sales agent, if any, therefor and the
underwriters, if any, thereof, dated (i) the effective date of such
registration statement and (ii) the effective date of any prospectus
supplement to the prospectus included in such registration statement or
post-effective amendment to such registration statement which includes
unaudited or audited financial statements as of a date or for a period
subsequent to that of the latest such statements included in such
prospectus (and, if such registration statement contemplates an
underwritten offering pursuant to any prospectus supplement to the
prospectus included in such registration statement or post-effective
amendment to such registration statement which includes unaudited or
audited financial statements as of a date or for a period subsequent to
that of the latest such statements included in such prospectus, dated the
date of the closing under the underwriting agreement relating thereto),
such letter or letters to be in customary form and covering such matters of
the type customarily covered by letters of such type; (D) deliver such
documents and
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certificates, including officers' certificates, as may be reasonably requested
by any holders of at least 51% in aggregate principal amount of the
Registrable Securities to be included in such Shelf Registration and the
placement or sales agent, if any, therefor and the managing underwriters, if
any, thereof to evidence the accuracy of the representations and warranties
made pursuant to clause (A) above or those contained in Section 5(a) hereof
and the compliance with or satisfaction of any agreements or conditions
contained in the underwriting agreement or other agreement entered into by the
Company; and (E) undertake such obligations relating to expense reimbursement,
indemnification and contribution as are provided in Section 6 hereof;
(xvi) notify in writing each holder of Registrable Securities of any
proposal by the Company to amend or waive any provision of this Agreement
pursuant to Section 9(h) hereof and of any amendment or waiver effected
pursuant thereto, each of which notices shall contain the text of the
amendment or waiver proposed or effected, as the case may be;
(xvii) in the event that any broker-dealer registered under the Exchange
Act shall underwrite any Registrable Securities or participate as a member
of an underwriting syndicate or selling group or "assist in the
distribution" (within the meaning of the Rules of Conduct (the "Rules of
Conduct") of the National Association of Securities Dealers, Inc. ("NASD"))
thereof, whether as a holder of such Registrable Securities or as an
underwriter, a placement or sales agent or a broker or dealer in respect
thereof, or otherwise, assist such broker-dealer in complying with the
requirements of such Rules of Conduct, including, without limitation, by
(A) if such Rules of Conduct shall so require, engaging a "qualified
independent underwriter" (as defined in such Rules of Conduct) to
participate in the preparation of the registration statement relating to
such Registrable Securities, to exercise usual standards of due diligence
in respect thereto and, if any portion of the offering contemplated by such
registration statement is an underwritten offering or is made through a
placement or sales agent, to recommend the yield of such Registrable
Securities, (B) indemnifying any such qualified independent underwriter to
the extent of the indemnification of underwriters provided in Section 6
hereof, and (C) providing such information to such broker-dealer as may be
required in order for such broker-dealer to comply with the requirements of
the Rules of Conduct; and
(xviii) comply with all applicable rules and regulations of the
Commission, and make generally available to its security holders not later
than eighteen months after the effective date of such registration
statement, an earning statement of the Company and its subsidiaries
complying with Section 11(a) of the Securities Act (including, at the
option of the Company, Rule 158 thereunder) .
(d) In the event that the Company would be required, pursuant to Section
3(c)(vi)(F) above, to notify the selling holders of Registrable Securities, the
placement or sales agent, if any, therefor and the managing underwriters, if
any, thereof, the Company shall without delay prepare and furnish to each such
holder, to each placement or sales agent, if any, and to each underwriter, if
any, a reasonable number of copies of a prospectus supplemented or amended so
that, as thereafter delivered to Initial Purchasers of Registrable Securities,
such prospectus shall not contain an untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary to make the
statements therein not misleading in light of the circumstances then existing.
Each holder of Registrable Securities agrees that upon receipt of any notice
from the Company pursuant
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to Section 3(c)(vi)(F) hereof, such holder shall forthwith discontinue the
disposition of Registrable Securities pursuant to the registration statement
applicable to such Registrable Securities until such holder shall have received
copies of such amended or supplemented prospectus, and if so directed by the
Company, such holder shall deliver to the Company (at the Company's expense) all
copies, other than permanent file copies, then in such holder's possession of
the prospectus covering such Registrable Securities at the time of receipt of
such notice.
(e) The Company may require each holder of Registrable Securities as to which
any registration is being effected to furnish to the Company such information
regarding such holder and such holder's intended method of distribution of such
Registrable Securities as the Company may from time to time reasonably request
in writing, but only to the extent that such information is required in order to
comply with the Securities Act. Each such holder agrees to notify the Company as
promptly as practicable of any inaccuracy or change in information previously
furnished by such holder to the Company or of the occurrence of any event in
either case as a result of which any prospectus relating to such registration
contains or would contain an untrue statement of a material fact regarding such
holder or such holder's intended method of distribution of such Registrable
Securities or omits to state any material fact regarding such holder or such
holder's intended method of distribution of such Registrable Securities required
to be stated therein or necessary to make the statements therein not misleading
in light of the circumstances then existing, and promptly to furnish to the
Company any additional information required to correct and update any previously
furnished information or required so that such prospectus shall not contain,
with respect to such holder or the distribution of such Registrable Securities,
an untrue statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements therein not misleading
in light of the circumstances then existing.
4. Registration Expenses.
The Company agrees to bear and to pay or cause to be paid all expenses
incident to the Company's performance of or compliance with this Agreement,
including, without limitation, (a) all Commission and any NASD registration and
filing fees and expenses, (b) all fees and expenses in connection with the
qualification of the Securities or Exchange Securities for offering and sale
under the State securities and blue sky laws referred to in Section 3(c)(x)
hereof, including reasonable fees and disbursements of counsel for the placement
or sales agent or underwriters in connection with such qualifications, (c) all
expenses relating to the preparation, printing, distribution and reproduction of
each registration statement required to be filed hereunder, each prospectus
included therein or prepared for distribution pursuant hereto, each amendment or
supplement to the foregoing, the certificates representing the Securities and
Exchange Securities and all other documents relating hereto, (d) messenger and
delivery expenses, (e) fees and expenses of the Trustee under the Indenture and
of any escrow agent or custodian, (f) internal expenses (including, without
limitation, all salaries and expenses of the Company's officers and employees
performing legal or accounting duties), (g) fees, disbursements and expenses of
counsel and independent certified public accountants of the Company (including
the expenses of any opinions or "cold comfort" letters required by or incident
to such performance and compliance), (h) reasonable fees, disbursements and
expenses of any "qualified independent underwriter" engaged pursuant to Section
3(c)(xvii) hereof, (i) reasonable fees, disbursements and expenses of one
counsel for the holders of Registrable Securities retained in connection with a
Shelf Registration, as selected by the holders of at least a
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majority in aggregate principal amount of the Registrable Securities being
registered, and fees, expenses and disbursements of any other persons, including
special experts, retained by the Company in connection with such registration
(collectively, the "Registration Expenses"). To the extent that any Registration
Expenses are incurred, assumed or paid by any holder of Registrable Securities
or any placement or sales agent therefor or underwriter thereof, the Company
shall reimburse such person for the full amount of the Registration Expenses so
incurred, assumed or paid promptly after receipt of a request therefor.
Notwithstanding the foregoing, the holders of the Registrable Securities being
registered shall pay all agency fees and commissions and underwriting discounts
and commissions attributable to the sale of such Registered Securities and the
fees and disbursements of any counsel or other advisors or experts retained by
such holders (severally or jointly), other than the counsel and experts
specifically referred to above.
5. Representations and Warranties.
The Company represents and warrants to, and agrees with, the Initial
Purchasers and each of the holders from time to time of Registrable Securities
that:
(a) Each registration statement covering Registrable Securities and each
prospectus (including any preliminary or summary prospectus) contained
therein or furnished pursuant to Section 3(c)(ix) hereof and any further
amendments or supplements to any such registration statement or prospectus,
when it becomes effective or is filed with the Commission, as the case may be,
and, in the case of an underwritten offering of Registrable Securities, at the
time of the closing under the underwriting agreement relating thereto, will
conform in all material respects to the requirements of the Securities Act and
the Trust Indenture Act and any such registration statement and any amendment
thereto will not contain an untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading and any such prospectus or any amendment or
supplement thereto will not contain an untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to
make the statements therein not misleading in light of the circumstances then
existing; and at all times subsequent to the Effective Time when a prospectus
would be required to be delivered under the Securities Act, other than from
(i) such time as a notice has been given to holders of Registrable Securities
pursuant to Section 3(c)(vi)(F) hereof until (ii) such time as the Company
furnishes an amended or supplemented prospectus pursuant to Section 3(d)
hereof, each such registration statement, and each prospectus (including any
summary prospectus) contained therein or furnished pursuant to Section
3(c)(ix) hereof, as then amended or supplemented, will conform in all material
respects to the requirements of the Securities Act and the Trust Indenture Act
and will not contain an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading in the light of the circumstances then
existing; provided, however, that this representation and warranty shall not
apply to any statements or omissions made in reliance upon and in conformity
with information furnished in writing to the Company by a holder of
Registrable Securities, or any sales or placement agent, if any, or
underwriter, if any, expressly for use therein.
(b) Any documents incorporated by reference in any prospectus referred to
in Section 5(a) hereof, when they become or became effective or are or were
filed with the Commission, as the
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<PAGE>
case may be, will conform or conformed in all material respects to the
requirements of the Securities Act or the Exchange Act, as applicable, and
none of such documents will contain or contained an untrue statement of a
material fact or will omit or omitted to state a material fact required to be
stated therein or necessary to make the statements therein in light of the
circumstances then existing not misleading; provided, however, that this
representation and warranty shall not apply to any statements or omissions
made in reliance upon and in conformity with information furnished in writing
to the Company by a holder of Registrable Securities, or any sales or
placement agent, if any, or underwriter, if any, expressly for use therein.
(c) The compliance by the Company with all of the provisions of this
Agreement and the consummation of the transactions herein contemplated will
not conflict with or result in a breach of any of the terms or provisions of,
or constitute a default under, any indenture, mortgage, deed of trust, loan
agreement or other agreement or instrument to which the Company or any
subsidiary of the Company is a party or by which the Company or any subsidiary
of the Company is bound or to which any of the property or assets of the
Company or any subsidiary of the Company is subject nor will such action
result in any violation of the provisions of the articles of incorporation or
by-laws of the Company or any statute or any order, rule or regulation of any
court or governmental agency or body having jurisdiction over the Company or
any subsidiary of the Company or any of their properties; and no consent,
approval, authorization, order, registration or qualification of or with any
such court or governmental agency or body is required for the consummation by
the Company of the transactions contemplated by this Agreement, except the
registration under the Securities Act of the Registrable Securities,
qualification of the Indenture under the Trust Indenture Act and such
consents, approvals, authorizations, registrations or qualifications as may be
required under State securities or blue sky laws in connection with the
offering and distribution of the Registrable Securities.
(d) This Agreement has been duly authorized, executed and delivered by the
Company.
6. Indemnification.
(a) Indemnification by the Company. Upon the registration of the Registrable
Securities pursuant to Section 2 hereof, and in consideration of the agreements
of the Initial Purchasers contained herein, and as an inducement to the Initial
Purchasers to purchase the Securities, the Company shall, and it hereby agrees
to, indemnify and hold harmless each of the holders of Registrable Securities to
be included in such registration, and each person who participates as a
placement or sales agent or as an underwriter in any offering or sale of such
Registrable Securities against any losses, claims, damages or liabilities, joint
or several, to which such holder, agent or underwriter may become subject under
the Securities Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon an
untrue statement or alleged untrue statement of a material fact contained in any
registration statement under which such Registrable Securities were registered
under the Securities Act, or any preliminary, final or summary prospectus
contained therein or furnished by the Company to any such holder, agent or
underwriter, or any amendment or supplement thereto, or arise out of or are
based upon the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, and the Company shall, and hereby it agrees to, reimburse such
holder, such agent and such underwriter for any legal or other expenses
reasonably incurred by them in
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<PAGE>
connection with investigating or defending any such action or claim as such
expenses are incurred; provided, however, that the Company shall not be liable
to any such person in any such case to the extent that any such loss, claim,
damage or liability arises out of or is based upon an untrue statement or
alleged untrue statement or omission or alleged omission made in such
registration statement, or preliminary, final or summary prospectus, or
amendment or supplement thereto (i) in reliance upon and in conformity with
written information furnished to the Company by holders of Registrable
Securities, or any sales or placement agent, if any, or underwriter, if any,
expressly for use therein or (ii) if and to the extent that such untrue
statement or omission or alleged untrue statement or omission is eliminated or
remedied by the Company through furnishing such holder of Registrable Securities
a supplemented or amended prospectus pursuant to Section 3(d) hereof prior to
the use by such holder of Registrable Securities of a prospectus that has not
been so supplemented or amended and from which the need to indemnify arises;
(b) Indemnification by the Holders and any Agents and Underwriters. The
Company may require, as a condition to including any Registrable Securities in
any registration statement filed pursuant to Section 2 hereof and to entering
into any underwriting agreement with respect thereto, that the Company shall
have received an undertaking reasonably satisfactory to it from the holder of
such Registrable Securities and from each underwriter named in any such
underwriting agreement, severally and not jointly, to indemnify and hold
harmless the Company and all other holders of Registrable Securities, against
any losses, claims, damages or liabilities to which the Company or such other
holders of Registrable Securities may become subject, under the Securities Act
or otherwise, insofar as such losses, claims, damages or liabilities (or actions
in respect thereof) arise out of or are based upon an untrue statement or
alleged untrue statement of a material fact contained in such registration
statement, or any preliminary, final or summary prospectus contained therein or
furnished by the Company to any such holder, agent or underwriter, or any
amendment or supplement thereto, or arise out of or are based upon the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, in
each case to the extent, but only to the extent, that such untrue statement or
alleged untrue statement or omission or alleged omission was made in reliance
upon and in conformity with written information furnished to the Company by such
holder or underwriter expressly for use therein, provided, however, that no such
holder shall be required to undertake liability to any person under this Section
6(b) for any amounts in excess of the dollar amount of the net proceeds to be
received by such holder from the sale of such holder's Registrable Securities
pursuant to such registration.
(c) Notices of Claims, Etc. Promptly after receipt by an indemnified party
under subsection (a) or (b) above of written notice of the commencement of any
action, such indemnified party shall, if a claim in respect thereof is to be
made against an indemnifying party pursuant to the indem nification provisions
of or contemplated by this Section 6, notify such indemnifying party in writing
of the commencement of such action; but the omission so to notify the
indemnifying party shall not relieve it from any liability which it may have to
any indemnified party other than under the indemnification provisions of or
contemplated by Section 6(a) or 6(b) hereof. In case any such action shall be
brought against any indemnified party and it shall notify an indemnifying party
of the commencement thereof, such indemnifying party shall be entitled to
participate therein and, to the extent that it shall wish, jointly with any
other indemnifying party similarly notified, to assume the defense thereof, with
counsel reasonably satisfactory to such indemnified party (who shall not,
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<PAGE>
except with the consent of the indemnified party (which consent shall not be
unreasonably withheld), be counsel to the indemnifying party), and, after notice
from the indemnifying party to such indemnified party of its election so to
assume the defense thereof, such indemnifying party shall not be liable to such
indemnified party for any legal expenses of other counsel or any other expenses,
in each case subsequently incurred by such indemnified party, in connection with
the defense thereof other than reasonable costs of investigation. No
indemnifying party shall, without the written consent of the indemnified party,
effect the settlement or compromise of, or consent to the entry of any judgment
with respect to, any pending or threatened action or claim in respect of which
indemnification or contribution may be sought hereunder (whether or not the
indemnified party is an actual or potential party to such action or claim)
unless such settlement, compromise or judgment (i) includes an unconditional
release of the indemnified party from all liability arising out of such action
or claim and (ii) does not include a statement as to or an admission of fault,
culpability or a failure to act by or on behalf of any indemnified party. No
indemnifying party shall be liable for the cost of any settlement effected by an
indemnified party without the written consent of such indemnifying party, which
consent shall not be unreasonably withheld.
(d) Contribution. Each party hereto agrees that, if for any reason the
indemnification provisions contemplated by Section 6(a) or Section 6(b) are
unavailable to or insufficient to hold harmless an indemnified party in respect
of any losses, claims damages or liabilities (or actions in respect thereof)
referred to therein, then each indemnifying party shall contribute to the amount
paid or payable by such indemnified party as a result of such losses, claims,
damages or liabilities (or actions in respect thereof) in such proportion as is
appropriate to reflect the relative fault of the indemnifying party and the
indemnified party in connection with the statements or omissions which resulted
in such losses, claims, damages or liabilities (or actions in respect thereof),
as well as any other relevant equitable considerations. The relative fault of
such indemnifying party and indemnified party shall be determined by reference
to, among other things, whether the untrue or alleged untrue statement of a
material fact or omission or alleged omission to state a material fact relates
to information supplied by such indemnifying party or by such indemnified party,
and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission. The parties hereto
agree that it would not be just and equitable if contributions pursuant to this
Section 6(d) were determined by pro rata allocation (even if the holders or any
agents or underwriters or all of them were treated as one entity for such
purpose) or by any other method of allocation which does not take account of the
equitable considerations referred to in this Section 6(d). The amount paid or
payable by an indemnified party as a result of the losses, claims, damages, or
liabilities (or actions in respect thereof) referred to above shall be deemed to
include any reasonable legal or other fees or expenses reasonably incurred by
such indemnified party in connec tion with investigating or defending any such
action or claim. Notwithstanding the provisions of this Section 6(d), no holder
shall be required to contribute any amount in excess of the amount by which the
dollar amount of the net proceeds received by such holder from the sale of any
Registrable Securities (after deducting any fees, discounts and commissions
applicable thereto) exceeds the amount of any damages which such holder has
otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission, and no underwriter shall be required
to contribute any amount in excess of the amount by which the total price at
which the Registrable Securities underwritten by it and distributed to the
public were offered to the public exceeds the amount of any damages which such
underwriter has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or
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<PAGE>
alleged omission. No person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. The holders' and any underwriters' obligations in this
Section 6(d) to contribute shall be several in proportion to the principal
amount of Registrable Securities registered or underwritten, as the case may be,
by them and not joint.
(e) The obligations of the Company under this Section 6 shall be in addition
to any liability which the Company may otherwise have and shall extend, upon the
same terms and conditions, to each officer, director and partner of each holder,
agent and underwriter and each person, if any, who controls any holder, agent or
underwriter within the meaning of the Securities Act; and the obliga tions of
the holders and any underwriters contemplated by this Section 6 shall be in
addition to any liability which the respective holder or underwriter may
otherwise have and shall extend, upon the same terms and conditions, to each
officer and director of the Company including any person who, with his consent,
is named in any registration statement as about to become a director of the
Company and to each person, if any, who controls the Company within the meaning
of the Securities Act.
7. Underwritten Offerings.
(a) Selection of Underwriters. If any of the Registrable Securities covered by
the Shelf Registra tion are to be sold pursuant to an underwritten offering, the
managing underwriter or underwriters thereof shall be designated by the holders
of at least a majority in aggregate principal amount of the Registrable
Securities to be included in such offering, provided that such designated
managing underwriter or underwriters is or are reasonably acceptable to the
Company.
(b) Participation by Holders. Each holder of Registrable Securities hereby
agrees with each other such holder that no such holder may participate in any
underwritten offering hereunder unless such holder (1) agrees to sell such
holder's Registrable Securities on the basis provided in any underwriting
arrangements approved by the persons entitled hereunder to approve such
arrangements and (ii) completes and executes all questionnaires, powers of
attorney, indemnities, underwriting agreements and other documents reasonably
required under the terms of such underwriting arrangements and (iii) provides
such information as reasonably requested by the Company, any sales or placement
agent, if any, or underwriter, if any, in connection with the underwritten
offering.
8. Rule 144.
The Company covenants to the holders of Registrable Securities that to the
extent it shall be required to do so under the Exchange Act, it shall timely
file the reports required to be filed by it under the Exchange Act or the
Securities Act (including, but not limited to, the reports under Section 13 and
15(d) of the Exchange Act referred to in subparagraph (c)(1) of Rule 144) and
the rules and regulations adopted by the Commission thereunder, and shall take
such further action as any holder of Registrable Securities may reasonably
request, all to the extent required from time to time to enable such holder to
sell Registrable Securities without registration under the Securities Act within
the limitations of the exemption provided by Rule 144 or any similar rule or
regulation hereafter adopted by the Commission; provided, however, that the
holders of Registrable Securities will not sell the Registrable Securities
pursuant to any such statutory registration exemption prior to the first
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<PAGE>
anniversary of the Closing Date. Upon the request of any holder of Registrable
Securities in connection with that holder's sale pursuant to Rule 144, the
Company shall deliver to such holder a written statement as to whether it has
complied with such requirements.
9. Miscellaneous.
(a) No Inconsistent Agreements. The Company represents, warrants, covenants
and agrees that it has not granted, and shall not grant, registration rights
with respect to Registrable Securities or any other securities which would be
inconsistent with the terms contained in this Agreement.
(b) Specific Performance. The parties hereto acknowledge that there would be
no adequate remedy at law if any party fails to perform any of its obligations
hereunder and that each party may be irreparably harmed by any such failure, and
accordingly agree that each party, in addition to any other remedy to which it
may be entitled at law or in equity, shall be entitled to compel specific
performance of the obligations of any other party under this Agreement in
accordance with the terms and conditions of this Agreement, in any court of the
United States or any State thereof having jurisdiction.
(c) Notices. All notices, requests, claims, demands, waivers and other
communications hereunder shall be in writing and shall be deemed to have been
duly given when delivered by hand, if delivered personally or by courier, or
three days after being deposited in the mail (registered or certified mail,
postage prepaid, return receipt requested) as follows: If to the Company, to it
at 1436 Lancaster Avenue, Suite 210, Berwyn, Pennsylvania 19312, Attention:
President, with a copy to Gregory J. Annick, c/o Leonard Green & Partners, L.P.,
11111 Santa Monica Boulevard, Suite 2000, Los Angeles, California 90025 and if
to a holder, to the address of such holder set forth in the security register or
other records of the Company, or to such other address as any party may have
furnished to the others in writing in accordance herewith, except that notices
of change of address shall be effective only upon receipt.
(d) Parties in Interest. All the terms and provisions of this Agreement shall
be binding upon, shall inure to the benefit of and shall be enforceable by the
respective successors and assigns of the parties hereto. In the event that any
transferee of any holder of Registrable Securities shall acquire Registrable
Securities, in any manner, whether by gift, bequest, purchase, operation of law
or otherwise, such transferee shall, without any further writing or action of
any kind, be deemed a party hereto for all purposes and such Registrable
Securities shall be held subject to all of the terms of this Agreement, and by
taking and holding such Registrable Securities such transferee shall be entitled
to receive the benefits of and be conclusively deemed to have agreed to be bound
by and to perform all of the terms and provisions of this Agreement.
(e) Survival. The respective indemnities, agreements, representations,
warranties and each other provision set forth in this Agreement or made pursuant
hereto shall remain in full force and effect regardless of any investigation (or
statement as to the results thereof) made by or on behalf of any holder of
Registrable Securities, any director, officer or partner of such holder, any
agent or underwriter or any director, officer or partner thereof, or any
controlling person of any of the foregoing, and shall survive delivery of and
payment for the Registrable Securities pursuant to the
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Purchase Agreement and the transfer and registration of Registrable Securities
by such holder and the consummation of an Exchange Offer.
(f) LAW GOVERNING. THIS AGREEMENT SHALL BE GOVERNED BY AND CON STRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
(g) Headings. The descriptive headings of the several Sections and paragraphs
of this Agreement are inserted for convenience only, do not constitute a part of
this Agreement and shall not affect in any way the meaning or interpretation of
this Agreement.
(h) Entire Agreement; Amendments. This Agreement and the other writings
referred to herein (including the Indenture and the form of Securities) or
delivered pursuant hereto which form a part hereof contain the entire
understanding of the parties with respect to its subject matter. This Agreement
supersedes all prior agreements and understandings between the parties with
respect to its subject matter. This Agreement may be amended and the observance
of any term of this Agreement may be waived (either generally or in a particular
instance and either retroactively or prospectively) only by a written instrument
duly executed by the Company and the holders of at least a majority in aggregate
principal amount of the Registrable Securities at the time outstanding. Each
holder of any Registrable Securities at the time or thereafter outstanding shall
be bound by any amendment or waiver effected pursuant to this Section 9(h),
whether or not any notice, writing or marking indicating such amendment or
waiver appears on such Registrable Securities or is delivered to such holder.
(i) Inspection. For so long as this Agreement shall be in effect, this
Agreement and a complete list of the names and addresses of all the holders of
Registrable Securities shall be made available for inspection and copying on any
business day by any holder of Registrable Securities at the offices of the
Company at the address thereof set forth in Section 9(c) above and at the office
of the Trustee under the Indenture.
(j) Counterparts. This agreement may be executed by the parties in
counterparts, each of which shall be deemed to be an original, but all such
respective counterparts shall together constitute one and the same instrument.
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<PAGE>
Agreed to and accepted as of the date referred to above.
DOLLAR FINANCIAL GROUP, INC.
By:/s/ Richard Dorfman
-------------------------------------
Name: Richard Dorfman
Title: Chief Financial Officer
GS MEZZANINE PARTNERS, L.P.
By: GS Mezzanine Advisors, L.P.,
its general partner
By: GS Mezzanine Advisors, Inc.,
its general partner
By:/s/ Melina Higgins
------------------------------------
Name: Melina Higgins
Title: Attorney-in-fact
GS MEZZANINE PARTNERS OFFSHORE, L.P.
By: GS Mezzanine Advisors (Cayman), L.P.,
its general partner
By: GS Mezzanine Advisors, Inc.,
its general partner
By:/s/ Melina Higgins
------------------------------------
Name: Melina Higgins
Title: Attorney-in-fact
STONE STREET FUND 1998, L.P.
By: Stone Street Advantage Corp.
General Partner
By:/s/ Melina Higgins
------------------------------------
Name: Melina Higgins
Title: Attorney-in-fact
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<PAGE>
BRIDGE STREET FUND 1998, L.P.
By: Stone Street Advantage Corp.
Managing General Partner
By:/s/ Melina Higgins
------------------------------------
Name: Melina Higgins
Title: Attorney-in-fact
ARES LEVERAGED INVESTMENT FUND, L.P.
By: ARES Management, L.P.
By: ARES Operating Member, LLC,
its General Partner
By:/s/ Jeff Serota
---------------------------------------
Name: Jeff Serota
Title: Vice President
ARES LEVERAGED INVESTMENT FUND II, L.P.
By: ARES Management II, L.P.
By: ARES Operating Member II, LLC,
its General Partner
By:/s/ Jeff Serota
---------------------------------------
Name: Jeff Serota
Title: Vice President
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<PAGE>
EXHIBIT 10.22
SECURED PROMISSORY NOTE
-----------------------
$2,000,000 December 18, 1998
FOR VALUE RECEIVED, the undersigned, Jeffrey Weiss, an individual
whose primary residence is at 1436 Lancaster Avenue, Berwyn, Pennsylvania
("Maker"), hereby promises to pay to the order of Dollar Financial Group, Inc.,
a New York corporation ("Payee"; Payee and any subsequent holder(s) hereof are
hereinafter referred to collectively as "Holder"), at such place as Holder may
designate to Maker in writing from time to time, in lawful money of the United
States, the principal sum of Two Million Dollars ($2,000,000).
The outstanding principal balance hereof shall be due and payable in
full on December 18, 2004 (the "Maturity Date"), subject to acceleration as
provided below.
The indebtedness and other obligations evidenced by this Note are
secured by the collateral set forth in the Pledge Agreement, dated as of the
date hereof, by and between Maker and Payee (the "Pledge Agreement"). Except
for rights against the Pledged Collateral as set forth in the Pledge Agreement,
the indebtedness and other obligations evidenced by this Note are non-recourse
to Maker personally.
This Note may be prepaid, in whole or in part, by the Maker, at any
time and from time to time, without penalty.
Time is of the essence of this Note. It is hereby expressly agreed
that, subject to the other provisions of this Note, in the event that an
Acceleration Event (as hereinafter defined) occurs and is continuing, the entire
outstanding principal balance of the indebtedness evidenced hereby shall, at the
option of Holder and upon notice to Maker, at once become due and payable and
may be collected forthwith, regardless of the stipulated Maturity Date.
"Acceleration Event" means each and all of the following: (a) Maker
defaults in any obligation provided in this Note, which default remains uncured
for ten (10) days following the giving of notice to Maker by Holder specifying
such default in reasonable detail; (b) Maker defaults in any obligation provided
in the Pledge Agreement, which default remains uncured following the giving of
any applicable notice and cure period as set forth in the Pledge Agreement; (c)
other than in a manner as described in Section 2.8.3(i) of that certain Amended
and Restated Stockholders Agreement, dated the date hereof, by and among DFG
Holdings, Inc. ("Holdings"), Maker and certain other stockholders of Holdings
parties thereto, Maker sells or otherwise transfers the collateral securing or
otherwise relating to the indebtedness evidenced hereby, whether or not such
sale or other transfer is permitted by the terms of any stockholders or other
agreements to which Maker and Holdings and/or Payee, are or may become parties;
(d) Maker defaults in any obligation provided in any other instrument or
document now or hereafter evidencing, securing or otherwise relating to the
indebtedness evidenced hereby (subject to any applicable notice or cure
provisions set forth therein); (e) Maker files a bankruptcy petition, a
bankruptcy
<PAGE>
petition is filed against Maker (and such petition remains undischarged for 60
days thereafter), Maker makes a general assignment for the benefit of creditors
or Maker admits in writing its inability to pay its obligations as they become
due; (f) a receiver or similar official is appointed for any of Maker's assets
or business; or (g) Maker's employment with Payee (including any successor
entity) is terminated, or Maker dies or becomes disabled; provided, however, in
-------- -------
the event of a termination of Maker by Holdings or Payee not for cause (as such
term is defined in Maker's employment agreement with Payee, if any) or the death
or disability of Maker, such Acceleration Event shall be reasonably held in
abeyance (not to exceed 150 days) if Maker or his legal representative requires
such additional 150 days to liquidate the collateral subject to the Pledge
Agreement in order to repay the indebtedness under this Note.
In the event this Note is placed in the hands of an attorney for
collection, or if Holder incurs any costs incident to the collection of the
indebtedness evidenced hereby, Maker agrees to pay to Holder an amount equal to
all such costs, including without limitation all actual reasonable attorney's
fees and all court costs.
Presentment for payment, demand, protest and notice of demand, protest
and nonpayment are hereby waived by Maker and all other parties hereto, if any.
No failure to accelerate the indebtedness evidenced hereby by reason of default
hereunder or other indulgences granted from time to time shall be construed as a
novation of this Note or as a waiver of such right of acceleration or of the
right of Holder thereafter to insist upon strict compliance with the terms of
this Note or to prevent the exercise of such right of acceleration or any other
right granted hereunder or by applicable laws. No extension of time for payment
of the indebtedness evidenced hereby made by agreement with any person now or
hereafter liable for payment of the indebtedness evidenced hereby, shall operate
to release, discharge, modify, change or affect the original liability of Maker
hereunder or that of any other person now or hereafter liable for payment of the
indebtedness evidenced hereby, either in whole or in part, unless Holder agrees
otherwise in writing. This Note may not be changed orally, but only by an
agreement in writing signed by the party against whom enforcement of any waiver,
change, modification or discharge is sought.
Upon the occurrence of any Acceleration Event as set forth herein, at
the option of Holder and upon notice to Maker, the entire outstanding principal
balance shall bear interest thereafter until paid at an annual rate equal to the
lesser of (i) ten percent (10%) or (ii) the maximum rate of interest allowed to
be charged under applicable law (the "Maximum Rate"). No other interest will be
payable in respect of the indebtedness as evidenced hereby.
All agreements herein made are expressly limited so that in no event
whatsoever, whether by reason of advancement of proceeds hereof, acceleration of
maturity of the unpaid balance hereof or otherwise, shall the amount paid or
agreed to be paid to Holder for the use of the money advanced or to be advanced
hereunder exceed the Maximum Rate. If, from any circumstances whatsoever, the
fulfillment of any provision of this Note or any other agreement or instrument
now or hereafter evidencing, or in any way relating to the indebtedness
evidenced hereby shall involve the payment of interest in excess of the Maximum
Rate, then ipso facto, the obligation to pay interest hereunder shall be reduced
to the Maximum Rate. This provision shall control every other provision in any
and all other
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<PAGE>
agreements and instruments existing or hereafter arising between Maker and
Holder with respect to the indebtedness evidenced hereby.
As used herein, the terms "Maker" and "Holder" shall be deemed to
include their respective successors, legal representatives and assigns, whether
by voluntary action of the parties or by operation of law.
Maker may not assign any of his rights or obligations under this Note
without the express prior written consent of Holder. Holder may assign this
Note or any of the rights and obligations herein at its sole discretion.
This Note is intended as a contract under and shall be construed and
enforceable in accordance with the laws of the Commonwealth of Pennsylvania.
MAKER:
-----
______________________
Jeffrey Weiss
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<PAGE>
EXHIBIT 10.23
PLEDGE AGREEMENT
THIS PLEDGE AGREEMENT (this "Pledge Agreement") is entered into as of
December 18, 1998 by and between DOLLAR FINANCIAL GROUP, INC., a New York
corporation ("Lender"), and Jeffrey Weiss, an individual ("Pledgor").
RECITALS
--------
WHEREAS, in connection with the Agreement and Plan of Merger, dated as of
November 13, 1998 (the "Merger Agreement"), and pursuant to that certain
Employment Agreement (the "Employment Agreement") dated as of the date hereof by
and among Pledgor, Lender and DFG Holdings, Inc. ("Holdings"), Lender has agreed
to make an interest-free loan (the "Loan") to Pledgor upon the terms and subject
to the conditions set forth therein;
WHEREAS, the obligation of Lender to make the Loan is subject to the
consummation of the merger between Holdings and DFG Acquisition, Inc. (the
"Merger") pursuant to the Merger Agreement;
WHEREAS, it is a condition precedent to the obligation of Lender to make
the Loan that the Pledgor shall have executed and delivered this Pledge
Agreement to Lender;
NOW, THEREFORE, in consideration of these premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. Pledge and Grant of Security Interest. To secure the prompt payment
and performance in full when due, whether by lapse of time or otherwise, of the
Obligations (as defined in Section 2 hereof), Pledgor hereby pledges and assigns
to Lender, and grants to Lender a continuing security interest in, any and all
right, title and interest of Pledgor in and to all shares of stock of Holdings
owned by Pledgor, as listed on Schedule 1 attached hereto (the "Pledged
----------
Shares"), and all other rights, contractual or otherwise, with respect thereto,
and including, but not limited to, the following (collectively, the "Pledged
Collateral"):
(a) all shares or securities representing a dividend on any of the
Pledged Shares, or representing a distribution or return of capital upon or
in respect of the Pledged Shares, or resulting from a stock split,
reclassification or other exchange therefor, and any subscriptions,
warrants, rights or options issued to the holder of, or otherwise in
respect of, the Pledged Shares;
(b) without affecting the obligations of Pledgor under any provision
prohibiting such action hereunder or under any other agreement, in the
event of any consolidation or merger involving the issuer of any Pledged
Shares and in which such issuer is not the surviving corporation, all
shares of each class of the capital stock of the successor corporation
formed by or resulting from such consolidation or merger;
<PAGE>
(c) all now existing or hereafter arising rights of Pledgor under any
stockholder's agreement pertaining to the Pledged Shares;
(d) all now existing or hereafter arising rights of Pledgor,
including, without limitation, all voting rights and all rights to payment
of any kind, including cash and non-cash dividends and redemptions,
instruments and other property from time to time received, receivable or
otherwise distributed on account of, or in exchange for, the Pledged
Shares; and
(e) all proceeds and products of the foregoing, however and whenever
acquired and in whatever form.
2. Security for Pledgor's Obligations. The security interest created
hereby in the Pledged Collateral constitutes continuing collateral security for
the prompt performance and observance by Pledgor of all obligations of Pledgor
under the Employment Agreement, the note between Lender and Pledgor (the
"Note"), and this Pledge Agreement, whether now existing or hereafter incurred
(collectively, the "Obligations").
3. Delivery of the Pledged Collateral. Pledgor and Lender hereby agree
that:
(a) Pledged Shares. Pledgor shall deliver to Lender (i)
--------------
simultaneously with or prior to the execution and delivery of this Pledge
Agreement all certificates representing the Pledged Shares and (ii)
promptly upon the receipt thereof, all other certificates and instruments
constituting Pledged Collateral. Prior to delivery to Lender, all such
certificates and instruments constituting Pledged Collateral shall be held
in trust by Pledgor for the benefit of Lender pursuant hereto. All such
certificates shall be delivered in suitable form for transfer by delivery
or shall be accompanied by duly executed instruments of transfer or
assignment in blank. Upon the full and complete satisfaction of Pledgor's
Obligation under a respective Note, Lender shall promptly return to Pledgor
all of such applicable Pledged Collateral so delivered under such
respective Note.
(b) Financing Statements. Pledgor shall execute and deliver to Lender
--------------------
such UCC or other applicable financing statements as may be reasonably
requested by Lender in order to perfect and protect the security interest
created hereby in the Pledged Collateral.
4. Representations and Warranties. Pledgor hereby represents and warrants
to Lender that so long as any of Pledgor's Obligations remain outstanding:
(a) Title. Pledgor has and will have good and indefeasible title to
-----
the Pledged Collateral and will at all times be the legal and beneficial
owner of such Pledged Collateral free and clear of any lien or other
encumbrances other than pursuant to the terms of this Pledge Agreement and
the Stockholders Agreement (as defined below);
(b) Exercising of Rights. The exercise by Lender of its rights and
--------------------
remedies hereunder will not violate any law or governmental regulation or
any material contractual restriction binding on or affecting Pledgor or any
of his property.
-2-
<PAGE>
(c) Pledgor's Authority. Pledgor has duly authorized, executed and
-------------------
delivered this Pledge Agreement and his Note. No authorization, approval or
action by and no notice or filing with any governmental authority is
required either (i) for the pledge made by Pledgor or for the granting of
the security interest by Pledgor pursuant to this Pledge Agreement or (ii)
for the exercise by Lender of its rights and remedies hereunder (except as
may be required by laws affecting the offering and sale of securities).
(d) Security Interest and Priority. This Pledge Agreement creates a
------------------------------
valid security interest, in favor of Lender, in the Pledged Collateral. The
taking possession by Lender of the certificates representing the Pledged
Shares and all other certificates and instruments constituting Pledged
Collateral will perfect and establish the first priority of Lender's
security interest in the Pledged Shares and, when properly perfected by
filing or registration, in all other Pledged Collateral represented by such
Pledged Shares and instruments securing Pledgor's Obligations. Except as
set forth in this subsection 4(d), no action is necessary to perfect or
otherwise protect such security interest.
5. Covenants. Pledgor hereby covenants that, so long as any of Pledgor's
Obligations remain outstanding, Pledgor shall:
(a) Defense of Title. Warrant and defend title to and ownership of
----------------
the Pledged Collateral at his own expense against the claims and demands of
all other parties claiming an interest therein, keep the Pledged Collateral
free from all liens, and not sell, exchange, transfer, assign, lease or
otherwise dispose of the Pledged Collateral or any interest therein, except
as permitted under the Employment Agreement or that certain Amended and
Restated Stockholders Agreement, dated the date hereof, among Holdings and
the stockholders of Holdings parties thereto (the "Stockholders
Agreement"), including as such is subsequently amended or restated.
(b) Further Assurances. Promptly execute and deliver at his expense
------------------
all further instruments and documents and take all further action that may
be necessary and desirable or that Lender may reasonably request in order
to (i) perfect and protect the security interest created hereby in the
Pledged Collateral (including without limitation any and all action
necessary to satisfy Lender that Lender has obtained a first priority
perfected security interest in any capital stock); (ii) enable Lender to
exercise and enforce its rights and remedies hereunder in respect of the
Pledged Collateral; and (iii) otherwise effect the purposes of this Pledge
Agreement, including, without limitation and if requested by Lender,
delivering to Lender irrevocable proxies in respect of the Pledged
Collateral.
6. Events of Default. The occurrence of any of the following shall, at
the option of Lender, constitute an Event of Default hereunder by Pledgor: (a)
Pledgor defaults under any indebtedness owed to the Lender, which default
remains uncured following the giving of any applicable notice or cure period;
(b) Pledgor defaults in any Obligation provided in this Pledge Agreement; (c)
other than in a manner as described in Section 2.8.3(i) of the Stockholders
Agreement, Pledgor sells or otherwise transfers the Pledged Collateral, whether
or not such sale or other transfer is permitted by the terms of any stockholders
or other agreements (other than Section 2.8.3(i) of the Stockholders Agreement)
to which Pledgor and the Lender, and/or Holdings, are or may become parties;
-3-
<PAGE>
(d) Pledgor defaults in any obligation provided in any other document or
instrument now or hereafter evidencing, securing or otherwise relating to the
Obligations; (e) Pledgor files a bankruptcy petition, a bankruptcy petition is
filed against Pledgor (and such petition remains undischarged for 60 days
thereafter), Pledgor makes a general assignment for the benefit of creditors or
Pledgor admits in writing its inability to pay its obligations as they become
due; (f) a receiver or similar official is appointed to any of Pledgor's assets
or business; or (g) Pledgor's employment with Lender (including any successor
entity) is terminated or Pledgor dies or becomes disabled; provided, however, in
-------- -------
the event of a termination of Pledgor by Lender not for cause (as such term is
defined in the Employment Agreement or any future employment agreement by and
between Pledgor and Lender, if any) or the death or disability of Pledgor, such
Event of Default shall be reasonably held in abeyance (not to exceed 150 days)
if Pledgor or his legal representative requires such additional 150 days to
liquidate the Pledged Collateral in order to repay the Obligations.
7. Remedies. Upon the occurrence of an Event of Default and during the
continuation thereof, Lender shall have, in respect of the Pledged Collateral
pledged by the defaulting Pledgor, the rights and remedies of a secured party
under the UCC or any other applicable law; including without limitation, the
right to (a) foreclose or otherwise enforce Lender's security interest in any or
all of the Pledged Collateral; (b) sell or otherwise dispose of the Pledged
Collateral or a part thereof at one or more public or private sales; (c) require
Pledgor to assemble the Pledged Collateral owned by Pledgor and make such
available to Lender; or (d) retain such Pledged Collateral in exchange for
cancellation of Pledgor's obligations under his Note. Upon any sale or
disposition of the Pledged Collateral pursuant to this Pledge Agreement, Lender
shall have the right to deliver, assign and transfer to the purchaser thereof
the Pledged Collateral or portion thereof so sold or disposed of. Each
purchaser (including without limitation, Lender, if applicable) at any such sale
or other disposition shall hold the Pledged Collateral free from any claim or
right of whatever kind, including any equity or right of redemption of Pledgor
and Pledgor specifically waives all rights of redemption, stay or appraisal (to
the fullest extent permitted by law) that Pledgor has or may have under any rule
of law.
8. Rights of Lender.
(a) Power of Attorney. Pledgor hereby designates and appoints Lender,
-----------------
and each of its designees or agents, as attorney-in-fact of Pledgor,
irrevocably and with power of substitution, with authority to take any or
all actions necessary upon the occurrence and during the continuance of an
Event of Default. This power of attorney is a power coupled with an
interest and shall be irrevocable for so long as any of Pledgor's
Obligations remain outstanding. Lender shall be under no duty to exercise
or withhold the exercise of any of the rights, powers, privileges and
options expressly or implicitly granted to Lender in this Pledge Agreement,
and shall not be liable for any failure to do so or any delay in doing so.
Lender shall not be liable for any act or omission or for any error of
judgment or any mistake of fact or law in its individual capacity or its
capacity as attorney-in-fact, except acts or omissions resulting from its
gross negligence or willful misconduct. This power of attorney is conferred
on Lender solely to protect, preserve and realize upon its security
interest in Pledged Collateral.
(b) Performance by Lender of Pledgor's Obligations. If Pledgor fails
----------------------------------------------
to perform any agreement or obligation contained herein, Lender itself may
perform, or
-4-
<PAGE>
cause performance of, such agreement or obligation, and the expenses of
Lender incurred in connection therewith shall be payable by Pledgor.
(c) Assignment by Lender. Lender may from time to time assign the
Pledgor's Obligations and any portion thereof and/or the Pledged Collateral
and any portion thereof, and the assignee shall be entitled to all of the
rights and remedies of Lender under this Pledge Agreement in relation
thereto.
(d) Voting Rights in Respect of the Pledged Collateral. Subject to
--------------------------------------------------
the terms of the Stockholders Agreement:
(i) So long as no Event of Default shall have occurred and be
continuing, to the extent permitted by law, Pledgor may exercise any
and all voting and other consensual rights pertaining to the Pledged
Collateral or any part thereof for any purpose not inconsistent with
the terms of this Pledge Agreement; and
(ii) Upon the occurrence and during the continuance of an Event of
Default of Pledgor, all rights of Pledgor to exercise the voting and
other consensual rights which it would otherwise be entitled to
exercise pursuant to paragraph (i) of this Section 8(d) shall cease and
all such rights shall thereupon become vested in Lender which shall
then have the sole right to exercise such voting and other consensual
rights.
(e) Release of Pledged Collateral. Lender may release any of the
-----------------------------
Pledged Collateral from this Pledge Agreement or may substitute any of the
Pledged Collateral for other Pledged Collateral without altering, varying
or diminishing in any way the force, effect, lien, pledge or security
interest of this Pledge Agreement as to any Pledged Collateral not
expressly released or substituted, and this Pledge Agreement shall continue
as a first priority lien on all Pledged Collateral not expressly released
or substituted.
9. Application of Proceeds. Upon the occurrence and during the
continuance of an Event of Default, any payments in respect of Pledgor's
Obligations and any proceeds of any Pledged Collateral, when received by Lender
in cash or its equivalent, will be applied in reduction of indebtedness
constituting Pledgor's Obligations, and Pledgor irrevocably waives the right to
direct the application of such payments and proceeds and acknowledges and agrees
that Lender shall have the continuing and exclusive right to apply and reapply
any and all such payments and proceeds in Lender's sole discretion,
notwithstanding any entry to the contrary upon any of its books and records.
10. Costs of Counsel. If at any time hereafter upon the occurrence of an
Event of Default, Lender employs counsel to prepare or consider amendments,
waivers or consents with respect to this Pledge Agreement, or to take action or
make a response in or with respect to any legal or arbitral proceeding relating
to this Pledge Agreement or relating to the Pledged Collateral, or to protect
the Pledged Collateral or exercise any rights or remedies under this Pledge
Agreement or with respect to the Pledged Collateral, then Pledgor agrees to
promptly pay upon demand any and all such reasonable documented costs and
expenses of Lender.
-5-
<PAGE>
11. Amendments, Waivers, Modifications. This Pledge Agreement and the
provisions hereof may not be amended, waived, modified, changed, discharged or
terminated except by prior written consent of each of Lender and Pledgor.
12. Successors in Interest. This Pledge Agreement shall create a
continuing security interest in the Pledged Collateral (including without
limitation in the event that the Pledged Collateral is transferred pursuant to
Section 2.8.3(i) of the Stockholders Agreement) and shall be binding upon
Pledgor, his successors and assigns (which shall include without limitation any
transferees of the Pledged Collateral pursuant to Section 2.8.3(i) of the
Stockholders Agreement), and shall inure, together with the rights and remedies
of Lender hereunder, to the benefit of Lender and its successors and permitted
assigns; provided, however, that Pledgor may not assign his rights or delegate
-------- -------
his duties hereunder without the prior written consent of Lender.
13. Counterparts. This Pledge Agreement may be executed in any number of
counterparts, each of which when so executed and delivered shall be an original,
but all of which shall constitute one and the same instrument. It shall not be
necessary in making proof of this Pledge Agreement to produce or account for
more than one such counterpart.
14. Headings. The headings of the sections and subsections hereof are
provided for convenience only and shall not in any way affect the meaning or
construction of any provision of this Pledge Agreement.
15. Governing Law, Submission to Jurisdiction, Venue. This Pledge
Agreement and the rights and obligations of the parties hereunder shall be
governed by and construed and interpreted in accordance with the laws of the
Commonwealth of Pennsylvania and of the United States of America, without regard
to conflict of laws principles.
16. Severability. If any provision of this Pledge Agreement is determined
to be illegal, invalid or unenforceable, such provision shall be fully severable
and the remaining provisions shall remain in full force and effect and shall be
construed without giving effect to the illegal, invalid or unenforceable
provision or provisions.
17. Survival. All representations and warranties of Pledgor hereunder
shall survive the execution and delivery of this Pledge Agreement, the delivery
of the Note and the making of the Loan.
-6-
<PAGE>
Each of the parties hereto has caused a counterpart of this Pledge
Agreement to be duly executed and delivered as of the date first above written.
LENDER: DOLLAR FINANCIAL GROUP, INC.
- ------ a New York corporation
By:________________________
Name:______________________
Title:_____________________
PLEDGOR: JEFFREY WEISS,
- ------- an individual
___________________________
-7-
<PAGE>
Schedule 1
----------
Pledged Collateral
<TABLE>
<CAPTION>
<S> <C>
Pledgor Number of Shares
------- ----------------
Jeffrey Weiss 310.0775 (as security for the Executive Loan)
</TABLE>
-8-
<PAGE>
Exhibit 21.1
(Subsidiaries of the Registrant)
Financial Exchange Company of Pennsylvania, Inc.
Financial Exchange Company of Ohio, Inc.
Monetary Management of California, Inc.
Monetary Management of New York, Inc.
Financial Exchange Company of Pittsburgh, Inc.
Financial Exchange Company of Virginia, Inc.
Monetary Management Corporation of Pennsylvania, Inc.
Check Mart of New Mexico, Inc. (f/k/a New Mexico Check Mart, Inc.)
Monetary Management Corp.
DFG Warehousing Co., Inc.
QTV Holdings, Inc.
L.M.S. Development Corporation
Pacific Ring Enterprises, Inc.
Check Mart of Wisconsin, Inc.
Check Mart of Pennsylvania, Inc.
Check Mart of Texas, Inc.
Check Mart of Louisiana, Inc.
Monetary Management of Maryland, Inc.
Check Mart of Washington, D.C., Inc.
Dollar Financial Insurance Corp.
Dollar Insurance Administration Corp.
Anykind Check Cashing Centers, Inc.
Albuquerque Investments, Inc.
National Money Mart Company
DFG International, Inc.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS CONTAINED IN THE BODY OF THE ACCOMPANYING FORM 10-K AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-END> DEC-31-1998
<CASH> 61,979
<SECURITIES> 0
<RECEIVABLES> 7,234
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 76,179
<PP&E> 14,581
<DEPRECIATION> 5,740
<TOTAL-ASSETS> 185,831
<CURRENT-LIABILITIES> 20,324
<BONDS> 115,656
0
0
<COMMON> 0
<OTHER-SE> 31,351
<TOTAL-LIABILITY-AND-EQUITY> 185,831
<SALES> 0
<TOTAL-REVENUES> 56,020
<CGS> 0
<TOTAL-COSTS> 34,537
<OTHER-EXPENSES> 21,794
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 6,498
<INCOME-PRETAX> (6,809)
<INCOME-TAX> (363)
<INCOME-CONTINUING> (6,446)
<DISCONTINUED> 0
<EXTRAORDINARY> 85
<CHANGES> 0
<NET-INCOME> (6,531)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
