<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
SCHEDULE 14D-1
(RULE 14D-100)
----------------
TENDER OFFER STATEMENT PURSUANT TO
SECTION 14(d)(1) OF THE SECURITIES EXCHANGE ACT OF 1934
BOLLE INC.
(Name of Subject Company)
SHADE ACQUISITION, INC.
(Bidder)
COMMON STOCK, PAR VALUE $0.01 PER SHARE
(Title of Class of Securities)
097937 10 6
(CUSIP Number of Class of Securities)
RICHARD KRACUM
Chairman
Worldwide Sports and Recreation, Inc.
c/o Wind Point Partners
675 North Michigan Avenue, Suite 3300
Chicago, Illinois 60611
(312) 255-4820
With Copy to:
STEVEN V. NAPOLITANO, ESQ.
KATTEN MUCHIN ZAVIS
525 West Monroe Street, Suite 1600
Chicago, Illinois 60661
(312) 902-5200
(Name, address and telephone number of person authorized to receive notices and
communications on behalf of bidder)
CALCULATION OF FILING FEE
TRANSACTION VALUATION* AMOUNT OF FILING FEE*
$62,282,461 $12,456.49
*For the purpose of calculating the filing fee only. This calculation assumes
the purchase of (i) 7,091,774 shares of Common Stock, par value $0.01 per
share ("Shares") at a price per Share of $5.25, (ii) 1,268,053 Shares which
are subject to outstanding options at a price per Share of $5.25 less the
exercise price of such options, (iii) 64,120 shares of Series A Preferred
Stock, par value $0.01 per share with a redemption price of $172.41 per
share, and (iv) 9,625 shares of Series B Preferred Stock, par value $0.01
per share with a redemption price of $1,078.66 per share. Except for
warrants to purchase 663,618 Shares (which warrants shall at the Effective
Time of the Merger become the right to receive $5.25 per Share upon payment
by the holders of such warrants of the exercise price for such warrants),
such number of Shares, options and preferred shares represent all of the
securities of the Subject Company outstanding as of December 1, 1999. The
amount of the filing fee, calculated in accordance with Rule 0-11(d) under
the Securities Exchange Act of 1934, as amended, equals 1/50 of one percent
of the value of the securities of the Subject Company to be purchased.
[_]Check box if any part of the fees is offset as provided by Rule 0-11(a)(2)
and identify the filing with which the offsetting fee was previously paid.
Identify the previous filing by registration statement number, or the form
or schedule and the date of its filing.
Amount previously paid: Not applicable Filing Party: Not applicable
Form of registration number: Not applicable
Date filed: Not applicable
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
SCHEDULE 14D-1 AND 13D
CUSIP NO. 097937106
- --------------------------------------------------------------------------------
1 NAME OF REPORTING PERSON: Shade Acquisition, Inc.
S.S. OR I.R.S. IDENTIFICATION NUMBER OF ABOVE PERSON
- --------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
(A) [X]
(B) [_]
- --------------------------------------------------------------------------------
3 SEC USE ONLY
- --------------------------------------------------------------------------------
4 SOURCE OF FUNDS
BK, AF
- --------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(E) OR 2(F):
[_]
- --------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
- --------------------------------------------------------------------------------
7 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
923,588*
- --------------------------------------------------------------------------------
8 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (7) EXCLUDES CERTAIN SHARES
[_]
- --------------------------------------------------------------------------------
9 PERCENT OF CLASS REPRESENTED TO AMOUNT IN ROW (7)
12.6%*
- --------------------------------------------------------------------------------
10 TYPE OF REPORTING PERSON
CO
- --------------------------------------------------------------------------------
- --------
*November 24, 1999, Worldwide Sports and Recreation, Inc, a Delaware
corporation ("Purchaser"), and Shade Acquisition Sub, Inc., a Delaware
corporation and a wholly owned subsidiary of Purchaser ("Acquisition Sub"),
entered into Tender and Voting Agreements (the "Tender Agreements") with
Martin E. Franklin, Chairman of the Board of Bolle Inc. (the "Company"), and
Ian G. H. Ashken, Vice Chairman and Secretary of the Company (the "Executive
Stockholders"), who beneficially owned an aggregate of 923,588 shares, or
approximately 12.6% of the shares outstanding on November 24, 1999, pursuant
to which the Executive Stockholders agreed, among other things and upon the
terms and conditions set forth therein, to tender the shares owned by them
in the Offer (as defined herein) and to vote such shares in the manner
specified in the Tender Agreements with respect to certain matters. The
Tender Agreements are described more fully in Section 12 of the Offer to
Purchase dated December 2, 1999.
2
<PAGE>
SCHEDULE 14D-1 and 13D
CUSIP NO. 097937106
- --------------------------------------------------------------------------------
1 NAME OF REPORTING PERSON Worldwide Sports and Recreation, Inc.
S.S. OR I.R.S. IDENTIFICATION NUMBER OF ABOVE PERSON
- --------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
(A) [X]
(B) [_]
- --------------------------------------------------------------------------------
3 SEC USE ONLY
- --------------------------------------------------------------------------------
4 SOURCE OF FUNDS
BK, AF
- --------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(e) OR 2(f):
[_]
- --------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
- --------------------------------------------------------------------------------
7 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
923,588*
- --------------------------------------------------------------------------------
8 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (7) EXCLUDES CERTAIN SHARES
[_]
- --------------------------------------------------------------------------------
9 PERCENT OF CLASS REPRESENTED TO AMOUNT IN ROW (7)
12.6%*
- --------------------------------------------------------------------------------
10 TYPE OF REPORTING PERSON
CO
- --------------------------------------------------------------------------------
- --------
*The footnote on page 2 is incorporated by reference herein.
3
<PAGE>
This Tender Offer Statement on Schedule 14D-1 (this "Statement") relates to
the offer by Shade Acquisition, Inc. a Delaware corporation ("Acquisition Sub")
and a wholly owned subsidiary of Worldwide Sports and Recreation, Inc., a
Delaware corporation ("Purchaser"), to purchase all outstanding shares of
Common Stock, par value $0.01 per share (the "Common Stock") (the "Shares"), of
Bolle Inc., a Delaware corporation (the "Company"), at $5.25 per Share, net to
the seller in cash, upon the terms and subject to the conditions set forth in
the Offer to Purchase dated December 2, 1999 (the "Offer to Purchase"), a copy
of which is attached hereto as Exhibit (a)(1), and in the related Letter of
Transmittal, a copy of which is attached hereto as Exhibit(a)(2) (which
together constitute the "Offer").
This Tender Offer Statement on Schedule 14D-1 also constitutes a Statement
on Schedule 13D with respect to the Tender Agreements as described above. The
item numbers and responses thereto below are in accordance with the
requirements of Schedule 14D-1.
Item 1. Security and Subject Company.
(a) The name of the subject company is Bolle Inc., and the address of its
principal executive offices is Suite B-302, 555 Theodore Fremd Avenue, Rye, New
York 10580.
(b) The class of securities to which this statement relates is the Common
Stock, par value $0.01 per share of the Company. The information set forth in
the Introduction and Section 1 of the Offer to Purchase is incorporated herein
by reference.
(c) The information set forth in Section 6 of the Offer to Purchase is
incorporated herein by reference.
Item 2. Identity and Background
(a)-(d); (g) The information set forth in Section 9 and Schedule A of the
Offer to Purchase is incorporated herein by reference. The name, business,
address, present principal occupation or employment, the material occupations,
positions, offices or employments for the past five years and citizenship of
each director and executive officer of Purchaser and Acquisition Sub, and the
name, principal business and address of each corporation or other organization
in which such occupations, positions, offices and employments are or were
carried on are set forth in Schedule A to the Offer to Purchase and are
incorporated herein by reference.
(e); (f) During the last five years, neither Purchaser, Acquisition Sub,
nor, to the best of their knowledge, any of the directors or executive officers
of Purchaser has been convicted in a criminal proceeding (excluding traffic
violations or similar misdemeanors) or was a party to a civil proceeding of a
judicial or administrative body of competent jurisdiction as a result of which
any such person was or is subject to a judgment, decree or final order
enjoining future violations of, or prohibiting activities subject to, federal
or state securities laws or finding any violation of such laws.
Item 3. Past Contacts, Transactions or Negotiations with the Subject Company.
(a)-(b) The information set forth in the Introduction and Sections 10, 11
and 12 of the Offer to Purchase is incorporated herein by reference.
Item 4. Source and Amount of Funds or Other Consideration.
(a)-(b) The information set forth in Section 13 of the Offer to Purchase is
incorporated herein by reference.
Item 5. Purpose of the Tender Offer and Plans or Proposals of the Bidder.
The information set forth in the Introduction and Sections 7 and 11 of the
Offer to Purchase is incorporated herein by reference.
4
<PAGE>
Item 6. Interest in Securities of the Subject Company.
(a)-(b) The information set forth in the Introduction and Sections 9, 10
and 11 of the Offer to Purchase is incorporated herein by reference.
Item 7. Contracts, Arrangements, Understandings or Relationships With Respect
to the Subject Company's Securities.
The information set forth in the Introduction and Sections 9, 10 and 11 of
the Offer to Purchase is incorporated herein by reference.
Item 8. Persons Retained, Employed or to be Compensated.
The information set forth in Section 17 of the Offer to Purchase is
incorporated herein by reference.
Item 9. Financial Statements of Certain Bidders.
The information set forth in Section 9 of the Offer to Purchase and the
documents incorporated by reference therein are incorporated herein by
reference.
Item 10. Additional Information.
(a) The information set forth in Section 10 of the Offer to Purchase and
the documents incorporated by reference therein are incorporated herein by
reference.
(b)-(c) The information set forth in Section 16 of the Offer to Purchase is
incorporated herein by reference.
(d)-(f) Not applicable
Item 11. Material to be Filed as Exhibits.
(a)(1) Offer to Purchase, dated December 2, 1999.
(a)(2) Letter of Transmittal.
(a)(3) Letter to brokers, dealers, commercial banks, trust companies and
nominees.
(a)(4) Letter to clients to be used by brokers, dealers, commercial banks,
trust companies and nominees.
(a)(5) Press Release, dated November 15, 1999.
(a)(6) Press Release, dated November 26, 1999.
(a)(7) Form of newspaper advertisement, dated December 2, 1999.
(a)(8) Notice of Guaranteed Delivery.
(a)(9) IRS Guidelines for Certification of Taxpayer Identification Number
on Substitute Form W-9.
(b)(1) Credit Agreement dated as of August 5, 1999 by and among Purchaser
and Antares Capital Corporation, as agent for the several lenders.
(b)(2) First Amendment to Credit Agreement and Waiver, dated as of August
18, 1999 by and between the Purchaser and Antares Capital Corporation, as
agent for the several lenders.
(b)(3) Subordinated Note Purchase Agreement dated as of August 5, 1999
between Purchaser and Northwestern Mutual Life Insurance Company.
(b)(4) First Amendment to Subordinated Note Purchase Agreement dated as of
August 18, 1999 between Purchaser and Northwestern Mutual Life Insurance
Company.
5
<PAGE>
(c)(1) Confidentiality Agreement, dated September 1, 1999, between the
Company and the Purchaser.
(c)(2) Agreement and Plan of Merger, dated as of November 24, 1999, among
the Company, Purchaser and Acquisition Sub.
(c)(3) Tender and Voting Agreements, dated as of November 24, 1999, by and
between Purchaser, Acquisition Sub and each of Martin E. Franklin and Ian G.H.
Ashken.
(c)(4) Letter Agreement, dated as of November 24, 1999, by and between the
Company, Acquisition Sub and each of Messrs. Franklin and Ashken relating to
Board membership of Surviving Corporation.
(c)(5) Letter Agreement, dated as of November 24, 1999, by and among the
Company, Marlin Holdings, Inc. and Wind Point Partners amending the Management
Services Agreement.
6
<PAGE>
SIGNATURE
After due inquiry and to the best of my knowledge and belief, I certify that
the information set forth in this statement is true, complete and correct.
Worldwide Sports and Recreation,
Inc.
/s/ Richard Kracum
By: _________________________________
Name: Richard Kracum
Title: Chairman
Shade Acquisition, Inc.
/s/ Richard Kracum
By: _________________________________
Name: Richard Kracum
Title: Chairman
Dated: December 2, 1999
7
<PAGE>
EXHIBIT (a)(1)
OFFER TO PURCHASE FOR CASH
All of the Outstanding Shares of Common Stock
of
BOLLE INC.
at
$5.25 Net Per Share
by
SHADE ACQUISITION, INC.
a wholly owned subsidiary of
Worldwide Sports and Recreation, Inc.
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON JANUARY 4, 2000 UNLESS THE OFFER IS EXTENDED.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, (1) THERE BEING VALIDLY
TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER A NUMBER OF
SHARES OF COMMON STOCK, PAR VALUE $0.01 PER SHARE (THE "SHARES"), OF BOLLE INC.
(THE "COMPANY") WHICH, TOGETHER WITH ANY SHARES OWNED BY WORLDWIDE SPORTS AND
RECREATION, INC. ("PURCHASER"), SHADE ACQUISITION, INC. ("ACQUISITION SUB") OR
ANY OF THEIR AFFILIATES, CONSTITUTES MORE THAN 90% OF THE AGGREGATE OUTSTANDING
SHARES (INCLUDING ANY SHARES OUTSTANDING AS OF THE CONSUMMATION OF THE OFFER
THAT HAVE BEEN ISSUED UPON THE EXERCISE OF OPTIONS TO PURCHASE, AND THE
CONVERSION OR EXCHANGE OF ALL SECURITIES CONVERTIBLE OR EXCHANGEABLE INTO,
SHARES) (THE "MINIMUM CONDITION"), (2) ANY WAITING PERIOD UNDER THE HART-SCOTT-
RODINO ANTITRUST IMPROVEMENTS ACT OF 1976, AS AMENDED, AND THE REGULATIONS
THEREUNDER APPLICABLE TO THE PURCHASE OF SHARES PURSUANT TO THE OFFER HAVING
EXPIRED OR BEEN TERMINATED, AND (3) PURCHASER HAVING OBTAINED SUFFICIENT
FINANCING, ON TERMS AND CONDITIONS SATISFACTORY TO PURCHASER, TO ENABLE
CONSUMMATION OF THE OFFER AND THE MERGER. THE OFFER IS ALSO SUBJECT TO CERTAIN
OTHER CONDITIONS DESCRIBED IN SECTION 14.
THE BOARD OF DIRECTORS OF THE COMPANY HAS APPROVED THE MERGER AGREEMENT, THE
OFFER AND THE MERGER AND DETERMINED THAT THE OFFER AND THE MERGER ARE FAIR TO
AND IN THE BEST INTERESTS OF THE STOCKHOLDERS OF THE COMPANY. THE BOARD OF
DIRECTORS OF THE COMPANY RECOMMENDS THAT ALL HOLDERS OF SHARES ACCEPT THE OFFER
AND IMMEDIATELY TENDER THEIR SHARES PURSUANT TO THE OFFER. IN CONNECTION WITH
THE MERGER AGREEMENT, PURCHASER ENTERED INTO TENDER AND VOTING AGREEMENTS WITH
CERTAIN STOCKHOLDERS OF THE COMPANY WHO COLLECTIVELY OWN APPROXIMATELY 12.6% OF
THE OUTSTANDING SHARES, PURSUANT TO WHICH SUCH STOCKHOLDERS AGREED, AMONG OTHER
THINGS, TO TENDER THEIR SHARES IN THE OFFER AT THE OFFER PRICE (AS DEFINED
BELOW) AND TO VOTE SUCH SHARES IN THE MANNER SPECIFIED IN THE TENDER
AGREEMENTS.
---------------
IMPORTANT
Any stockholder desiring to tender all or any portion of such stockholder's
shares of Common Stock, par value $0.01 per share, of the Company (the
"Shares"), should either (1) complete and sign the Letter of Transmittal or a
facsimile thereof in accordance with the instructions in the Letter of
Transmittal, including any required signature guarantees, and mail or deliver
the Letter of Transmittal or such facsimile with such stockholder's
certificate(s) for the tendered Shares and any other required documents to the
Depositary (as defined herein), (2) follow the procedure for book-entry tender
of Shares set forth in Section 3, or (3) request such stockholder's broker,
dealer, commercial bank, trust company or other nominee to effect the
transaction for such stockholder. Stockholders having Shares registered in the
name of a broker, dealer, commercial bank, trust company or other nominee are
urged to contact such broker, dealer, commercial bank, trust company or other
nominee if they desire to tender Shares so registered.
A stockholder who desires to tender Shares and whose certificates for such
Shares are not immediately available, or who cannot comply with the procedure
for book-entry transfer on a timely basis, may tender such Shares by following
the procedures for guaranteed delivery set forth in Section 3.
Questions and requests for assistance may be directed to the Information
Agent (as defined herein) at its addresses and telephone numbers set forth on
the back cover of this Offer to Purchase. Requests for additional copies of
this Offer to Purchase and the Letter of Transmittal may be directed to the
Information Agent or to brokers, dealers, commercial banks or trust companies.
---------------
The date of this Offer to Purchase is December 2, 1999.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<C> <S> <C>
INTRODUCTION............................................................. 1
1. TERMS OF THE OFFER............................................... 2
2. ACCEPTANCE FOR PAYMENT AND PAYMENT FOR SHARES.................... 3
3. PROCEDURE FOR TENDERING SHARES................................... 4
4. RIGHTS OF WITHDRAWAL............................................. 6
5. CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE OFFER............. 7
6. PRICE RANGE OF SHARES; DIVIDENDS................................. 7
7. EFFECT OF THE OFFER ON MARKET FOR THE SHARES, STOCK EXCHANGE
LISTING, AND EXCHANGE ACT REGISTRATION........................... 8
8. CERTAIN INFORMATION CONCERNING THE COMPANY....................... 9
9. CERTAIN INFORMATION CONCERNING ACQUISITION SUB AND PURCHASER..... 11
10. BACKGROUND OF THE OFFER; CONTACTS WITH THE COMPANY............... 13
11. PURPOSE OF THE OFFER; PLANS FOR THE COMPANY...................... 14
12. THE MERGER AGREEMENT............................................. 15
13. SOURCE AND AMOUNT OF FUNDS....................................... 21
14. CERTAIN CONDITIONS OF THE OFFER.................................. 22
15. DIVIDENDS AND DISTRIBUTIONS...................................... 24
16. CERTAIN LEGAL MATTERS............................................ 24
17. FEES AND EXPENSES................................................ 26
18. MISCELLANEOUS.................................................... 26
</TABLE>
<TABLE>
<C> <S> <C>
Schedule A Information Concerning the Directors and Executive Officers
Purchaser and Acquisition Sub.................................. A-1
</TABLE>
i
<PAGE>
TO THE HOLDERS OF SHARES OF
BOLLE INC.;
INTRODUCTION
Shade Acquisition, Inc., a newly formed Delaware corporation ("Acquisition
Sub") which is a wholly owned subsidiary of Worldwide Sports and Recreation,
Inc., a Delaware corporation ("Purchaser"), hereby offers to purchase all of
the outstanding shares (the "Shares") of Common Stock, par value $0.01 per
share (the "Common Stock"), of Bolle Inc., a Delaware corporation (the
"Company"), at $5.25 per Share, net to the seller in cash, (such price, or any
such higher price per Share as may be paid in the Offer (as defined below),
being referred to herein as the "Offer Price"), on the terms and subject to the
conditions set forth in this Offer to Purchase and in the related Letter of
Transmittal (which collectively, together with any amendments or supplements
hereto or thereto, constitute the "Offer"). Tendering stockholders will not be
obligated to pay brokerage fees or commissions or, subject to Instruction 6 of
the Letter of Transmittal, transfer taxes on the purchase of Shares by
Purchaser pursuant to the Offer. Purchaser will pay all charges and expenses of
First Chicago Trust Company of New York (the "Depositary") and Morrow & Co.,
Inc. (the "Information Agent").
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, (1) THERE BEING VALIDLY
TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER A NUMBER OF
SHARES WHICH, TOGETHER WITH ANY SHARES OWNED BY PURCHASER, ACQUISITION SUB OR
ANY OF THEIR AFFILIATES, CONSTITUTES MORE THAN 90% OF THE AGGREGATE OUTSTANDING
SHARES (INCLUDING ANY SHARES OUTSTANDING AS OF THE CONSUMMATION OF THE OFFER
THAT HAVE BEEN ISSUED UPON THE EXERCISE OF OPTIONS TO PURCHASE, AND THE
CONVERSION OR EXCHANGE OF ALL SECURITIES CONVERTIBLE OR EXCHANGEABLE INTO,
SHARES), (2) ANY WAITING PERIOD UNDER THE HART-SCOTT-RODINO ANTITRUST
IMPROVEMENTS ACT OF 1976, AS AMENDED, AND THE REGULATIONS THEREUNDER (THE "HSR
ACT") APPLICABLE TO THE PURCHASE OF SHARES PURSUANT TO THE OFFER HAVING EXPIRED
OR BEEN TERMINATED, AND (3) PURCHASER HAVING OBTAINED SUFFICIENT FINANCING, ON
TERMS AND CONDITIONS SATISFACTORY TO PURCHASER, TO ENABLE CONSUMMATION OF THE
OFFER AND THE MERGER. THE OFFER IS ALSO SUBJECT TO CERTAIN OTHER CONDITIONS
DESCRIBED IN SECTION 14.
THE BOARD OF DIRECTORS OF THE COMPANY HAS APPROVED THE MERGER AGREEMENT, THE
OFFER AND THE MERGER AND DETERMINED THAT THE OFFER AND THE MERGER ARE FAIR TO
AND IN THE BEST INTERESTS OF THE STOCKHOLDERS OF THE COMPANY. THE BOARD OF
DIRECTORS OF THE COMPANY RECOMMENDS THAT ALL HOLDERS OF SHARES ACCEPT THE OFFER
AND IMMEDIATELY TENDER THEIR SHARES PURSUANT TO THE OFFER. IN CONNECTION WITH
THE MERGER AGREEMENT, PURCHASER ENTERED INTO TENDER AND VOTING AGREEMENTS WITH
CERTAIN STOCKHOLDERS OF THE COMPANY WHO COLLECTIVELY OWN APPROXIMATELY 12.6% OF
THE OUTSTANDING SHARES, PURSUANT TO WHICH SUCH STOCKHOLDERS AGREED, AMONG OTHER
THINGS, TO TENDER THEIR SHARES IN THE OFFER AT THE OFFER PRICE AND TO VOTE SUCH
SHARES IN THE MANNER SPECIFIED IN THE TENDER AGREEMENTS.
The Offer is being made pursuant to the Agreement and Plan of Merger, dated
as of November 24, 1999 (the "Merger Agreement"), by and among the Purchaser,
Acquisition Sub and the Company, pursuant to which, after the completion of the
Offer, Acquisition Sub will be merged with and into the Company (the "Merger")
and each issued and outstanding Share (other than Shares owned by Purchaser,
Acquisition Sub or any of their affiliates (collectively, the "Purchaser
Companies"), Shares owned by the Company or its subsidiaries and Shares that
are held by stockholders ("Dissenting Stockholders") exercising appraisal
rights
1
<PAGE>
pursuant to Section 262 of the Delaware General Corporation Law (the "DGCL"))
shall, by virtue of the Merger and without any action on the part of the holder
thereof, be converted into the right to receive, without interest, the Offer
Price. The Merger Agreement is more fully described in Section 12, and is set
forth in full as an annex to the Company's Solicitation/Recommendation
Statement on Schedule 14D-9. As a result of the Merger, the Company (sometimes
referred to herein as the "Surviving Corporation") will become a wholly owned
subsidiary of Purchaser.
According to the Company, as of December 1, 1999, there were (i) 7,091,774
Shares outstanding, (ii) 64,120 shares of Company Series A Stock (as defined in
the Merger Agreement) were outstanding, (iii) 9,625 Shares of Company Series B
Stock (as defined in the Merger Agreement) were outstanding, (iv) warrants to
purchase 663,618 Shares were outstanding and (v) no shares of capital stock
were held in the Company's treasury. There are no other outstanding shares of
capital stock or voting securities of the Company and no outstanding
commitments to issue any shares of capital stock or voting securities of the
Company after the date of the Merger Agreement other than pursuant to the
exercise of options outstanding as of such date under the Company's stock
option and incentive plans.
THIS OFFER TO PURCHASE AND THE RELATED LETTER OF TRANSMITTAL CONTAIN
IMPORTANT INFORMATION WHICH SHOULD BE READ IN THEIR ENTIRETY BEFORE ANY
DECISION IS MADE WITH RESPECT TO THE OFFER.
1. TERMS OF THE OFFER.
On the terms and subject to the conditions set forth in the Offer (including
the terms and conditions set forth in Section 14 (the "Offer Conditions") and
together with, if the Offer is extended or amended, the terms and conditions of
such extension or amendment) Acquisition Sub will accept for payment, and pay
for, any and all Shares validly tendered on or prior to the Expiration Date (as
herein defined) and not withdrawn as permitted by Section 4. The term
"Expiration Date" means 12:00 Midnight, New York City time, on January 4, 2000,
unless and until Acquisition Sub shall, in its sole discretion, have extended
the period for which the Offer is open, in which event the term "Expiration
Date" shall mean the latest time and date on which the Offer, as so extended by
Acquisition Sub, shall expire.
Subject to the terms of the Merger Agreement and applicable rules and
regulations of the Securities and Exchange Commission (the "SEC"), Acquisition
Sub expressly reserves the right, in its sole discretion, at any time or from
time to time, to extend the period of time during which the Offer is open by
giving oral or written notice of such extension to the Depositary. Any such
extension will also be publicly announced by press release issued no later than
9:00 A.M., New York City time, on the next business day after the previously
scheduled Expiration Date. During any such extension, all Shares previously
tendered and not withdrawn will remain subject to the Offer, subject to the
right of a tendering stockholder to withdraw such stockholder's Shares. See
Section 4. Subject to the applicable rules and regulations of the SEC,
Acquisition Sub also expressly reserves the right, in its sole discretion at
any time or from time to time, (i) to delay acceptance for payment of or,
regardless of whether such Shares were theretofore accepted for payment,
payment for, any Shares, or to terminate or amend the Offer and not accept for
payment or pay for any Shares not theretofore accepted for payment, or paid
for, on the occurrence of any of the conditions specified in Section 14 and
(ii) to waive any condition and to set forth or change any other term and
condition of the Offer, by giving oral or written notice of such delay,
termination or amendment to the Depositary and by making a public announcement
thereof; provided that Acquisition Sub shall not amend or waive or otherwise
modify the Minimum Condition so as to reduce the minimum number of Shares that
Acquisition Sub will accept in the Offer to an amount constituting less than
fifty-one percent (51%) of the aggregate outstanding Shares (assuming the
exercise of all options to purchase, and the conversion or exchange of all
securities convertible or exchangeable into, Shares outstanding as of the
consummation of the Offer), decrease the Offer Price, accept for payment or pay
for any Shares pursuant to the Offer prior to January 4, 2000, extend the Offer
beyond the Cut-Off Date (as defined below) or amend any other condition of the
Offer in any manner adverse to the holders of Shares without the prior written
consent of the Company. Acquisition Sub confirms that its reservation of the
right to delay payment for
2
<PAGE>
Shares which it has accepted for payment is limited by Rule 14e-1(c) under the
Securities and Exchange Act of 1934, as amended (the "Exchange Act"), which
requires that a tender offeror pay the consideration offered or return the
tendered securities promptly after the termination or withdrawal of a tender
offer.
Acquisition Sub confirms that if it makes a material change in the terms of
the Offer or the information concerning the Offer, or if it waives a material
condition of the Offer, Acquisition Sub will extend the Offer to the extent
required by Rules 14d-4(c), 14d-6(d) and 14e-1 under the Exchange Act.
If, prior to the Expiration Date, Acquisition Sub, if previously consented
to by the Company in writing, shall decrease the percentage of Shares being
sought or the consideration offered to holders of Shares, such decrease shall
be applicable to all holders whose Shares are accepted for payment pursuant to
the Offer and, if at the time notice of any decrease is first published, sent
or given to holders of Shares, the Offer is scheduled to expire at any time
earlier than the tenth business day from and including the date that such
notice is first so published, sent or given, the Offer will be extended until
the expiration of such ten business day period. For purposes of the Offer, a
"business day" means any day other than a Saturday, Sunday or federal holiday
and consists of the time period from 12:01 A.M. through 12:00 Midnight, New
York City time.
The Company has provided Acquisition Sub with the Company's stockholder
lists and security position listings for the purpose of disseminating the Offer
to holders of the Shares. This Offer to Purchase, the related Letter of
Transmittal and other relevant materials will be mailed by Acquisition Sub to
record holders of Shares and will be furnished by Acquisition Sub to brokers,
dealers, banks, trust companies and similar persons whose names, or the names
of whose nominees, appear on the stockholder lists or, if applicable, who are
listed as participants in a clearing agency's security position listing, for
subsequent transmittal to beneficial owners of Shares.
2. ACCEPTANCE FOR PAYMENT AND PAYMENT FOR SHARES.
On the terms and subject to the terms and conditions set forth in the Offer
(including the Offer Conditions and together with, if the Offer is extended or
amended, the terms and conditions of such extension or amendment), Acquisition
Sub will accept for payment, and will pay for, Shares validly tendered and not
withdrawn as promptly as practicable after the later of (i) the expiration or
termination of the waiting period under the HSR Act applicable to the purchase
of Shares pursuant to the Offer, and any material consent, approval, permit or
authorization of any Governmental Entity (as defined in the Merger Agreement)
having been obtained on terms satisfactory to the Purchaser in its reasonable
discretion and (ii) the Expiration Date, if at the time of the later of the
occurrence of (i) and (ii) above, the Minimum Condition has been satisfied or
waived; provided that Acquisition Sub expressly reserves the right to extend
the Offer from time to time notwithstanding prior satisfaction of the Offer
Conditions and, subject to applicable rules of the SEC, expressly reserves the
right to delay acceptance for payment of or payment for Shares in order to
comply, in whole or in part, with any applicable law. See Section 14. In all
cases, payment for Shares tendered and accepted for payment pursuant to the
Offer will be made only after timely receipt by the Depositary of certificates
for such Shares (or a confirmation of a book-entry transfer of such Shares into
the Depositary's account at The Depository Trust Company (the "Depository
Institution")), a properly completed and duly executed Letter of Transmittal
(or facsimile thereof) and any other required documents.
For purposes of the Offer, Acquisition Sub will be deemed to have accepted
for payment Shares validly tendered and not withdrawn as, if and when
Acquisition Sub gives oral or written notice to the Depositary of its
acceptance for payment of such Shares pursuant to the Offer. Payment for Shares
accepted for payment pursuant to the Offer will be made by deposit of the
purchase price therefor with the Depositary, which will act as agent for the
tendering stockholders for purpose of receiving payments from Acquisition Sub
and transmitting such payments to the tendering stockholders. UNDER NO
CIRCUMSTANCES WILL INTEREST ON THE OFFER PRICE FOR SHARES BE PAID, REGARDLESS
OF ANY DELAY IN MAKING SUCH PAYMENT.
3
<PAGE>
If any tendered Shares are not accepted for payment pursuant to the terms
and conditions of the Offer for any reason, or if certificates are submitted
for more Shares than are tendered, certificates for such unpurchased Shares
will be returned without expense to the tendering stockholder (or, in the case
of Shares tendered by book-entry transfer of such Shares into the Depositary's
account at the Depository Institution pursuant to the procedures set forth in
Section 3, such Shares will be credited to an account maintained with the
Depository Institution), as soon as practicable following expiration or
termination of the Offer.
Acquisition Sub reserves the right to transfer or assign in whole or in part
from time to time to one or more direct or indirect subsidiaries of Purchaser
the right to purchase all or any portion of the Shares tendered pursuant to the
Offer, but any such transfer or assignment will not relieve Acquisition Sub of
its obligations under the Offer and will in no way prejudice the rights of
tendering stockholders to receive payment for Shares validly tendered and
accepted for payment pursuant to the Offer.
3. PROCEDURE FOR TENDERING SHARES.
Valid Tender. To tender Shares pursuant to the Offer, either (a) a Letter of
Transmittal (or a facsimile thereof), properly completed and duly executed in
accordance with the instructions of the Letter of Transmittal, with any
required signature guarantees, certificates for Shares to be tendered, and any
other documents required by the Letter of Transmittal, must be received by the
Depositary prior to the Expiration Date at one of its addresses set forth on
the back cover of this Offer to Purchase, (b) such Shares must be delivered
pursuant to the procedures for book-entry transfer described below (and a
confirmation of such delivery received by the Depositary, including an Agent's
Message if the tendering stockholder has not delivered a Letter of
Transmittal), prior to the Expiration Date, or (c) the tendering stockholder
must comply with the guaranteed delivery procedures set forth below. The term
"Agent's Message" means a message, transmitted by the Depository Institution
to, and received by, the Depositary and forming a part of a book-entry
confirmation, which states that the Depository Institution has received an
express acknowledgment from the participant in the Depository Institution
tendering the Shares which are the subject of such book-entry confirmation,
that such participant has received and agrees to be bound by the terms of the
Letter of Transmittal and that Acquisition Sub may enforce such agreement
against the participant.
Book-Entry Delivery. The Depositary will establish accounts with respect to
the Shares at the Depository Institution for purposes of the Offer within two
business days after the date of this Offer to Purchase. Any financial
institution that is a participant in any of the Depository Institution's
systems may make a book-entry transfer of Shares by causing the Depository
Institution to transfer such Shares into the Depositary's account in accordance
with the Depository Institution's procedures for such transfer. Although
delivery of Shares may be effected through book-entry transfer, either the
Letter of Transmittal (or facsimile thereof), properly completed and duly
executed, together with any required signature guarantees, or an Agent's
Message in lieu of the Letter of Transmittal, and any other required documents,
must, in any case, be transmitted to and received by the Depositary by the
Expiration Date at one of its addresses set forth on the back cover of this
Offer to Purchase, or the tendering stockholder must comply with the guaranteed
delivery procedures described below. The confirmation of a book-entry transfer
of Shares into the Depositary's account at the Depository Institution as
described above is referred to herein as a "Book-Entry Confirmation." DELIVERY
OF DOCUMENTS TO A BOOK-ENTRY TRANSFER FACILITY IN ACCORDANCE WITH THE
DEPOSITORY INSTITUTION'S PROCEDURES DOES NOT CONSTITUTE DELIVERY TO THE
DEPOSITARY.
THE METHOD OF DELIVERY OF SHARES, THE LETTER OF TRANSMITTAL AND ALL OTHER
REQUIRED DOCUMENTS, INCLUDING DELIVERY THROUGH THE DEPOSITORY INSTITUTION, IS
AT THE ELECTION AND RISK OF THE TENDERING STOCKHOLDER. SHARES WILL BE DEEMED
DELIVERED ONLY WHEN ACTUALLY RECEIVED BY THE DEPOSITARY (INCLUDING, IN THE CASE
OF A BOOK-ENTRY TRANSFER, BY BOOK-ENTRY CONFIRMATION). IF DELIVERY IS BY MAIL,
IT IS RECOMMENDED THAT THE STOCKHOLDER USE PROPERLY INSURED REGISTERED MAIL
WITH RETURN RECEIPT REQUESTED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED
TO ENSURE TIMELY DELIVERY.
4
<PAGE>
Signature Guarantees. Except as otherwise provided below, all signatures on
a Letter of Transmittal must be guaranteed by a financial institution
(including most commercial banks, savings and loan associations and brokerage
houses) that is a participant in the Security Transfer Agents Medallion
Program, the New York Stock Exchange Medallion Signature Guarantee Program or
the Stock Exchange Medallion Program (an "Eligible Institution"). Signatures on
a Letter of Transmittal need not be guaranteed (a) if the Letter of Transmittal
is signed by the registered holders (which term, for purposes of this section,
includes any participant in any of the Depository Institution's systems whose
name appears on a security position listing as the owner of the Shares) of
Shares and such registered holder has not completed the box entitled "Special
Payment Instructions" or the box entitled "Special Delivery Instructions" on
the Letter of Transmittal, or (b) if such Shares are tendered for the account
of an Eligible Institution. See Instructions 1 and 5 of the Letter of
Transmittal. If the certificates for Shares are registered in the name of a
person other than the signer of the Letter of Transmittal, or if payment is to
be made or certificates for Shares not tendered or not accepted for payment are
to be returned to a person other than the registered holder of the certificates
surrendered, then the tendered certificates must be endorsed or accompanied by
appropriate stock powers, in either case signed exactly as the name or names of
the registered holders or owners appear on the certificates, with the
signatures on the certificates or stock powers guaranteed as described above.
See Instructions 1 and 5 of the Letter of Transmittal.
Guaranteed Delivery. A stockholder who desires to tender Shares pursuant to
the Offer and whose certificates for Shares are not immediately available, or
who cannot comply with the procedure for book-entry transfer on a timely basis,
or who cannot deliver all required documents to the Depositary prior to the
Expiration Date, may tender such Shares by following all of the procedures set
forth below:
(i) such tender is made by or through an Eligible Institution;
(ii) a properly completed and duly executed Notice of Guaranteed
Delivery, substantially in the form provided by Acquisition Sub, is
received by the Depositary (as provided below) prior to the Expiration
Date; and
(iii) the certificates for all tendered Shares, in proper form for
transfer (or a Book-Entry Confirmation with respect to all such Shares),
together with a properly completed and duly executed Letter of Transmittal
(or facsimile thereof), with any required signature guarantees (or, in the
case of a book-entry transfer, an Agent's Message in lieu of the Letter of
Transmittal), and any other required documents, are received by the
Depositary within three trading days after the date of execution of such
Notice of Guaranteed Delivery. A "trading day" is any day on which the New
York Stock Exchange, Inc. (the "NYSE") is open for business.
The Notice of Guaranteed Delivery may be delivered by hand to the Depositary
or transmitted by telegram, facsimile transmission or mail to the Depositary
and must include a guarantee by an Eligible Institution in the form set forth
in such Notice of Guaranteed Delivery.
Other Requirements. Notwithstanding any provision hereof, payment for Shares
accepted for payment pursuant to the Offer will in all cases be made only after
timely receipt by the Depositary of (a) certificates for (or a timely Book-
Entry Confirmation with respect to) such Shares, (b) a Letter of Transmittal
(or facsimile thereof), properly completed and duly executed, with any required
signature guarantees (or, in the case of a book-entry transfer, an Agent's
Message in lieu of the Letter of Transmittal), and (c) any other documents
required by the Letter of Transmittal. Accordingly, tendering stockholders may
be paid at different times depending upon when certificates for Shares or Book-
Entry Confirmations with respect to Shares are actually received by the
Depositary. UNDER NO CIRCUMSTANCES WILL INTEREST ON THE OFFER PRICE FOR THE
SHARES BE PAID BY ACQUISITION SUB, REGARDLESS OF ANY EXTENSION OF THE OFFER OR
ANY DELAY IN MAKING SUCH PAYMENT.
Tender Constitutes an Agreement. The valid tender of Shares will constitute
a binding agreement between the tendering stockholder and Acquisition Sub on
the terms and subject to the conditions of the Offer.
5
<PAGE>
Appointment. By executing a Letter of Transmittal as set forth above, the
tendering stockholder irrevocably appoints designees of Acquisition Sub as such
stockholder's proxies, each with full power of substitution, to the full extent
of such stockholder's rights with respect to the Shares tendered by such
stockholder and accepted for payment by Acquisition Sub and with respect to any
and all cash dividends, distributions, rights, other Shares or other securities
issued or issuable in respect of such Shares on or after the date of this Offer
to Purchase. All such proxies will be considered coupled with an interest in
the tendered Shares. Such appointment is effective when, and only to the extent
that, Acquisition Sub deposits the payment for such Shares with the Depositary.
Upon the effectiveness of such appointment, all prior powers of attorney,
proxies and consents given by such stockholder will be revoked, and no
subsequent powers of attorney, proxies and consents may be given (and, if
given, will not be deemed effective). Acquisition Sub's designees will, with
respect to the Shares for which the appointment is effective, be empowered to
exercise all voting and other rights of such stockholder as they, in their sole
discretion, may deem proper at any annual, special or adjourned meeting of the
stockholders of the Company, by written consent in lieu of any such meeting or
otherwise. Acquisition Sub reserves the right to require that, in order for
Shares to be deemed validly tendered, immediately upon Acquisition Sub's
payment for such Shares, Acquisition Sub must be able to exercise full voting
rights with respect to such Shares.
Determination of Validity. All questions as to the validity, form,
eligibility (including time of receipt) and acceptance of any tender of Shares
will be determined by Acquisition Sub in its sole discretion, which
determination will be final and binding. Acquisition Sub reserves the absolute
right to reject any and all tenders determined by it not to be in proper form
or the acceptance for payment of or payment for which may, in the opinion of
Acquisition Sub's counsel, be unlawful. Acquisition Sub also reserves the
absolute right to waive any defect or irregularity in the tender of any Shares
of any particular stockholder whether or not similar defects or irregularities
are waived in the case of other stockholders. No tender of Shares will be
deemed to have been validly made until all defects and irregularities relating
thereto have been cured or waived. None of Acquisition Sub, the Depositary, the
Information Agent or any other person will be under any duty to give
notification of any defects or irregularities in tenders or incur any liability
for failure to give any such notification. Acquisition Sub's interpretation of
the terms and conditions of the Offer (including the Letter of Transmittal and
Instructions thereto) will be final and binding.
Backup Withholding. In order to avoid "backup withholding" of Federal income
tax on payments of cash pursuant to the Offer, a stockholder surrendering
Shares in the Offer must, unless an exemption applies, provide the Depositary
with such stockholder's correct taxpayer identification number ("TIN") on a
Substitute Form W-9 and certify under penalties of perjury that such TIN is
correct and that such stockholder is not subject to backup withholding. If a
stockholder does not provide such stockholder's correct TIN or fails to provide
the certifications described above, the Internal Revenue Service (the "IRS")
may impose a penalty on such stockholder and payment of cash to such
stockholder pursuant to the Offer may be subject to backup withholding of 31%.
All stockholders surrendering Shares pursuant to the Offer should complete and
sign the main signature form and the Substitute Form W-9 included as part of
the Letter of Transmittal to provide the information and certification
necessary to avoid backup withholding (unless an applicable exemption exists
and is proved in a manner satisfactory to Acquisition Sub and the Depositary).
Certain stockholders (including, among others, all corporations and certain
foreign individuals and entities) are not subject to backup withholding. Non-
corporate foreign stockholders should complete and sign the main signature form
and a Form W-8, Certificate of Foreign Status, a copy of which may be obtained
from the Depositary, in order to avoid backup withholding. See Instruction 9 to
the Letter of Transmittal.
4. RIGHTS OF WITHDRAWAL.
Tenders of Shares made pursuant to the Offer are irrevocable except that
Shares tendered pursuant to the Offer may be withdrawn at any time prior to the
Expiration Date and, unless theretofore accepted for payment by Acquisition Sub
pursuant to the Offer, may also be withdrawn at any time after January 31,
2000. For a
6
<PAGE>
withdrawal to be effective, a written, telegraphic, telex or facsimile
transmission notice of withdrawal must be timely received by the Depositary at
one of its addresses set forth on the back cover of this Offer to Purchase. Any
such notice of withdrawal must specify the name of the person having tendered
the Shares to be withdrawn, the number of Shares to be withdrawn and the names
in which the certificate(s) evidencing the Shares to be withdrawn are
registered, if different from that of the person who tendered such Shares. The
signature(s) on the notice of withdrawal must be guaranteed by an Eligible
Institution, unless such Shares have been tendered for the account of any
Eligible Institution. If Shares have been tendered pursuant to the procedures
for book-entry tender as set forth in Section 3, any notice of withdrawal must
specify the name and number of the account at the Depository Institution to be
credited with the withdrawn Shares. If certificates for Shares to be withdrawn
have been delivered or otherwise identified to the Depositary, then prior to
the physical release of such certificates, the name of the registered holder
and the serial numbers shown on such certificates must also be furnished to the
Depositary as aforesaid prior to the physical release of such certificates. All
questions as to the form and validity (including time of receipt) of any notice
of withdrawal will be determined by Acquisition Sub, in its sole discretion,
which determination shall be final and binding. None of the Purchaser,
Acquisition Sub, the Depositary, the Information Agent, or any other person
will be under any duty to give notification of any defects or irregularities in
any notice of withdrawal or incur any liability for failure to give such
notification. Withdrawals of tenders of Shares may not be rescinded, and any
Shares properly withdrawn will be deemed not to have been validly tendered for
purposes of the Offer. However, withdrawn Shares may be retendered by following
one of the procedures described in Section 3 at any time prior to the
Expiration Date.
If Acquisition Sub extends the Offer, is delayed in its acceptance for
payment of Shares, or is unable to accept for payment Shares pursuant to the
Offer, for any reason, then, without prejudice to Acquisition Sub's rights
under this Offer, the Depositary may, nevertheless, on behalf of Acquisition
Sub, retain tendered Shares, and such Shares may not be withdrawn except to the
extent that tendering stockholders are entitled to withdrawal rights as set
forth in this Section 4.
5. CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE OFFER.
Sales of Shares pursuant to the Offer and the exchange of Shares for cash
pursuant to the Merger will be taxable transactions for Federal income tax
purposes and may also be taxable under applicable state, local and other tax
laws. For Federal income tax purposes, a stockholder whose Shares are purchased
pursuant to the Offer or who receives cash as a result of the Merger will
realize gain or loss equal to the difference between the adjusted basis of the
Shares sold or exchanged and the amount of cash received therefor. Such gain or
loss will be capital gain or loss if the Shares are held as capital assets by
the stockholder and generally will be long-term capital gain or loss for stock
held for more than one year.
THE INCOME TAX DISCUSSION SET FORTH ABOVE IS INCLUDED FOR GENERAL
INFORMATION ONLY AND MAY NOT BE APPLICABLE TO STOCKHOLDERS IN SPECIAL
SITUATIONS SUCH AS STOCKHOLDERS WHO RECEIVED THEIR SHARES UPON THE EXERCISE OF
EMPLOYEE STOCK OPTIONS OR OTHERWISE AS COMPENSATION AND STOCKHOLDERS WHO ARE
NOT UNITED STATES PERSONS. STOCKHOLDERS SHOULD CONSULT THEIR OWN TAX ADVISORS
WITH RESPECT TO THE SPECIFIC TAX CONSEQUENCES TO THEM OF THE OFFER AND THE
MERGER, INCLUDING THE APPLICATION AND EFFECT OF FEDERAL, STATE, LOCAL, FOREIGN
OR OTHER TAX LAWS.
6. PRICE RANGE OF SHARES; DIVIDENDS.
During the third quarter of 1999, the Company's Board of Directors approved
a plan to have the Shares listed on the American Stock Exchange (the "AmEx").
Prior to that time, the Shares were traded on the Nasdaq Stock Market's
National Market System under the symbol BEYE. The Shares began trading on the
7
<PAGE>
AmEx on September 10, 1999 under the symbol BLE. The following table sets
forth, based upon public sources, for the calendar quarters indicated, the high
and low bid quotations for the Shares on the AmEx (no cash dividends were paid
during such quarters):
<TABLE>
<CAPTION>
BID QUOTES
SHARES
---------------
HIGH LOW
------- -------
<S> <C> <C>
CALENDAR YEAR
1998:
First Quarter (beginning March 12)........................ $8.2500 $6.3750
Second Quarter............................................ $7.0625 $4.8750
Third Quarter............................................. $5.3750 $3.6875
Fourth Quarter............................................ $4.1250 $1.7500
1999:
First Quarter............................................. $3.7500 $1.8750
Second Quarter............................................ $3.0625 $2.1250
Third Quarter............................................. $3.0625 $2.1875
Fourth Quarter (through December 1)....................... $5.0000 $2.7500
</TABLE>
On November 12, 1999, the last full trading day prior to the public
announcement of the signing of a non-binding letter of intent regarding a
possible business combination, the quoted closing bid price on the AmEx was
$3.3125 per Share. On November 24, 1999, the last full trading day prior to the
public announcement of the terms of the Offer and the Merger, the quoted
closing bid price on the AmEx was $4.6250 per Share. On December 1, 1999, the
last full trading day prior to commencement of the Offer, the quoted closing
bid price on the AmEx was $4.875 per Share. Stockholders are urged to obtain a
current market quotation for the Shares.
7. EFFECT OF THE OFFER ON MARKET FOR THE SHARES, STOCK EXCHANGE LISTING, AND
EXCHANGE ACT REGISTRATION.
Market for Shares. The purchase of Shares by Acquisition Sub pursuant to the
Offer will reduce the number of Shares that might otherwise trade publicly and
may reduce the number of holders of Shares, which could adversely affect the
liquidity and market value of the remaining Shares held by the public.
Stock Quotation. The Shares are quoted on the AmEx. According to published
guidelines of the AmEx, the Shares would no longer be quoted on the AmEx if,
among other things, the number of publicly held Shares (excluding Shares held
directly or indirectly by officers, directors and any person who is a
beneficial owner of more than 10% of the Shares) were less than 500,000, the
aggregate market value of publicly held Shares were less than $3,000,000
(subject to maintenance of certain operating income levels) or there were fewer
than 400 holders of the Shares in round lots (subject to minimum average daily
volume trading requirements). According to information furnished to Purchaser
by the Company, as of the close of business on December 1, 1999, there were
approximately 760 holders of record of shares of Common Stock not including
beneficial holders of Common Stock held in street name, and there were
7,091,774 Shares outstanding.
If the Shares were to cease to be quoted on the AmEx, the market for the
Shares could therefore be adversely affected. It is possible that the Shares
would be traded or quoted on other securities exchanges or in the over-the-
counter market, and that price quotations would be reported by such exchanges,
or other sources. The extent of the public market for the shares of Common
Stock and the availability of such quotations would, however, depend upon the
number of stockholders and/or the aggregate market value of the shares of
Common Stock remaining at such time, the interest in maintaining a market in
the shares of Common Stock on the part of securities firms, the possible
termination of registration of the Shares under the Exchange Act and other
factors.
Margin Regulations. The shares of Common Stock are presently "margin
securities" under the regulations of the Board of Governors of the Federal
Reserve System (the "Federal Reserve Board"), which has the effect, among other
things, of allowing brokers to extend credit on the collateral of such shares
of Common Stock.
8
<PAGE>
Depending upon factors similar to those described above regarding listing and
market quotations, the shares of Common Stock might no longer constitute
"margin securities" for the purposes of the Federal Reserve Board's margin
regulations in which event the shares of Common Stock would be ineligible as
collateral for margin loans made by brokers.
Exchange Act Registration. The shares of Common Stock are currently
registered under the Exchange Act. Such registration may be terminated by the
Company upon application to the SEC if the outstanding shares of Common Stock
are not listed on a national securities exchange and if there are fewer than
300 holders of record of shares of Common Stock. Termination of registration of
the shares of Common Stock under the Exchange Act would reduce the information
required to be furnished by the Company to its stockholders and to the SEC and
would make certain provisions of the Exchange Act, such as the short-swing
profit recovery provisions of Section 16(b) and the requirement of furnishing a
proxy statement in connection with stockholders' meetings pursuant to Section
14(a) and the related requirement of furnishing an annual report to
stockholders, no longer applicable with respect to the shares of Common Stock.
Furthermore, the ability of "affiliates" of the Company and persons holding
"restricted securities" of the Company to dispose of such securities pursuant
to Rule 144 under the Securities Act of 1933, as amended, may be impaired or
eliminated. If registration of the shares of Common Stock under the Exchange
Act were terminated, the shares of Common Stock would no longer be eligible for
quotation on the AmEx or for continued inclusion on the Federal Reserve Board's
list of "margin securities." Acquisition Sub intends to seek to cause the
Company to apply for termination of registration of the shares of Common Stock
as soon as possible after consummation of the Offer if the requirements for
termination of registration are met.
8. CERTAIN INFORMATION CONCERNING THE COMPANY.
The Company is a Delaware corporation with its principal executive offices
located at Suite B-302, 555 Theodore Fremd Avenue, Rye, New York 10580;
telephone number (914) 967-9475. The Company has described its business in
publicly available information in the manner set forth in the next paragraph
below.
The Company designs, manufactures and markets premium sunglasses and sport
shields, goggles and safety and tactical eyewear under the Bolle(R) brand name.
Bolle(R) products enjoy worldwide recognition and a high quality image in the
sport and active lifestyle markets, particularly skiing, golf and tennis as
well as in the larger, fashion-driven recreational sunglass market. The
Company's safety and tactical business, which accounts for approximately half
of the Company's aggregate unit sales, serves the specialty segment of the
safety eyewear market outside of North America, including laser protection
products and military applications.
Set forth below is certain summary consolidated financial information for
each of the Company's last three fiscal years, as contained in the Company's
Annual Report on Form 10-K for the fiscal year ended
December 31, 1998 (the "Company's Form 10-K"), and for the three months ended
September 30, 1999 and 1998, as contained in the Company's Quarterly Report on
Form 10-Q for the period ended September 30, 1999 (together, the "Reports").
More comprehensive financial information is included in the Reports (including
management's discussion and analysis of financial condition and results of
operations) and other documents filed by the Company with the SEC, and the
following summary is qualified in its entirety by reference to the Reports and
other documents and all of the financial information and notes contained
therein. Copies of the Reports and other documents may be examined at or
obtained from the SEC or from the AmEx in the manner set forth below.
9
<PAGE>
BOLLE INC.
SELECTED CONSOLIDATED FINANCIAL INFORMATION
(IN THOUSANDS, EXCEPT PER SHARE DATA)
The Company was formed in 1997 to complete Lumen's acquisition of Bolle
France and therefore has only one full fiscal year of historical activity or
financial statements. Bolle America was purchased by Lumen in November 1995 in
a pooling of interests transaction. In conjunction with the purchase of Bolle
France, Bolle America became a subsidiary of the Company. Accordingly, for
accounting purposes only, Bolle America is treated as the acquiror of Bolle
France and therefore the predecessor business for historical financial
statement purposes.
<TABLE>
<CAPTION>
Nine Months
Ended
September 30
(unaudited) Year Ended December 31,
----------------- -----------------------------
1999 1998 1998(1) 1997(2)(4) 1996(3)
------- -------- --------- ---------- -------
<S> <C> <C> <C> <C> <C>
Statement of Operations Data:
Net sales.................... $46,303 $ 38,209 $ 52,551 $ 32,160 $24,425
Cost of sales................ 19,826 17,501 26,304 15,354 12,130
------- -------- --------- -------- -------
Gross profit................. 26,477 20,708 26,247 16,806 12,295
Selling, general and
administrative expenses
(including advertising and
sponsoring expenses)........ 23,918 19,900 32,852 16,342 11,374
Merger and acquisition
integration related
expenses.................... 3,750
Interest expense (income).... 1,217 1,096 1,555 963 (256)
Write down of intangible
assets...................... 28,186
Other expense (income)....... (938) (1,271) (1,284) (693) (450)
------- -------- --------- -------- -------
Income (loss) before income
taxes and minority
interests................... 2,280 983 (35,062) (3,556) 1,627
Provision for (benefit from)
income taxes................ 888 373 (2,141) 1,099 635
------- -------- --------- -------- -------
Income (loss) before minority
interests................... 1,392 610 (32,921) (4,655) 992
Minority interests........... 1 32 70
------- -------- --------- -------- -------
Net income (loss)............ 1,391 578 (32,991) (4,655) 992
Preferred dividends.......... (574) (313) (598)
------- -------- --------- -------- -------
Net income (loss)
attributable to common
stock....................... $ 817 $ 265 $ (33,589) $ (4,655) $ 992
======= ======== ========= ======== =======
Earnings Per Share (5).......
Basic...................... $0.12 $.04 $(4.98) $(0.72)
Diluted.................... $0.11 $.04 $(4.98) $(0.72)
Weighted average shares
outstanding.................
Basic...................... 6,895 6,596 6,738 6,469
Diluted.................... 7,127 6,835 7,002 6,469
French Franc per US Dollar
exchange rate (6)........... 6.1063 6.0021 5.8969 5.9843
Australian Dollar per US
Dollar exchange rate (7).... 1.5482 1.6365 1.5891
<CAPTION>
As of September
30, As of December 31,
----------------- -----------------------------
1999 1998 1998(1) 1997(2)(4) 1996(3)
------- -------- --------- ---------- -------
<S> <C> <C> <C> <C> <C>
Balance Sheet Data:
Working capital (deficiency). $ 2,789 $ 8,461 $ 3,979 $(21,736) $ 8,535
Total assets................. 75,495 120,373 82,246 93,897 15,624
Long term debt............... 2,365 6,677 3,407
Convertible debt............. 7,000 7,000 7,000
Mandatorily redeemable
preferred stock............. 21,293 20,992 20,724 11,055
Stockholders' equity......... 1,734 41,893 2,693 18,843 9,743
French Franc per US Dollar
exchange rate (6)........... 6.1396 5.5975 5.6233 5.9912
US Dollar per Australian
Dollar exchange rate (7).... 1.5337 1.6852 1.6385
</TABLE>
10
<PAGE>
- --------
(1) As of April 1, 1998, the Company purchased 75% of Bolle Australia.
Accordingly, the results of operations for Bolle Australia are included in
the Company's historical results from that date.
(2) On July 10, 1997, the Company acquired Bolle France and related assets in a
transaction accounted for as a purchase. Accordingly, the results of
operations for Bolle France are included in historical results of
operations from that date.
(3) In 1996, the Company paid a dividend to Lumen (the Company's then current
stockholder) of $4,019.
(4) Despite the loss before tax of 53,556 the Company recorded a tax charge of
$1,099 primarily due to the creation of a valuation allowance against the
entire net tax benefit arising from domestic operations, resulting in a net
loss of $4,655.
(5) Basic earnings per share is computed pursuant to SFAS No. 128 "Earnings Per
Share," by dividing net earnings or loss available to common stockholders
by the weighted average number of outstanding shares of common stock.
Diluted earnings per share includes weighted average common stock
equivalents outstanding during each year in the denominators, unless the
effect is antidilutive. Common stock equivalents consist of the dilutive
effect of common shares which may be issued upon exercise of stock options,
warrants or conversion of debt. Weighted average shares outstanding at
December 31, 1998 assumes the shares issued in connection with the
Company's spinoff from Lumen were issued as of the beginning of the year.
Weighted average shares outstanding for 1997 assumes the shares issued in
connection with the Company's spinoff from Lumen were issued for the entire
year.
(6) Represents the exchange rates used to translate the results of operations
and balance sheet amounts of Bolle France. The exchange rates shown for the
actual results of operations for the year ended December 31, 1997
represents the average exchange rate for the six months ended December 31,
1997 used to translate the results of operations of Bolle France included
in the Company's actual results.
(7) Represents the exchange rates used to translate the results of operations
and balance sheet amounts of Bolle Australia. The exchange rates shown for
the actual results of operations for the nine months ended September 30,
1998 represents the average exchange rate for the six months ended
September 30, 1998 used to translate the results of operations of Bolle
Australia included in the Company's actual results.
During the course of discussions between Purchaser and the Company that led
to the execution and delivery of the Merger Agreement (See Section 12), the
Company provided Purchaser with certain information relating to the Company
which Purchaser believes is not publicly available. Purchaser has received this
non-public information from the Company pursuant to the terms of a non-binding
letter of intent, dated November 10, 1999 and a confidentiality agreement,
dated September 1, 1999. The non-public information provided by the Company
included certain projections of the Company's future operating performance
showing net sales increasing to $65,100,000, $75,400,000 and $86,700,000,
respectively, gross margins increasing to 53.9%, 55.0% and 55.0% respectively,
and adjusted operating income increasing to $6,300,000, $9,700,000 and
$11,200,000, respectively in the years ending December 31, 1999, 2000 and 2001,
respectively.
The foregoing estimates constitute forward-looking statements that involve
risks and uncertainties, including, but not limited to, risks associated with
fluctuations in quarterly results, new product introductions, dependence upon
suppliers, competition and other factors. These risks and uncertainties are
discussed in greater detail in the Company's periodic filings with the SEC. The
Company does not as a matter of course make public any estimates as to future
performance or earnings, and the estimates set forth above are included in this
Offer to Purchase only because the information was made available to Purchaser
by the Company. The Company has informed Purchaser that the estimates were not
prepared with a view to public disclosure or compliance with the published
guidelines of the SEC or the guidelines established by the American Institute
of Certified Public Accountants regarding estimates or forecasts. The Company
has also informed Purchaser that its internal financial forecasts (upon which
the estimates provided to Purchaser were based in part) are, in general,
prepared solely for internal use and capital budgeting and other management
decision-making purposes and are subjective in many respects and thus
susceptible to various interpretations and periodic revision based on actual
experience and business developments. Projected information of this type is
based on estimates and
11
<PAGE>
assumptions that are inherently subject to significant economic and competitive
uncertainties and contingencies, all of which are difficult to predict and many
of which are beyond the control of the Company. Many of the assumptions upon
which the estimates were based, none of which were approved by Purchaser or
Acquisition Sub, are dependent upon forecasting (both general and specific to
the Company's business), which is inherently uncertain and subjective. The
inclusion of the foregoing estimates should not be regarded as an indication
that the Company, Purchaser or Acquisition Sub or any other person who received
such information considers it an accurate prediction of future events, and
neither Purchaser nor Acquisition Sub has relied on them as such. Neither
Purchaser nor Acquisition Sub assumes any responsibility for the accuracy or
validity of any of the estimates.
Except as otherwise set forth herein, the information concerning the Company
contained in this Offer to Purchase has been taken from or based upon publicly
available documents and records on file with the SEC and other public sources
and is qualified in its entirety by reference thereto. Although Purchaser and
Acquisition Sub have no knowledge that would indicate that any statements
contained herein based on such documents and records are untrue, Purchaser and
Acquisition Sub cannot take responsibility for the accuracy or completeness of
the information contained in such documents and records, or for any failure by
the Company to disclose events which may have occurred or may affect the
significance or accuracy of any such information but which are unknown to
Purchaser or Acquisition Sub.
The Company is subject to the information and reporting requirements of the
Exchange Act and in accordance therewith is obligated to file reports and other
information with the SEC relating to its business, financial condition and
other matters. Information, as of particular dates, concerning the Company's
directors and officers, their remuneration, stock options granted to them, the
principal holders of the Company's securities, any material interests of such
persons in transactions with the Company and other matters is required to be
disclosed in proxy statements distributed to the Company's stockholders and
filed with the SEC. Such reports, proxy statements and other information should
be available for inspection at the public reference room at the SEC's offices
at 450 Fifth Street, N.W., Judiciary Plaza, Washington, D.C. 20549, and also
should be available for inspection and copying at the regional offices of the
SEC located at Seven World Trade Center, 13th Floor, New York, New York 10048
and Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois
60661. Copies may be obtained, by mail, upon payment of the SEC's customary
charges, by writing to its principal office at 450 Fifth Street, N.W.,
Judiciary Plaza, Washington, D.C. 20549 and can be obtained electronically on
the SEC's Website at http://www.sec.gov. Such material should also be available
for inspection at the offices of the AmEx, 86 Trinity Place, New York, New York
10006-1872.
9. CERTAIN INFORMATION CONCERNING ACQUISITION SUB AND PURCHASER.
Acquisition Sub is a Delaware corporation and to date has engaged in no
activities other than those incident to its formation and the commencement of
the Offer. Acquisition Sub is a wholly owned subsidiary of Purchaser. The
principal executive offices of Acquisition Sub are located at 675 North
Michigan Avenue, Suite 3300, Chicago, Illinois 60611.
Purchaser is a Delaware corporation. Purchaser's principal executive offices
are located at 9200 Cody, Overland Park, Kansas 66214.
Neither Purchaser nor Acquisition Sub is subject to the informational filing
requirements of the Exchange Act. Purchaser and Acquisition Sub do not file
reports or other information with the SEC relating to their respective
businesses, financial condition or other matters.
Purchaser is a branded consumer products company, and operates as a holding
company for Bushnell Sports Optics Worldwide ("Bushnell") and Voit Sports, Inc.
("Voit"). During the period between December 1994 and April 1995, a predecessor
of Purchaser changed its name to Worldwide Sports and Recreation, Inc. and
purchased Bushnell, a division of Bausch & Lomb Incorporated. In August 1999,
Wind Point Partners, ("Wind Point") a Chicago based private equity sponsor,
acquired a majority ownership position in Purchaser. The acquisition took place
in conjunction with the recapitalization of Purchaser.
12
<PAGE>
Purchaser's product portfolio includes binoculars, laser rangefinders,
riflescopes, spotting scopes and telescopes, and is marketed worldwide through
its subsidiary, Bushnell, under well-known brand names including Bushnell and
Bausch & Lomb. These products and brands are widely recognized for their
leading technology, performance, quality and value, and are generally regarded
as the premier product portfolio within the industry. Through its Voit
subsidiary, Purchaser is a master licensor of the Voit brand name to others in
connection with the manufacture and distribution of a variety of sporting goods
products including athletic shoes, exercise equipment, sports apparel and
sporting goods equipment. Purchaser's revenues by product line are broken down
as follows: Binoculars--46%; Ranging--19%; Riflescopes --18%; Telescopes--11%;
Spotting Scopes--5%; and other--1%.
Set forth below is certain summary consolidated financial information with
respect to Purchaser.
WORLDWIDE SPORTS AND RECREATION, INC.
SELECTED CONSOLIDATED FINANCIAL INFORMATION
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
--------------------------
1998 1997 1996
-------- -------- --------
<S> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Total Net Sales................................ $146,005 $140,618 $116,912
Gross Profit................................... 53,754 52,039 43,076
Adjusted Selling, General & Distribution
Expenses...................................... 38,596 37,929 30,974
-------- -------- --------
Total EBITDA................................... $ 16,589 $ 15,725 $ 14,080
BALANCE SHEET DATA:
Working Capital................................ 45,619 42,429 39,747
Total Assets................................... 121,149 122,433 153,331
======== ======== ========
Total Assets less excess cost of assets
acquired over book value...................... 78,645 78,759 108,488
Total Indebtedness............................. 67,717 67,524 102,287
Stockholders' equity........................... 17,620 16,910 18,190
</TABLE>
The name, citizenship, business address, present principal occupation, and
material positions held during the past five years of each of the directors and
executive officers of Purchaser and Acquisition Sub are set forth in Schedule A
to this Offer to Purchase.
Except as set forth in Sections 10 and 12, neither Purchaser nor Acquisition
Sub, or, to the best of their knowledge, any of the persons listed in Schedule
A hereto nor any associate or majority-owned subsidiary of any of the
foregoing, beneficially owns or has a right to acquire any equity securities of
the Company. Neither Purchaser nor Acquisition Sub, or, to the best of their
knowledge, any of the persons or entities referred to above, nor any director,
executive officer or subsidiary of any of the foregoing, has effected any
transaction in such equity securities during the past 60 days.
Except as set forth in Sections 10 and 12, neither Purchaser nor Acquisition
Sub, or, to the best of their knowledge, any of the persons listed in Schedule
A hereto, has any contract, arrangement, understanding or relationship with any
other person with respect to any securities of the Company, including, but not
limited to, any contract, arrangement, understanding or relationship concerning
the transfer or the voting of any such securities, joint ventures, loan or
option arrangements, puts or calls, guaranties of loans, guaranties against
loss or the giving or withholding of proxies. Except as set forth in Sections
10 and 12, there have been no contacts, negotiations or transactions since
January 1, 1996 between Purchaser or Acquisition Sub, or, to the best of their
knowledge, any of the persons listed in Schedule A hereto, on the one hand, and
the Company or its affiliates, on the other hand, concerning a merger,
consolidation or acquisition, a tender offer or other acquisition of
13
<PAGE>
securities, an election of directors, or a sale or other transfer of a material
amount of assets. Although not required to continue their employment with the
Company, the Company has advised Purchaser that it believes that certain
members of the Company's senior management team intend to continue with the
Surviving Corporation after consummation of the Merger. Except as described in
Sections 10 and 12, neither Purchaser nor Acquisition Sub, or, to the best of
their knowledge, any of the persons listed in Schedule A hereto, has since
January 1, 1996 had any transaction with the Company or any of its executive
officers, directors or affiliates that would require disclosure under the rules
and regulations of the SEC applicable to the Offer.
10. BACKGROUND OF THE OFFER; CONTACTS WITH THE COMPANY.
During the summer of 1999, the Board of Directors of the Company had a
number of meetings to discuss strategies to enhance stockholder value. As part
of its strategy to enhance stockholder value, the Board from time to time
discussed the short term and long term prospects of the vertical integration of
its business and the Company's short and long term projected financial outlook.
As a result of these discussions, the Board of Directors authorized Martin E.
Franklin, Chairman of the Board of Directors, to pursue strategic alternatives,
including a possible sale of the Company.
In August, 1999, the Company retained Banc of America Securities LLC ("Banc
of America") to act as its financial advisor and to assist the Company in its
review of strategic alternatives. During September and October, 1999, Banc of
America, on behalf of the Company contacted a number of parties, including
Purchaser, and informed such parties that the Board of Directors of the Company
was considering various options available to the Company including a possible
sale of the Company. At a meeting of the Board on October 27, 1999, it was
reported by Banc of America that nine of these parties, including Purchaser,
had executed confidentiality agreements and received a Confidential Descriptive
Memorandum regarding the Company.
During October, 1999, various telephone conversations took place between
representatives of Wind Point Partners and the Company. On October 28, 1999,
Mr. Franklin participated in a Bolle management presentation to Joseph Messner,
President and Chief Executive Officer of Bushnell, Inc., a wholly owned
subsidiary of Purchaser, and Richard R. Kracum, the Chairman of Purchaser in
Denver.
On November 3, 1999, Mr. Kracum contacted Mr. Franklin by telephone and made
an offer to purchase the Company. Purchaser offered an all cash purchase price
of $5.25 per share, subject to Purchaser completing due diligence, obtaining
financing, and other customary closing conditions.
On November 5, 1999, the Company received a draft Letter of Intent from
Purchaser. On November 10, 1999, the Company and Purchaser entered into a non-
binding letter of intent regarding a possible business combination. At this
time the Purchaser continued its due diligence review of the Company's records
and material contracts. The parties also began to negotiate the terms of the
Merger Agreement.
On November 12, 1999, the Board of Directors of the Company met and among
other things, unanimously ratified the signing of the Letter of Intent and
authorized the appropriate directors and officers to pursue the negotiations
with Purchaser. On November 18, 1999, representatives of the Company and
Purchaser, and their attorneys, met in New York to negotiate the terms of the
definitive Merger Agreement. Following the meeting, numerous telephone calls
took place between the parties.
On November 22, 1999 the Board of Directors of the Company met to discuss
the current state of negotiations with Purchaser. At this meeting, Banc of
America made a financial presentation to the Board of Directors as to the
fairness, from a financial point of view, of the $5.25 per Share cash
consideration to be received in the Offer and the Merger by the holders of
Shares (other than Shares held by Purchaser, Acquisition Sub or any of their
affiliates). The Company's counsel reviewed the terms of the Merger Agreement
and reminded the members of the Board of Directors of their fiduciary duties as
previously described at the meeting held on November 12, 1999. A vote regarding
the transaction was postponed until November 24, 1999 to give board members
time to fully review the material provided.
14
<PAGE>
On November 24, 1999, the Board of Directors met to review the Merger
Agreement, receive Banc of America's fairness opinion and discuss whether to
recommend the Offer. The Board of Directors received an oral opinion (which
opinion was subsequently confirmed by delivery of a written opinion dated
November 24, 1999, the date of execution of the Merger Agreement) from Banc of
America as to the fairness, from a financial point of view, of the
consideration to be received in the Offer and the Merger by the holders of
Shares (other than Shares held by Purchaser, Acquisition Sub or any of their
affiliates). The opinion is based upon the procedures and subject to the
assumptions, qualifications and limitations described therein. Accordingly, the
opinion may not be relied upon by any person other than the directors in their
capacity as members of the Company's Board of Directors and in connection with
their review and evaluation of the Offer and the Merger without the prior
written consent of Banc of America. After a discussion, the Board of Directors
approved, among other things, the Merger Agreement and the transactions
contemplated thereby. Following the meeting, the parties entered into the
Merger Agreement, the Tender Agreements, the Director Agreement (as defined
below) and the Management Services Amendment (as defined below).
11. PURPOSE OF THE OFFER; PLANS FOR THE COMPANY.
Purpose. The purpose of the Offer is to acquire for cash as many outstanding
Shares as possible as a first step in acquiring the entire equity interest in
the Company.
The Merger. The DGCL requires, among other things, that the adoption of any
plan of merger or consideration of the Company must be approved by the Board of
Directors of the Company and, if the "short form" merger procedure described
below is not available, by the holders of a majority of the Company's
outstanding Shares. The Board of Directors of the Company has approved the
Offer, the Merger and the Merger Agreement; consequently, the only additional
action of the Company that may be necessary to effect the Merger is approval by
such stockholders if the "short form" merger procedure described below is not
available. Under the DGCL, the affirmative vote of holders of a majority of the
outstanding Shares (including any Shares owned by Purchaser and Acquisition
Sub) is generally required to approve the Merger. If Acquisition Sub acquires,
through the Offer or otherwise, voting power with respect to at least a
majority of the outstanding Shares (which would be the case if the Minimum
Condition were satisfied and Acquisition Sub were to accept for payment Shares
tendered pursuant to the Offer), it would have sufficient voting power to
effect the Merger without the vote of any other stockholder of the Company. The
foregoing discussion is a summary of the relevant portions of the Company's
Restated Certificate of Incorporation and is by nature not complete and is
qualified in its entirety to the relevant portions of the Company's Restated
Certificate of Incorporation.
If Acquisition Sub acquires over 50% of the outstanding Shares pursuant to
the Offer, it will have the vote necessary under the DGCL and the Company's
Restated Certificate of Incorporation to approve the Merger. Under the DGCL, if
Acquisition Sub owns at least 90% of the outstanding Shares, Acquisition Sub
could effect the Merger using the "short-form" merger procedures without prior
notice to, or any action by, any other stockholder of the Company. Therefore,
if at least approximately 6,382,597 Shares (or such greater number as may be
necessary if options are exercised) are acquired pursuant to the Offer or
otherwise, Purchaser will be able to and intends to effect the Merger without a
meeting of holders of Shares.
12. THE MERGER AGREEMENT.
The Merger Agreement provides that upon the terms and subject to the
conditions set forth in the Merger Agreement and in accordance with the DGCL,
Acquisition Sub will be merged with and into the Company. Upon consummation of
the Merger (the "Effective Time"), each then outstanding Share (other than
Shares held in the Company's treasury or Shares beneficially owned by Purchaser
or Acquisition Sub or Shares that are held by Dissenting Stockholders), shall,
by virtue of the Merger and without any action on the part of the Company,
Purchaser, Acquisition Sub or the holder thereof, be converted into the right
to receive, without interest, the Offer Price.
15
<PAGE>
Conditions to the Merger. The respective obligations of the Company, the
Purchaser and Acquisition Sub to consummate the Merger are subject to the
fulfillment of certain conditions set forth in the Merger Agreement, any or all
of which may be waived in whole or in part by Purchaser or Acquisition Sub, as
the case may be, to the extent permitted by applicable law, including (i) if
required by the DGCL, the approval of the Merger Agreement by the holders of a
majority of the Shares in accordance with applicable law and the certificate of
incorporation and bylaws of the Company, (ii) the purchase by Acquisition Sub
(or one of the Purchaser Companies) of Shares pursuant to the Offer, (iii)
there being no statute, rule, regulation, judgment, decree, injunction or other
action (whether temporary, preliminary or permanent) enacted, issued,
promulgated, enforced or entered by any United States or state court or other
Governmental Entity (as defined in the Merger Agreement) of competent
jurisdiction in effect that prohibits consummation of the transactions
contemplated by the Merger Agreement or imposes material restrictions on
Purchaser or the Company in connection with consummation of the Merger or with
respect to their respective business operations, either prior to or subsequent
to the Merger, and (iv) that clearance from the appropriate agencies pursuant
to the HSR Act shall have been obtained or the waiting period thereunder shall
have expired or been terminated.
Termination Provisions. According to its terms, the Merger Agreement may be
terminated and the transactions contemplated thereby abandoned at any time
prior to the Effective Time, whether before or after approval by holders of
Shares (a) by the mutual written consent of the Company, Purchaser and
Acquisition Sub; (b) either by the Company or Purchaser if (1) the Offer shall
not have been consummated on or before February 28, 2000 (the "Cut-Off Date"),
unless such failure to consummate the Offer shall be due to a breach of the
Merger Agreement by the party or parties seeking to terminate the Merger
Agreement pursuant to Section 8.1(b) of the Merger Agreement; (2) there shall
be any statute, rule, or regulation that makes consummation of the transactions
contemplated thereby illegal or otherwise prohibited; (3) a Governmental Entity
shall have issued an order, decree or ruling or taken any other action
permanently restraining, enjoining or otherwise prohibiting the consummation of
the transactions contemplated thereby and such order, decree, ruling or other
action is or shall have become final and nonappealable; or (4) the waiting
period under the HSR Act has not expired or been terminated prior to the date
forty-five days after the Cut-Off Date; (c) either by Purchaser or by
Acquisition Sub (1) if as a result of the failure of any of the Offer
Conditions set forth in Annex A of the Merger Agreement (including, but not
limited to, the Minimum Condition but excluding the Offer Conditions described
in Sections 8.1(e), 8.1(f) and 8.1(g) of the Merger Agreement), the Offer shall
have been terminated or expired in accordance with its terms without
Acquisition Sub having accepted for payment any Shares pursuant to the Offer
consistent with Acquisition Sub's obligations under Section 1.1 of the Merger
Agreement; provided, however, that the right to terminate the Merger Agreement
pursuant to Section 8.1(d) shall not be available to any party whose failure to
perform any of its obligations under the Merger Agreement results in the
failure of any such Offer Condition; (2) in the event (i) Purchaser, in its
good faith belief, determines that the facts or conditions disclosed in the
French Environmental Audit (as defined in the Merger Agreement) have or could
reasonably be expected to have a Company Material Adverse Effect but only if
Purchaser terminates the Merger Agreement as a result of such determination on
or prior to December 15, 1999; (ii) Purchaser has failed to satisfy the
Financing Condition (as defined in the Merger Agreement) on or prior to January
15, 2000, but only if Purchaser terminates the Merger Agreement as a result
thereof within two (2) Business Days after such date; or (iii) the Company
fails to satisfy the Transaction Fee Condition (as defined in the Merger
Agreement); (3) prior to the purchase of Shares pursuant to the Offer in the
event of a breach by the Company of (i) the provisions of the Acquisition
Proposals Section (as defined below under "Acquisition Proposals") of the
Merger Agreement in any respect in connection with the non-solicitation
agreements and covenants contained therein and in any material respect in
connection with any of the other agreements and covenants contained therein or
(ii) any representation, warranty, covenant or other agreement contained in the
Merger Agreement (other than as discussed in clause (c)(3)(i)) which (A) would
give rise to the failure of the Offer Condition set forth in paragraph (d) or
(e) of Annex A of the Merger Agreement and (B) cannot reasonably be or has not
been cured within fifteen (15) business days after the giving of written notice
thereof to the Company; (4) if either Purchaser or Acquisition Sub is entitled
to terminate the Offer as a result of the occurrence of any event set forth in
paragraph (c) of Annex A to the Merger Agreement; provided that the temporary
suspension of the recommendation of the Company's Board referred to therein in
accordance
16
<PAGE>
with the Acquisition Proposals Section shall not give rise to such a right of
termination; (d) by the Company (1) in accordance with the Acquisition
Proposals Section, provided, however, that the Company has complied with all
provisions thereof, including the notice provisions therein, and that the
Company complies with the requirements of the Merger Agreement relating to the
payment (including the timing of any payment) of the $4,000,000 termination
fee, which is discussed in further detail below; (2) if (i) there shall have
occurred and be continuing a breach of one or more of the representations or
warranties of Purchaser or Acquisition Sub set forth in the Merger Agreement
which (A) either individually or in the aggregate, materially impairs the
ability of the Purchaser to consummate the Merger, Offer or the Merger
Agreement (a "Purchaser Material Adverse Effect") and (B) cannot reasonably be
or has not been cured within fifteen (15) business days after the giving of
written notice thereof to the Company, or (ii) Purchaser or Acquisition Sub
shall have failed to perform or to comply with one or more obligations,
covenants or agreements set forth in the Merger Agreement to be performed or
complied with by it under the Merger Agreement prior to the commencement of the
Offer which, either individually or in the aggregate, have resulted or could
reasonably be expected to result in a Purchaser Material Adverse Effect, or (3)
prior to the commencement of the Offer if Acquisition Sub for any reason shall
have failed to commence the Offer in accordance with Section 1.1 of the Merger
Agreement within five (5) Business Days after the date of the Merger Agreement.
Fees and Expenses. The Merger Agreement provides that in the event of the
termination and abandonment of the Merger Agreement described above under
"Termination Provisions" written notice shall be given to the other party
specifying the provision of the Merger Agreement pursuant to which such
termination is being made, and the Merger Agreement shall become void and have
no effect, without any liability on the part of any party or its affiliates,
directors, officers or stockholders, other than the provisions in the Offer
regarding Acquisition Proposals. However, these provisions do not relieve any
party from liability for any breach of the Merger Agreement.
The Merger Agreement further provides that the Company shall pay a
$4,000,000 termination fee (less any Purchaser Reimbursement (as defined in the
Merger Agreement) previously paid to Purchaser pursuant to Section 8.3 of the
Merger Agreement) (the "Termination Fee") to Purchaser, in the event any of the
following circumstances occurs: (a) if Purchaser or Acquisition Sub terminates
the Merger Agreement as a result of the suspension, withdrawal or modification
in a manner adverse to Purchaser or Acquisition Sub of the Board's approval of
the Offer, the Merger or the Merger Agreement; (b) if the Company terminates
the Merger Agreement pursuant to the provisions of the Merger Agreement
described under "Acquisition Proposals"; (c) if Purchaser terminates the Merger
Agreement in connection with, or as a result of, the failure to satisfy the
Indebtedness Condition (as defined in the Merger Agreement) or the occurrence
of an event which is materially adverse to the business of the Company or which
materially impairs the ability of the Company to consummate the Merger, the
Offer or the Merger Agreement (a "Company Material Adverse Effect"), or in
connection with, or as a result of, a breach of provisions of the Acquisition
Proposals Section of the Merger Agreement or of one or more representations,
warranties, covenants or agreements by the Company and in connection with a
termination under this clause (c) and prior to such termination or within six
(6) months thereafter, an Acquisition Proposal shall have been made and
accepted by the Company with respect to a Superior Proposal (as defined below)
or a Superior Proposal is consummated, then the Company shall pay to Purchaser
the Termination Fee, upon the earlier of the acceptance of such Superior
Proposal, the execution of an agreement (including, without limitation, a
letter of intent) in connection therewith or upon consummation of the Superior
Proposal.
Amendment. Subject to the applicable provisions of the DGCL, at any time
prior to the Effective Time, the parties to the Merger Agreement may modify or
amend the Merger Agreement by written agreement executed and delivered by duly
authorized officers of the respective parties.
Treatment of Options. The Merger Agreement provides that each option granted
to an employee, consultant or director of the Company or its subsidiaries to
acquire Shares (each, an "Option") that is outstanding as of the Effective
Time, whether or not then vested or exercisable, shall be terminated and
canceled. At the Effective Time, all holders of canceled Options, whether or
not then vested or exercisable,
17
<PAGE>
having an exercise price per share that is less that the Per Share Price shall
be canceled in exchange for a single lump sum cash payment equal to the product
of (1) the number of Shares subject to such Option and (2) the excess of the
Per Share Price over the exercise price per share of such Option.
Treatment of Company Series A Stock and Company Series B Stock. The Merger
Agreement provides that each share of Company Series A Stock and Company Series
B Stock that is outstanding as of the Effective Time, shall be redeemed and
canceled and become the right to receive in cash, without interest, a single
lump sum cash payment equal to its respective Liquidation Preference (as
defined in the Company's Certificate of Incorporation as in effect on November
24, 1999).
Treatment of Warrants. The Merger Agreement provides that each Company
Warrant that is outstanding immediately prior to the Effective Time, and
whether or not then exercisable, shall, effective as of the Effective Time,
become the right to receive in cash, without interest, a single lump sum cash
payment equal to the product of the number of Shares subject to such Company
Warrant, times the Per Share Amount, provided that such holder shall have first
paid to the Company, in cash, the aggregate exercise price payable for each
such Company Warrant.
Treatment of Zero Coupon Notes. The Merger Agreement provides that each Zero
Coupon Subordinated Note issued by the Company on May 29, 1998 (each, a "Zero
Coupon Note") that is outstanding as of the Effective Time shall be redeemed in
full and canceled, without any premium or prepayment penalty, in accordance
with its terms.
Treatment of Kiedaisch Employment Agreement. The Merger Agreement provides
that, prior to the consummation of the Offer, the Company shall obtain a
written consent and waiver (the "Kiedaisch Agreement"), in a form acceptable to
Purchaser and Acquisition Sub, from Gary Kiedaisch ("Kiedaisch") pursuant to
which Kiedaisch will confirm that he is not entitled to any severance or
separation pay or a sale or success bonus in connection with his voluntary
departure from the Company or the transactions contemplated by the Merger
Agreement. In accordance with this requirement, Kiedaisch executed the
Kiedaisch Agreement on December 2, 1999.
Tender Agreements. In connection with the execution of the Merger Agreement,
Purchaser entered into Tender and Voting Agreements, each dated as of November
24, 1999 (the "Tender Agreements"), with each of Martin E. Franklin, Chairman
of the Board of the Company, and Ian G.H. Ashken, Vice Chairman and Secretary
of the Company (the "Executive Stockholders"), who beneficially owned an
aggregate of 923,588 Shares, or approximately 12.6% of the Shares outstanding
on November 24, 1999, pursuant to which the Executive Stockholders agreed,
among other things and upon the terms and conditions set forth therein, to
tender their Shares in the Offer and to vote such Shares in the manner
specified in the Tender Agreements with respect to certain matters.
Director Agreement. In connection with the Merger Agreement and pursuant to
the terms of a letter agreement dated November 24, 1999, each of the Executive
Stockholders have agreed that, at the request of the Surviving Corporation, at
least one of them will serve on the Board of Directors of the Surviving
Corporation for one year following the consummation of the Merger, subject to
certain resignation rights.
Management Services Agreement. In connection with the Merger Agreement, the
Company and the parties thereto have agreed to amend (the "Amendment") a
Management Services Agreement (the "Management Services Agreement"), dated as
of March 11, 1998, as amended on September 23, 1998. Pursuant to the terms of
the Amendment, all amounts payable under the Management Services Agreement
shall be subordinated to any bank or other indebtedness for borrowed money
incurred or assumed by the Company in connection with the consummation of the
Offer.
Indemnification of Officers and Directors. The Merger Agreement provides
that all rights to indemnification or exculpation now existing in favor of the
directors, officers, employees and agents of the
18
<PAGE>
Company and its subsidiaries (the "Indemnified Parties") as provided in their
respective charters or by-laws or otherwise in effect as of the date thereof
with respect to matters occurring prior to the Effective Time shall survive
such Effective Time and shall continue in full force and effect for six (6)
years after the Effective Time; provided that such indemnification shall be
subject to any limitations imposed from time to time under applicable law.
Purchaser shall cause the Company or the Surviving Corporation, as the case may
be, to maintain in effect for not less than three (3) years after the Effective
Time, the policies of the directors' and officers' liability and fiduciary
insurance most recently maintained by the Company (provided that the Surviving
Corporation may substitute therefor policies of at least the same coverage
containing terms and conditions which are no less advantageous to the
beneficiaries thereof so long as such substitution does not result in gaps or
lapses in coverage) with respect to matters occurring prior to the consummation
of the Merger to the extent available, provided that in no event shall the
Company or the Surviving Corporation, as the case may be, be required to expend
more than an amount per year equal to 200% of the current annual premiums paid
by the Company (the "Premium Amount") to maintain or procure insurance coverage
pursuant to the terms of the Merger Agreement and further provided that if the
Surviving Corporation is unable to obtain the insurance called for by Section
6.10(b) of the Merger Agreement, the Surviving Corporation will obtain as much
comparable insurance as is available for the Premium Amount per year.
Composition of the Board of Directors. The Merger Agreement provides that,
effective upon the acceptance for payment by Acquisition Sub of Shares
constituting 51% of the aggregate outstanding Shares (assuming the exercise of
all options to purchase as of the consummation of the Offer), the Company shall
take all action necessary to cause persons designated by Purchaser to become
directors of the Company including, but not limited to increasing or seeking
and accepting resignations of incumbent directors or both, so that the total
number of such persons equals the product of (i) the total number of directors
on the Board (after giving effect to the directors elected pursuant to the
provision of the Merger Agreement described by this sentence) and (ii) the
percentage that the aggregate number of Shares beneficially owned by Purchaser
or Acquisition Sub. The Company will use its best efforts to cause individuals
designated by Purchaser to constitute the same percentage as such individuals
represent on the Board of (x) each committee of the Board, (y) each board of
directors of each subsidiary of the Company and (z) each committee of each such
board. The Company's obligations to appoint designees to the Company's Board of
Directors are subject to Section 14(f) of the Exchange Act and Rule 14f-1
promulgated thereunder.
Acquisition Proposals. The Merger Agreement provides in the section
discussing Acquisition Proposals (the "Acquisition Proposals Section") that (a)
the Company and each of its subsidiaries shall, and shall direct and use its
commercially reasonable efforts to cause its officers, directors, employees,
agents and other representatives to, immediately cease any discussions,
negotiations or contacts with any persons that may be ongoing with respect to
an Acquisition Proposal (as defined below). With respect to any person or
persons with whom the Company or any of its subsidiaries has been discussing
any Acquisition Proposal prior to the date hereof, the Company and its
subsidiaries shall, promptly following the execution of the Merger Agreement,
request each such person who has previously entered into a confidentiality
agreement with the Company or any of its subsidiaries regarding an Acquisition
Proposal to return to the Company all confidential information previously
furnished to such person or persons by or on behalf of the Company or its
subsidiaries. Neither the Company nor any of its subsidiaries shall, directly
or indirectly, through any officer, director, employee, agent or otherwise,
solicit, initiate or encourage the submission of any proposal or offer from any
person relating to any acquisition or purchase of all or (other than in the
ordinary course of business) any portion of the assets of, or any equity
interest in, the Company or any of its subsidiaries or any recapitalization,
business combination or similar transaction with the Company or any of its
subsidiaries (any communication with respect to the foregoing being an
"Acquisition Proposal") or participate in any negotiations regarding, or
furnish to any other person any information with respect to, or otherwise
cooperate in any way with, or assist or participate in, facilitate or encourage
any effort or attempt by any other person to do or seek any of the foregoing;
provided, however, that, at any time prior to the purchase of Shares by
Acquisition Sub pursuant to the Offer, the Company may furnish information to,
and negotiate or otherwise engage in discussions with, any party who delivers a
written Acquisition Proposal which was not solicited or encouraged after the
date of this Agreement
19
<PAGE>
if the Board by majority vote determines in good faith (i) after consultation
with and receipt of advice from its outside legal counsel, that failing to take
such action may reasonably be determined to constitute a breach of the
fiduciary duties of the Board under applicable law, (ii) that commitments
(financing and other) of substantially the same sufficiency and firmness as
those then obtained by Purchaser have been obtained with respect to such
Acquisition Proposal that the Board reasonably expects a transaction pursuant
to such Acquisition Proposal could be consummated and (iii) that such
Acquisition Proposal is not subject to any regulatory approvals that could
reasonably be expected to prevent consummation. In connection with the
Acquisition Proposal of a party that satisfies the criteria set forth in the
proviso to the preceding sentence, the Company will enter into a
confidentiality agreement with such party, which confidentiality agreement
shall have terms and conditions that will be no less favorable to the Company
than the terms and provisions relating to confidentiality contained in that
certain Letter of Intent dated November 10, 1999 by and between the Company and
Purchaser. The Merger Agreement further provides that on or after the date
thereof, the Company shall promptly give Purchaser written notice of the
receipt, directly or indirectly, of any inquiries, discussions, negotiations,
or proposals relating to an Acquisition Proposal (including the material terms
thereof and the identity of the other party or parties involved) and furnish to
Purchaser as soon as reasonably practicable and in any event no later than 24
hours after such receipt an accurate description of all material terms
(including any changes or adjustments to such terms as a result of negotiations
or otherwise) of any such written proposal. The Company shall promptly provide
to Purchaser any non-public information regarding the Company provided to any
other party, which information was not previously provided to Purchaser. In
addition, the Company shall promptly advise Purchaser, in writing, if the Board
shall make any determination as to any Acquisition Proposal as contemplated by
the proviso to the third sentence of the preceding paragraph. The Company
agrees that it shall keep Purchaser informed, on a current basis, of the status
of any Acquisition Proposal. Notwithstanding the foregoing, the Company shall
be permitted to take such actions as may be required to comply with Rule 14e-2
of the Exchange Act. It is understood and agreed that any violation of the
Acquisition Proposals Section by any officer, director, employee, agent or
other representative of the Company, whether or not such person is purporting
to act on behalf of the Company, shall be deemed a breach of the Acquisition
Proposals Section by the Company. Except as set forth in the Acquisition
Proposals Section, neither the Board nor any committee thereof shall (i)
withdraw or modify, or propose publicly to withdraw or modify, in a manner
adverse to Purchaser, the approval or recommendation by such Board or such
committee of the Offer, the Merger or the Merger Agreement; provided, however,
that the Board may (A) in respect to any takeover or Acquisition Proposal,
suspend such recommendation for a period of up to five (5) days pending its
analysis of such Acquisition Proposal, or (B) at any time prior to consummation
of the Offer, modify or withdraw such recommendation if the Board determines in
good faith, after consultation with and the advice of outside counsel, that it
would be consistent with its fiduciary responsibilities to so modify or
withdraw such recommendation; provided, further that, unless the Merger
Agreement shall have been terminated, any such suspension, modification or
withdrawal shall not prevent Purchaser and Acquisition Sub, in its or their
discretion, from consummating the Offer and shall not affect any of the actions
taken by the Company pursuant to the Merger Agreement, (ii) approve or
recommend, or propose publicly to approve or recommend, any Acquisition
Proposal, or (iii) cause the Company to enter into any letter of intent,
agreement in principle, acquisition or other similar agreement (each, an
"Acquisition Agreement") related to any Acquisition Proposal. Notwithstanding
the foregoing, in the event that prior to the acceptance for payment of Shares
pursuant to the Offer, the Board determines in good faith, after consultation
with and the advice of outside counsel, that it would be consistent with its
fiduciary responsibilities to the Company's stockholders under applicable law,
the Board may (subject to this and the following provisions of the Acquisition
Proposals Section) (i) withdraw or modify its approval or recommendation of the
Offer, the Merger and the Merger Agreement, (ii) approve or recommend a
Superior Proposal (as defined below), (iii) cause the Company to enter into an
Acquisition Agreement related to any Superior Proposal or (iv) terminate the
Merger Agreement, but in each case, only at a time that is after the second
Business Day following Purchaser's receipt of written notice (or such earlier
time as is necessary for the Board to comply with its fiduciary duties) (a
"Notice of Superior Proposal"), which obligation shall be satisfied by delivery
by facsimile transmission and by overnight delivery by Federal Express or other
nationally recognized overnight carrier as well as by delivery of the notice
required by the Acquisition Proposals Section advising Purchaser that the Board
has received an Acquisition Proposal that may constitute a
20
<PAGE>
Superior Proposal, subject to the fiduciary duties of the Board, specifying the
material terms and conditions of such Superior Proposal and identifying the
person making such Superior Proposal. For purposes of the Merger Agreement and
this Offer, a "Superior Proposal" means any Acquisition Proposal determined by
the Board in good faith, after consultation with and advice from outside
counsel, to be a bona fide proposal and made by a third party for consideration
consisting of cash, property and/or securities, for more than a substantial
minority (on an as-converted basis or otherwise) of the combined voting power
of the shares of Company Common Stock then outstanding or all or substantially
all of the assets of the Company or its subsidiaries and otherwise on terms
which the Board determines in its good faith judgment, after consultation with
outside counsel to be more favorable to the Company's stockholders than the
Offer and the Merger. During the period from the date of the Merger Agreement
until such time as Purchaser's designees shall constitute a majority of the
Board, the Company shall not terminate, amend, modify or waive any provision of
any confidentiality or standstill agreement to which the Company or any of its
subsidiaries is a party (other than any involving Purchaser) unless the Board
shall have determined in good faith, in reliance upon advice from its outside
counsel, that failing to release any third party or to amend, modify or waive
such provisions would not be consistent with the Board's fiduciary
responsibilities under applicable law.
Payment of Indebtedness. The Merger Agreement provides that, upon
consummation of the Offer, Purchaser shall (i) pay in full the indebtedness
owed by the Company to Bank of America, National Association ("Bank of
America") under that certain Credit Agreement, dated March 11, 1998, between
the lenders party thereto and the Company, as amended, or (ii) have obtained
from Bank of America a waiver of the default thereunder caused by the
consummation of the Offer.
Covenants. The Merger Agreement also contains certain other restrictions as
to the conduct of business of the Company pending the Merger, as well as
representations and warranties of each of the parties customary in transactions
of this kind.
Appraisal Rights. Any Shares held by a holder who has demanded and perfected
his demand for appraisal of his Shares in accordance with the DGCL (including,
but not limited to, Section 262 thereof) and as of the Effective Time has
neither withdrawn nor lost his, her or its right to such appraisal ("Dissenting
Shares") shall not be converted into or represent a right to receive the Offer
Price but the holder thereof shall be entitled to only such rights as are
granted by the DGCL. If any holder of Shares who demands appraisal of his
Shares under the DGCL effectively withdraws or loses (through failure to
perfect or otherwise) his, her or its right to appraisal, then as of the
Effective Time or the occurrence of such event, whichever later occurs, such
holder's Shares shall automatically be converted into and represent only the
right to receive the Offer Price, without interest thereon, upon surrender of
the certificate or certificates representing such Shares. If applicable, the
Company shall give Purchaser (i) prompt notice of any demands for appraisal or
payment of the fair value of any Shares, withdrawals of such demands, and any
other instruments served pursuant to the DGCL received by the Company and (ii)
the opportunity to direct all negotiations and proceedings with respect to
demands for appraisal under the DGCL. The Company shall not voluntarily make
any payment with respect to any demands for appraisal and shall not, except
with the prior written consent of Purchaser, settle or offer to settle any such
demands.
Rule 13e-3. Rule 13e-3 under the Exchange Act, which Purchaser does not
believe would be applicable to the Merger, would require, among other things,
that certain financial information concerning the Company and certain
information relating to the fairness of the proposed transaction and the
consideration offered to stockholders of the Company therein, be filed with the
SEC and disclosed to stockholders of the Company prior to consummation of the
transaction.
13. SOURCE AND AMOUNT OF FUNDS.
Purchaser estimates that the total amount of funds required to purchase all
of the outstanding Shares (assuming the exercise of all outstanding options and
the purchase of all of the Company Series A Stock and Company Series B Stock)
(other than those already owned by Purchaser, Acquisition Sub or any of their
21
<PAGE>
affiliates) pursuant to the Offer and the Merger and to pay related fees and
expenses will be approximately $84 million. Purchaser will obtain these funds
from: (i) existing cash resources, (ii) additional capital contributions, (iii)
additional borrowings received from amending the existing senior credit
facility, as described below, and/or (iv) proceeds from the placement of
additional subordinated notes to existing note holders, as described below. The
available borrowings under the Senior Credit Facility (as defined below), prior
to the prospective amendments discussed above, would not be sufficient to
consummate the Offer without the credit increases discussed above. Although
there are no commitments by such lenders at this time, Purchaser intends to
have such borrowing arrangements in effect prior to the satisfaction or waiver
of the conditions to the Offer.
Purchaser has been advised by Agent (as defined below) that Purchaser's
existing senior lender group, comprised of Antares Capital Corporation, Key
Corporate Capital, Inc., BankAustria, General Electric Capital Corporation, The
First National Bank of Chicago, LaSalle Bank National Association, Mercantile
Bank National Association, National City Bank of Michigan/Illinois,
Transamerica Business Credit Corporation, Harris Trust and Savings Bank, and
First Source Financial LLP, which is agented by Antares Capital Corporation
(the "Agent"), would be interested in amending the existing senior credit
facility (the "Senior Credit Facility") to increase the available borrowings
and to modify the covenants to accommodate the Offer which are necessary under
the current terms of the Senior Credit Facility.
The Senior Credit Facility currently provides for maximum borrowings of an
aggregate principal amount of up to $84.0 million and is comprised of a $24.0
million Senior Term A Loan ("Term Loan A"), a $30.0 million Senior Term B Loan
("Term Loan B"), and a $30.0 million revolving credit facility (the "Revolving
Loan"). The Revolving Loan commitment terminates on July 30, 2005, Term Loan A
terminates on July 30, 2005, and Term Loan B terminates on July 30, 2006,
unless earlier terminated in accordance with the terms of the Senior Credit
Facility. The Senior Credit Facility is secured by a lien on substantially all
of the assets of Purchaser and a pledge of the capital stock of each of
Purchaser's existing and future subsidiaries.
The Revolving Loan and Term Loan A and Term Loan B bear interest, at
Purchaser's option, at either (i) the Base Rate plus the Applicable Margin, or
(ii) the LIBOR Rate plus the Applicable Margin. Prior to
August 1, 2000, for the Revolving Loan and Term Loan A, the Base Rate
Applicable Margin is 1.5% and the LIBOR Rate Applicable Margin is 2.75%. Prior
to August 1, 2000, for Term Loan B, the Base Rate Applicable Margin is 2.0% and
the LIBOR Rate Applicable Margin is 3.25%. As of August 1, 2000 and thereafter,
the LIBOR Rate Applicable Margins in effect from time to time will range from
2.25% to 3.0% and are determined based upon the applicable Leverage Ratio then
in effect. As of August 1, 2000 and thereafter, the Base Rate Applicable
Margins in effect from time to time range from 1.0% to 2.0% and are determined
based upon the applicable Leverage Ratio (as defined in the Senior Credit
Facility) then in effect.
Northwestern Mutual Life Insurance Company, which purchased $22,800,000 of
12% Senior Subordinated Notes due 2007 (the "Subordinated Notes") has expressed
an interest in purchasing additional subordinated notes and amending the
existing Subordinated Note Agreement to accommodate the Offer. For purposes
hereof, the Senior Credit Facility and the Subordinated Notes are collectively,
the "Credit Facility."
It is anticipated that the indebtedness incurred by Purchaser under the
amendments to the Credit Facility will be repaid by funds generated internally
by Purchaser and its subsidiaries (including, after the Merger, if consummated,
funds generated by the Surviving Corporation and its subsidiaries), through
additional borrowings, or through a combination of such sources. No decisions
have been made concerning the method Purchaser will employ to repay such
indebtedness. Such decisions when made will be based on Purchaser's review from
time to time of the advisability of particular actions, as well as on
prevailing interest rates and financial and other economic conditions.
22
<PAGE>
14. CERTAIN CONDITIONS OF THE OFFER.
Notwithstanding any other term of the Offer, but subject, in all cases to
Purchaser's and Acquisition Sub's obligations set forth under the Merger
Agreement, including, without limitation, under Section 1.1 of the Merger
Agreement, Acquisition Sub shall not be required to accept for payment or,
subject to any applicable rules and regulations of the SEC, including Rule 14e-
1(c) under the 1934 Act (relating to Acquisition Sub's obligation to promptly
pay for or return tendered Shares after the termination or withdrawal of the
Offer), to pay for any Shares tendered pursuant to the Offer unless (i) there
shall have been validly tendered and not withdrawn prior to the expiration of
the Offer such number of Shares that would when combined with any Shares held
by the Purchaser, Acquisition Sub or any of their affiliates, would constitute
ninety percent (90%) of the aggregate outstanding Shares (including any Shares
outstanding as of the consummation of the Offer that have been issued upon the
exercise of options to purchase, and the conversion or exchange of all
securities convertible or exchangeable into, Shares) (the "Minimum Condition"),
(ii) any waiting period under the HSR Act applicable to the Offer shall have
expired or been terminated prior to the expiration of the Offer, (iii) the
Financing Condition shall have been satisfied, (iv) the Company shall have
delivered to Purchaser a fully-executed copy of the Kiedaisch Agreement and (v)
the Company shall have delivered, or caused to be delivered, to Purchaser a
pay-off letter, in form acceptable to Purchaser, from Bank of America with
respect to the Senior Credit Facility. Furthermore, notwithstanding any other
term of the Offer, but subject, in all cases, to Purchaser's and Acquisition
Sub's obligations set forth in the Merger Agreement, including, without
limitation, under Section 1.1, Acquisition Sub shall not be required to accept
for payment or, to pay for any Shares not theretofore accepted for payment or
paid for, and may terminate the Offer at any time if, at any time on or after
the date of the Merger Agreement and before the acceptance of such Shares for
payment or the payment therefor, any of the following conditions exists (other
than as a result of any action or inaction of Purchaser or any of its
subsidiaries that constitutes a breach of the Merger Agreement):
(a) there shall be instituted or pending by any governmental agency or
similar authority in any United States federal or state court or
administrative agency any suit, action, proceeding, application or
counterclaim which would reasonably be expected to (i) restrain or prohibit
the acquisition by Purchaser or Acquisition Sub of the Shares pursuant to
the Offer, the consummation of the Offer or the Merger, or require the
Company, Purchaser or Acquisition Sub to pay any damages that are material
in relation to the Company and its subsidiaries, or Purchaser and its
subsidiaries, taken as a whole, (ii) prohibit or limit in any material
respect the ownership or operation of any business or assets of the Company
or its subsidiaries or Purchaser or its subsidiaries, as they are presently
being operated, or to compel the Company or Purchaser to dispose of or hold
separate any material business or assets of the Company and its
subsidiaries or Purchaser and its subsidiaries, as a result of the Offer,
or the Merger, (iii) impose material limitations on the ability of
Purchaser or Acquisition Sub to acquire or hold, to exercise full rights of
ownership of, any Shares to be accepted for payment pursuant to the Offer,
including, without limitation, the right to vote such Shares on all matters
properly presented to the stockholders of the Company, (iv) prohibit
Purchaser or any of its subsidiaries from effectively controlling any
material business or operations of the Company or its subsidiaries, or (v)
which otherwise is reasonably likely to have a Company Material Adverse
Effect on the business, properties, assets, financial condition or results
of operations of the Company and its subsidiaries taken as a whole;
(b) there shall be enacted, entered, enforced, promulgated or deemed
applicable to the Offer or the Merger by any United States federal or state
governmental agency, court or similar authority, any statute, rule,
regulation, judgment, order of injunction, other than the application to
the Offer or the Merger of applicable waiting periods under the HSR Act,
that would reasonably be expected to result in any of the consequences
referred to in clauses (i) through (v) of paragraph (a) above (other than
any state law, statute, rule or regulation whose applicability can be
avoided by not extending the Offer to residents of such state provided that
in the aggregate not more than 5% of the outstanding Shares as of the
consummation of the Offer shall be owned of record by residents of all such
states);
(c)(i) the Board or any committee thereof shall have and be continuing
to have suspended (in excess of three days), withdrawn or modified in a
manner adverse to Purchaser or Acquisition Sub its approval or
23
<PAGE>
recommendation of the Offer, the Merger or the Merger Agreement, or
approved or recommended any Acquisition Proposal, or shall have resolved to
take any of the foregoing actions or (ii) the Company enters into an
agreement regarding an Acquisition Proposal;
(d) there shall have occurred and be continuing a breach of one or more
representations or warranties of the Company set forth in the Merger
Agreement which for purposes of this paragraph (d) shall be read without
giving any effect to any Company Material Adverse Effect or other
materiality qualifiers contained in any such representation and warranty
and which, either individually or in the aggregate, have resulted or could
reasonably be expected to result in a Company Material Adverse Effect, and
the Company shall have executed and delivered to Purchaser and Acquisition
Sub a certificate, dated the date of consummation of the Offer, executed by
the Company's Secretary that no such breach has occurred;
(e) the Company shall have and be continuing to have failed to perform
or comply with: the Acquisition Proposals Section in any respect in
connection with the non-solicitation agreements and covenants contained
therein and in any material respect in connection with any of the other
agreements and covenants contained therein; or one or more obligations,
covenants or agreements set forth in this Agreement to be performed or
complied with by it under the Merger Agreement prior to the consummation of
the Offer which, either individually or in the aggregate, have resulted in
or could reasonably be expected to result in a Company Material Adverse
Effect, and the Company shall have executed and delivered to Purchaser and
Acquisition Sub a certificate, dated the date of consummation of the Offer,
executed by the Company's Secretary that no such breach has occurred;
(f) there shall have occurred and be continuing (i) any general
suspension of trading in, or limitation on prices for, securities on a
national securities exchange in the United States (excluding any
coordinated trading halt triggered solely as a result of a specified
increase or decrease in a market index or similar "circuit breaker"
process), (ii) a declaration of a banking moratorium or any general
suspension of payments in respect of or operations by banks in the United
States, whether as a result of their failure to be Year 2000 Compliant or
otherwise, (iii) any material limitation (whether or not mandatory) by any
Governmental Entity on, or other similar event that materially adversely
affects, the extension of credit in the United States by banks or other
lending institutions, (iv) a commencement of a war or armed hostilities or
other national or international calamity directly or indirectly involving
the United States which materially adversely affects the extension of
credit in the United States by banks or other lending institutions, or (v)
from the date of the Merger Agreement through the date of termination or
expiration, a decline of at least 25% in either the Dow Jones Industrial
Average or the Standard & Poor's 500 Index;
(g) there shall have occurred and be continuing a Company Material
Adverse Effect with respect to the Company;
(h) the aggregate outstanding Indebtedness of the Company and its
subsidiaries and the aggregate Liquidation Preference payable upon the
Company Series A Stock and the Company Series B Stock under Section 6.7 of
the Merger Agreement shall exceed $48 million (the "Indebtedness
Condition");
(i) the aggregate Transaction Fees (as defined in the Merger Agreement)
shall exceed $3,300,000;
which, in the judgment of Purchaser or Acquisition Sub with respect to each
and every matter referred to above and regardless of the circumstances
(including any action or inaction by Acquisition Sub or any of its affiliates
not inconsistent with the terms hereof) giving rise to any such condition,
makes it inadvisable to proceed with the Offer or with such acceptance for
payment of or payment for Shares.
If the Merger Agreement is terminated by Purchaser or Acquisition Sub or by
the Company in accordance with its terms, Acquisition Sub shall, and Purchaser
shall cause Acquisition Sub to, terminate promptly the Offer.
The foregoing conditions are for the benefit of Purchaser and Acquisition
Sub and may, subject to the terms and conditions of the Merger Agreement, be
waived by Purchaser and Acquisition Sub in whole or in part at any time and
from time to time in their sole discretion; provided, however, that the
Minimum Condition must be satisfied prior to acceptance of any Shares for
purchase pursuant to the Offer. The failure by Purchaser
24
<PAGE>
or Acquisition Sub at any time to exercise any of the foregoing rights shall
not be deemed a waiver of any such right, the waiver of any such right with
respect to particular facts and circumstances shall not be deemed a waiver with
respect to any other facts and circumstances and each such right shall be
deemed an ongoing right that may be asserted at any time and from time to time.
Notwithstanding the fact that Acquisition Sub reserves the right to assert the
occurrence or non-occurrence of an Offer Condition following acceptance for
payment but prior to payment in order to delay or cancel its obligation to pay
for properly tendered Shares, Acquisition Sub shall either promptly pay for
such Shares or promptly return such Shares.
15. DIVIDENDS AND DISTRIBUTIONS.
If, on or after November 24, 1999, the Company should split, combine or
otherwise change the Shares or its capitalization, or shall disclose that it
has taken any such action, then Acquisition Sub, in its discretion, may, among
other things, without prejudice to Purchaser's and Acquisition Sub's other
rights under the Merger Agreement, make such adjustments in the Offer Price and
other terms of the Offer as it deems appropriate to reflect such split,
combination or other change.
If, on or after November 24, 1999, the Company should declare or pay any
cash or stock dividend or other distribution on or issue any rights with
respect to the Shares, payable or distributable to stockholders of record on a
date occurring on or after November 24, 1999 and prior to the transfer to the
name of Acquisition Sub or its nominees or transferees on the Company's stock
transfer records of the Shares purchased pursuant to the Offer, then, without
prejudice to Purchaser's and Acquisition Sub's other rights under the Merger
Agreement, (i) the price payable by Acquisition Sub pursuant to the Offer will
be reduced by the amount of any such cash dividend or distribution and (ii) the
whole of any non-cash dividend or distribution (including additional Shares or
rights as aforesaid) received by a tendering stockholder shall be required to
be promptly remitted and transferred by the tendering stockholder to the
Depositary for the account of Acquisition Sub, accompanied by appropriate
documentation of transfer. Pending such remittance or appropriate assurance
thereof, Acquisition Sub will be, subject to applicable law, entitled to all
rights and privileges as owner of any such non-cash dividend, distribution or
right and may withhold the entire purchase price or deduct from the purchase
price the amount or value thereof, as determined by Acquisition Sub in its sole
discretion.
16. CERTAIN LEGAL MATTERS.
General. Except as otherwise disclosed herein, based upon an examination of
publicly available filings with respect to the Company, Purchaser and
Acquisition Sub are not aware of any licenses or other regulatory permits which
appear to be material to the business of the Company and which might be
adversely affected by the acquisition of Shares by Acquisition Sub pursuant to
the Offer or of any approval or other action by any governmental,
administrative or regulatory agency or authority which would be required for
the acquisition or ownership of Shares by Acquisition Sub pursuant to the
Offer. Should any such approval or other action be required, it is currently
contemplated that such approval or action would be sought or taken. There can
be no assurance that any such approval or action, if needed, would be obtained
or, if obtained, that it will be obtained without substantial conditions or
that adverse consequences might not result to the Company's or Purchaser's
business or that certain parts of the Company's or Purchaser's business might
not have to be disposed of in the event that such approvals were not obtained
or such other actions were not taken, any of which could cause Acquisition Sub
to elect to terminate the Offer without the purchase of the Shares thereunder.
Acquisition Sub's obligation under the Offer to accept for payment and pay for
Shares is subject to certain conditions. See Section 14.
Antitrust Compliance. Under the HSR Act and the rules that have been
promulgated thereunder by the Federal Trade Commission (the "FTC"), certain
acquisition transactions may not be consummated unless certain information has
been furnished to the Antitrust Division of the Justice Department (the
"Antitrust Division") and the FTC and certain waiting period requirements have
been satisfied. The acquisition of Shares by Acquisition Sub is subject to
these requirements. See Section 2 of this Offer to Purchase as to the effect of
the HSR Act on the timing of Acquisition Sub's obligation to accept Shares for
payment.
25
<PAGE>
Purchaser intends, on or as soon as reasonably practicable following the
date hereof, to file with the FTC and the Antitrust Division a Premerger
Notification and Report Form in connection with the purchase of Shares pursuant
to the Offer. Under the provisions of the HSR Act applicable to the purchase of
Shares pursuant to the Offer, such purchases may not be made until the
expiration of a 15-calendar day waiting period following the filing by
Purchaser. Pursuant to the HSR Act, Purchaser intends to request early
termination of the waiting period applicable to the Offer. There can be no
assurances given, however, that the 15-day HSR Act waiting period will be
terminated early. If either the FTC or the Antitrust Division were to request
additional information or documentary material from Purchaser, the waiting
period would expire at 11:59 p.m., New York City time, on the tenth calendar
day after the date of substantial compliance by Purchaser with such request.
Thereafter, the waiting period could be extended only by agreement or by court
order. If the acquisition of Shares is delayed pursuant to a request by the FTC
or the Antitrust Division for additional information or documentary material
pursuant to the HSR Act, the purchase of and payment for Shares will be
deferred until 10 days after the request is substantially complied with unless
the waiting period is sooner terminated by the FTC or the Antitrust Division.
See Section 2. Only one extension of such waiting period pursuant to a request
for additional information is authorized by the rules promulgated under the HSR
Act, except by agreement or by court order. Any such extension of the waiting
period will not give rise to any withdrawal rights not otherwise provided for
by applicable law. See Section 4. Although the Company is required to file
certain information and documentary material with the Antitrust Division and
the FTC in connection with the Offer, neither the Company's failure to make
such filings nor a request from the Antitrust Division or the FTC for
additional information or documentary material made to the Company will extend
the waiting period.
The Antitrust Division and the FTC frequently scrutinize the legality under
the antitrust laws of transactions such as the proposed acquisition of Shares
by Acquisition Sub pursuant to the Offer. At any time before or after
Acquisition Sub's purchase of Shares, the Antitrust Division or the FTC could
take such action under the antitrust laws as it deems necessary or desirable in
the public interest, including seeking to enjoin the acquisition of Shares
pursuant to the Offer or seeking divestiture of Shares acquired by Acquisition
Sub or the divestiture of substantial assets of Purchaser, the Company or any
of their respective subsidiaries. Private parties may also bring legal action
under the antitrust laws under certain circumstances. There can be no assurance
that a challenge to the Offer on antitrust grounds will not be made or, if a
challenge is made, what the result will be. See Section 14 of this Offer to
Purchase for certain conditions to the Offer that could become applicable in
the event of such a challenge.
State Takeover Laws. A number of states have adopted laws and regulations
applicable to offers to acquire securities of corporations which are
incorporated in such states and/or which have substantial assets, stockholders,
principal executive offices or principal places of business therein. In Edgar
v. MITE Corporation, the Supreme Court of the United States held that the
Illinois Business Takeover Statute, which made the takeover of certain
corporations more difficult, imposed a substantial burden on interstate
commerce and was therefore unconstitutional. In CTS Corporation v. Dynamics
Corporation of America, the Supreme Court held that as a matter of corporate
law, and in particular, those laws concerning corporate governance, a state may
constitutionally disqualify an acquiror of "Control Shares" (ones representing
ownership in excess of certain voting power thresholds, e.g. 20%, 33 1/3% or
50%) of a corporation incorporated in its state and meeting certain other
jurisdictional requirements from exercising voting power with respect to those
shares without the approval of a majority of the disinterested stockholders.
A number of states have adopted laws and regulations applicable to offers to
acquire securities of corporations which are incorporated in such states and/or
which have substantial assets, stockholders, principal executive offices or
principal places of business therein. In Edgar v. MITE Corporation, the Supreme
Court of the United States held that the Illinois Business Takeover Statute,
which made the takeover of certain corporations more difficult, imposed a
substantial burden on interstate commerce and was therefore unconstitutional.
In CTS Corporation v. Dynamics Corporation of America, the Supreme Court held
that as a matter of corporate law, and in particular, those laws concerning
corporate governance, a state may
26
<PAGE>
constitutionally disqualify an acquiror of "Control Shares" (ones representing
ownership in excess of certain voting power thresholds e.g. 20%, 33% or 50%) of
a corporation incorporated in its state and meeting certain other
jurisdictional requirements from exercising voting power with respect to those
shares without the approval of a majority of the disinterested stockholders.
Section 203 of the DGCL limits the ability of a Delaware corporation to
engage in business combinations with "interested stockholders" (defined
generally as any beneficial owner of 15% or more of the outstanding voting
stock of the corporation) unless, among other things, the corporation's board
of directors has given its prior approval to either the business combination or
the transaction which resulted in the stockholder becoming an "interested
stockholder." The Company's Board of Directors and a disinterested Committee of
the Board of Directors have approved the Merger Agreement and Acquisition Sub's
acquisition of Shares pursuant to the Offer and, therefore, Section 203 of the
DGCL is inapplicable to the Offer and the Merger.
If it is asserted that one or more state takeover laws applies to the Offer
or the Merger and it is not determined by an appropriate court that such act or
acts do not apply or are invalid as applied to the Offer or the Merger,
Acquisition Sub might be required to file certain information with, or receive
approvals from, the relevant state authorities. In addition, if enjoined,
Acquisition Sub might be unable to accept for payment any Shares tendered
pursuant to the Offer, or be delayed in consummating the Offer. In such case,
Acquisition Sub may not be obligated to accept for payment any Shares tendered.
See Section 14.
17. FEES AND EXPENSES.
The Purchaser has also retained Morrow & Co., Inc. to act as the Information
Agent in connection with the Offer. The Information Agent may contact holders
of Shares by mail, telephone, telex, telegraph and personal interviews and may
request brokers, dealers and other nominee stockholders to forward materials
relating to the Offer to beneficial owners of Shares. The Information Agent
will receive reasonable and customary compensation for such services and
Acquisition Sub will indemnify the Information Agent against certain
liabilities and expenses in connection with the Offer, including liabilities
under the federal securities laws.
Acquisition Sub will pay the Depositary reasonable and customary
compensation for its services in connection with the Offer, plus reimbursement
for out-of-pocket expenses, and will indemnify the Depositary against certain
liabilities and expenses in connection therewith, including liabilities under
the federal securities laws. Brokers, dealers, commercial banks and trust
companies will be reimbursed by Acquisition Sub for customary mailing and
handling expenses incurred by them in forwarding material to their customers.
18. MISCELLANEOUS.
The Offer is not being made to (nor will tenders be accepted from or on
behalf of) holders of Shares in any jurisdiction in which the making of the
Offer or the acceptance thereof would not be in compliance with the laws of
such jurisdiction. However, Acquisition Sub may, in its sole discretion, take
such action as it may deem necessary to make the Offer in any such jurisdiction
and extend the Offer to holders of Shares in such jurisdiction.
Neither the Purchaser nor Acquisition Sub is aware of any jurisdiction in
which the making of the Offer or the acceptance of Shares in connection
therewith would not be in compliance with the laws of such jurisdiction.
The Purchaser and Acquisition Sub have filed with the SEC a Statement on
Schedule l4D-1 pursuant to Rule l4d-3 of the General Rules and Regulations
under the Exchange Act, furnishing certain additional information with respect
to the Offer, and may file amendments thereto. Such Statement and any
amendments thereto, including exhibits, may be examined and copies may be
obtained from the principal office of the SEC in Washington, D.C. and the AmEx
in the manner set forth in Section 8.
27
<PAGE>
No person has been authorized to give any information or make any
representation on behalf of Purchaser or Acquisition Sub not contained in this
Offer to Purchase or in the Letter of Transmittal and, if given or made, such
information or representation must not be relied upon as having been
authorized.
Shade Acquisition, Inc.
December 2, 1999
28
<PAGE>
SCHEDULE A
INFORMATION CONCERNING THE DIRECTORS AND EXECUTIVE OFFICERS
OF PURCHASER AND ACQUISITION SUB
The following tables set forth the name, business address, present principal
occupation and material positions held within the past five years of each
director and executive officer of Purchaser and Acquisition Sub. Each person
listed below is a citizen of the United States of America.
PURCHASER AND ACQUISITION SUB
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT,
NAME AND BUSINESS ADDRESS MATERIAL POSITIONS HELD DURING THE PAST FIVE YEARS
------------------------- --------------------------------------------------
<C> <S>
Richard R. Kracum................ Chairman of the Board of Directors of Purchaser since
Wind Point Partners August 1999 and of Acquisition Sub since November 1999.
676 N. Michigan Avenue, Suite Managing Director of Wind Point Partners, a private
3300 equity fund headquartered in Chicago, Illinois ("Wind
Chicago, IL 60611 Point") since 1986. A founder of Wind Point Partners
III, L.P., a $215 million private equity fund in 1997
and a founder of Wind Point Partners IV, L.P., a
private equity fund with approximately $290 million in
committed capital.
B. Joseph Messner................ President and Chief Executive Officer of Purchaser
Worldwide Sports & Recreation since August 1999 and of Acquisition Sub since November
9200 Cody 1999. From 1996 to 1997, Mr. Messner was the CEO of
Overland Park, KS 66214 First Alert, a publicly held manufacturer of smoke
alarms. Prior to this position, Mr. Messner was
President of Bushnell, a division of Bausch & Lomb from
1989 to 1995.
Norman Singer.................... Director of Purchaser since August 1999 and of
460 S. Marion Street Acquisition Sub since November 1999. Mr. Singer served
#1504C as Chairman of the Board of Directors of Purchaser from
Denver, CO 80209 1997 to 1999. He is also a licensed attorney and in his
capacity as a Director also represents the remaining
minority interests of a predecessor of Purchaser.
Salam Chaudhary.................. Secretary of Acquisition Sub since November 1999. Mr.
Worldwide Sports and Recreation, Chaudhary joined Wind Point as an Associate in 1997 and
Inc. is currently a Vice-President. Prior to working at Wind
c/o Wind Point Partners Point Partners, he was an analyst at First of Michigan
One Towne Square, Suite 780 Corporation, an investment bank, from 1996 to 1997 and
Southfield, MI 48076 the head analyst at Health Care REIT, a publicly traded
real estate investment trust, from 1995 to 1996.
</TABLE>
A-1
<PAGE>
Facsimile copies of the Letter of Transmittal will be accepted. The Letter
of Transmittal, certificates for the Shares and any other required documents
should be sent by each stockholder of the Company or his broker-dealer,
commercial bank, trust company or other nominee to the Depositary as follows:
The Depositary is:
FIRST CHICAGO TRUST COMPANY OF NEW YORK
By Hand: By Mail: By Overnight Delivery:
First Chicago Trust First Chicago Trust First Chicago Trust
Company of New York Company of New York Company of New York
Attention: Corporate Attention: Corporate Attention: Corporate
Actions Actions Actions
c/o Securities Transfer Suite 4660 Suite 4660
and Reporting Services P.O. Box 2565 525 Washington Boulevard,
Inc. Jersey City, NJ 07303- Jersey City, NJ 07310
100 William Street-- 2565
Galleria
New York, NY 10038
By Facsimile Transmissions (for Eligible Institutions only):
(201) 324-3402
or
(201) 324-3403
Confirm Receipt of Facsimile by Telephone Only:
(201) 222-4707
For Information:
(800) 251-4215
Any questions or requests for assistance or additional copies of the Offer
to Purchase and the Letter of Transmittal may be directed to the Information
Agent or the Dealer Manager at their respective telephone numbers and locations
listed below. You may also contact your broker, dealer, commercial bank or
trust company or other nominee for assistance concerning the Offer.
The Information Agent for the Offer is:
MORROW & CO., INC.
445 Park Avenue, 5th Floor
New York, NY 10022
Call Collect (212) 754-8000
Banks and Brokerage Firms Please Call:
(800) 662-5200
Shareholders Please Call: (800) 566-9061
A-2
<PAGE>
Letter of Transmittal
To Tender Shares of Common Stock
of
BOLLE INC.
at
$5.25 Net Per Share
by
SHADE ACQUISITION, INC.
a wholly owned subsidiary of
WORLDWIDE SPORTS AND RECREATION, INC.
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT,NEW YORK CITY
TIME, ON JANUARY 4, 2000 UNLESS THE OFFER IS EXTENDED.
The Depositary for the Offer is:
FIRST CHICAGO TRUST COMPANY OF NEW YORK
By Hand:
By Mail:
By Overnight Courier:
First Chicago Trust
Company
First Chicago Trust Company of New York
First Chicago Trust
Attention: Corporate Actions Company
of New York Suite 4660 of New York
Attention: Corporate P.O. Box 2565 Attention: Corporate
Actions Jersey City, NJ 07303-2565 Actions
c/o Securities Transfer Suite 4660
and Reporting Services 525 Washington Boulevard
Inc. Jersey City, NJ 07310
100 William Street--
Galleria
New York, NY 10038
By Facsimile Transmission (For Eligible Institutions Only):
(201) 324-3402
or
(201) 324-3403
Confirm Receipt of Facsimile by Telephone Only:
(201) 222-4707
For Information Call:
(800) 251-4215
----------------
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET FORTH
ABOVE DOES NOT CONSTITUTE A VALID DELIVERY.
THE INSTRUCTIONS ACCOMPANYING THIS LETTER OF TRANSMITTAL SHOULD BE READ
CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL IS COMPLETED.
This Letter of Transmittal is to be used either if certificates are to be
forwarded herewith or, unless an Agent's Message (as defined in Section 3 of
the Offer to Purchase (as defined below)) is utilized, if delivery is to be
made by book-entry transfer to an account maintained by the Depositary at a
Book-Entry Transfer Facility, as defined in and pursuant to the procedures set
forth in Section 3 of the Offer to Purchase. Stockholders who deliver Shares by
book-entry transfer are referred to herein as "Book-Entry Stockholders" and
other stockholders are referred to herein as "Certificate Stockholders."
Stockholders whose certificates for Shares are not immediately available or who
cannot comply with the procedure for book-entry transfer on a timely basis, or
who cannot deliver all required documents to the Depositary prior to the
Expiration Date (as defined in Section 1 of the Offer to Purchase), may tender
their Shares in accordance with the guaranteed delivery procedure set forth in
Section 3 of the Offer to Purchase. See Instruction 2. Delivery of documents to
the Book-Entry Transfer Facility in accordance with such Book-Entry Transfer
Facility's procedures does not constitute delivery to the Depositary.
<PAGE>
DESCRIPTION OF SHARES TENDERED
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
Name(s) and Address(es) of Registered Owner(s)
(Please fill in
if blank, exactly as name(s) appear(s) on Shares Tendered
certificate(s)) (Attach additional list if necessary)
</TABLE>
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Total Number of
Shares Represented Number
Certificate by of Shares
Number(s)(1) Certificate(s)(1) Tendered(2)
------
<S> <C> <C> <C>
------
------
------
------
Total Shares
</TABLE>
- -------------------------------------------------------------------------------
(1) Need not be completed by Book-Entry Stockholders.
(2) Unless otherwise indicated, it will be assumed that all Shares described
above are being tendered. See Instruction 4.
[_]CHECK HERE IF A CERTIFICATE HAS BEEN LOST OR MUTILATED. SEE INSTRUCTION 11.
[_]CHECK HERE IF TENDERED SHARES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER
MADE TO AN ACCOUNT MAINTAINED BY THE DEPOSITARY WITH THE BOOK-ENTRY
TRANSFER FACILITY AND COMPLETE THE FOLLOWING (ONLY FINANCIAL INSTITUTIONS
THAT ARE PARTICIPANTS IN THE SYSTEM OF ANY BOOK-ENTRY TRANSFER FACILITY MAY
DELIVER SHARES BY BOOK-ENTRY TRANSFER):
Name of Tendering Institution ______________________________________________
Account Number at The Depository Trust Company _____________________________
Transaction Code Number ____________________________________________________
[_]CHECK HERE IF TENDERED SHARES ARE BEING DELIVERED PURSUANT TO A NOTICE OF
GUARANTEED DELIVERY PREVIOUSLY SENT TO THE DEPOSITARY, ENCLOSE A PHOTOCOPY
OF SUCH NOTICE OF GUARANTEED DELIVERY AND COMPLETE THE FOLLOWING:
Name(s) of Registered Owner(s) _____________________________________________
Date of Execution of Notice of Guaranteed Delivery _________________________
Name of Institution which Guaranteed Delivery ______________________________
If delivered by book-entry transfer:
Name of Tendering Institution ______________________________________________
Account Number at The Depository Trust Company _____________________________
Transaction Code Number ____________________________________________________
<PAGE>
NOTE: SIGNATURES MUST BE PROVIDED BELOW
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
Ladies and Gentlemen:
The undersigned hereby tenders to Shade Acquisition, Inc., a Delaware
corporation ("Acquisition Sub") and a wholly owned subsidiary of Worldwide
Sports and Recreation, Inc., a Delaware corporation ("Purchaser"), the above-
described shares of common stock, par value $0.01 per share (the "Shares"), of
Bolle Inc., a Delaware corporation (the "Company"), pursuant to the Offer to
Purchase, dated December 2, 1999 (the "Offer to Purchase"), all of the
outstanding Shares at a price of $5.25 per Share, net to the seller in cash
(the "Offer Price"), upon the terms and subject to the conditions set forth in
the Offer to Purchase, receipt of which is hereby acknowledged, and in this
Letter of Transmittal (which, together with the Offer to Purchase, constitute
the "Offer"). The undersigned understands that Purchaser reserves the right to
transfer or assign, from time to time, in whole or in part, to one or more of
its affiliates, the right to purchase the Shares tendered herewith.
On the terms and subject to the conditions of the Offer (including the
conditions set forth in Section 14 of the Offer to Purchase and together with,
if the Offer is extended or amended, the terms and conditions of such extension
or amendment), subject to, and effective upon, acceptance for payment of, and
payment for, the Shares tendered herewith in accordance with the terms of the
Offer, the undersigned hereby sells, assigns and transfers to, or upon the
order of, Acquisition Sub, all right, title and interest in and to all of the
Shares being tendered hereby and any and all cash dividends, distributions,
rights, other Shares or other securities issued or issuable in respect of such
Shares on or after December 2, 1999 (collectively,"Distributions"), and
appoints First Chicago Trust Company of New York (the "Depositary") the true
and lawful agent and attorney-in-fact of the undersigned with respect to such
Shares (and any Distributions) with full power of substitution (such power of
attorney being deemed to be an irrevocable power coupled with an interest) to
the fullest extent of such stockholder's rights with respect to such Shares
(and any Distributions) (a) to deliver such Share Certificates (as defined
herein) (and any Distributions) or transfer ownership of such Shares (and any
Distributions) on the account books maintained by the Book-Entry Transfer
Facility, together in either such case with all accompanying evidences of
transfer and authenticity, to or upon the order of Acquisition Sub, (b) to
present such Shares (and any Distributions) for transfer on the books of the
Company and (c) to receive all benefits and otherwise exercise all rights of
beneficial ownership of such Shares (and any Distributions), all in accordance
with the terms and the conditions of the Offer.
The undersigned hereby irrevocably appoints the designees of Acquisition
Sub, and each of them, the attorneys-in-fact and proxies of the undersigned,
each with full power of substitution, to the full extent of such stockholder's
rights with respect to the Shares tendered hereby which have been accepted for
payment by Acquisition Sub and with respect to any Distributions. The designees
of Acquisition Sub will, with respect to the Shares (and any associated
Distributions) for which the appointment is effective, be empowered to exercise
all voting and any other rights of such stockholder, as they, in their sole
discretion, may deem proper at any annual, special or adjourned meeting of the
Company's stockholders, by written consent in lieu of any such meeting or
otherwise. This proxy and power of attorney shall be irrevocable and coupled
with an interest in the tendered Shares. Such appointment is effective when,
and only to the extent that, Acquisition Sub deposits the payment for such
Shares with the Depositary. Upon the effectiveness of such appointment, without
further action, all prior powers of attorney, proxies and consents given by the
undersigned with respect to such Shares (and any associated Distributions) will
be revoked, and no subsequent powers of attorney, proxies, consents or
revocations may be given (and, if given, will not be deemed effective).
Acquisition Sub reserves the right to require that, in order for Shares to be
deemed validly tendered, immediately upon Acquisition Sub's acceptance for
payment of such Shares, Acquisition Sub must be able to exercise full voting
rights with respect to such Shares (and any associated Distributions),
including voting at any meeting of stockholders.
<PAGE>
The undersigned hereby represents and warrants that the undersigned has full
power and authority to tender, sell, assign and transfer the Shares (and any
Distributions) tendered hereby and, when the same are accepted for payment by
Acquisition Sub, Acquisition Sub will acquire good, marketable and unencumbered
title thereto, free and clear of all liens, restrictions, charges and
encumbrances, and the same will not be subject to any adverse claim. The
undersigned will, upon request, execute and deliver any additional documents
deemed by the Depositary or Acquisition Sub to be necessary or desirable to
complete the sale, assignment and transfer of the Shares (and any
Distributions) tendered hereby. In addition, the undersigned shall promptly
remit and transfer to the Depositary for the account of Acquisition Sub any and
all Distributions in respect of the Shares tendered hereby, accompanied by
appropriate documentation of transfer and, pending such remittance or
appropriate assurance thereof, Acquisition Sub shall be entitled to all rights
and privileges as owner of any such Distributions and may withhold the entire
Offer Price or deduct from the Offer Price the amount or value thereof, as
determined by Acquisition Sub in its sole discretion.
No authority conferred or agreed to be conferred pursuant to this Letter of
Transmittal shall be affected by, and all such authority shall survive, the
death or incapacity of the undersigned and any obligation of the undersigned
hereunder shall be binding upon the heirs, personal representatives, successors
and assigns of the undersigned. Except as stated in the Offer to Purchase, this
tender is irrevocable.
The undersigned understands that the valid tender of Shares pursuant to one
of the procedures described in Section 3 of the Offer to Purchase will
constitute a binding agreement between the undersigned and Acquisition Sub upon
the terms and subject to the conditions of the Offer. The undersigned
recognizes that under certain circumstances set forth in the Offer to Purchase,
Acquisition Sub may not be required to accept for payment any of the Shares
tendered hereby.
Unless otherwise indicated herein under "Special Payment Instructions,"
please issue the check for the Offer Price and/or return any certificates for
Shares not tendered or accepted for payment in the name(s) of the registered
owner(s) appearing under "Description of Shares Tendered." Similarly, unless
otherwise indicated under "Special Delivery Instructions," please mail the
check for the Offer Price and/or return any certificates for Shares not
tendered or accepted for payment (and accompanying documents, as appropriate)
to the address(es) of the registered owner(s) appearing under "Description of
Shares Tendered." In the event that both the Special Delivery Instructions and
the Special Payment Instructions are completed, please issue the check for the
Offer Price and/or issue any certificates for Shares not tendered or accepted
for payment (and any accompanying documents, as appropriate) in the name of,
and deliver such check and/or return such certificates (and any accompanying
documents, as appropriate) to, the person or persons so indicated. The
undersigned recognizes that Purchaser has no obligation pursuant to the Special
Payment Instructions to transfer any Shares from the name of the registered
owner thereof if Purchaser does not accept for payment any of the Shares so
tendered.
<PAGE>
SPECIAL PAYMENT INSTRUCTIONS SPECIAL DELIVERY INSTRUCTIONS
(See Instructions 1, 5, 6 and 7) (See Instructions 5 and 7)
To be completed ONLY if To be completed ONLY if
certificate(s) for Shares not certificate(s) for Shares not
tendered or not accepted for tendered or not accepted for
payment and/or the check for the payment and/or the check for the
purchase price of Shares accepted purchase price of Shares accepted
for payment are to be issued in for payment are to be sent to
the name of someone other than the someone other than the undersigned
undersigned at an address other than that
shown above.
Issue: [_] Check [_]
Certificate(s) to:
Name: _____________________________ Deliver: [_] Check [_]
(Please Print) Certificate(s) to:
Address: __________________________ Name: _____________________________
----------------------------------- (Please Print)
(Include Zip Code)
----------------------------------- Address: __________________________
(Tax Identification or Social -----------------------------------
Security No.) (Include Zip Code)
-----------------------------------
(Tax Identification or Social
Security No.)
<PAGE>
IMPORTANT
SIGN HERE
(also complete Substitute Form W-9 Below)
(Signature(s) of Holder(s)) _______________________________________________
Dated: ,
(Must be signed by registered owner(s) exactly as name(s) appear(s) on
stock certificate(s) or on a security position listing or by person(s)
authorized to become registered owner(s) by certificates and documents
transmitted herewith. If signature is by trustees, executors,
administrators, guardians, attorneys-in-fact, officers of corporations or
others acting in a fiduciary or representative capacity, please set forth
full title and see Instruction 5.)
Name(s) ___________________________________________________________________
(Please Print)
Address ___________________________________________________________________
---------------------------------------------------------------------------
(Including Zip Code)
Capacity (Full Title) _____________________________________________________
---------------------------------------------------------------------------
Area Code and Telephone No.
Tax Identification or Social Security No.
GUARANTEE OF SIGNATURE(S)
(See Instructions 1 and 5)
Authorized Signature ______________________________________________________
Name ______________________________________________________________________
(Please Type or Print)
Address ___________________________________________________________________
(Including Zip Code)
Full Title and Name of Firm _______________________________________________
Dated: ,
<PAGE>
INSTRUCTIONS
Forming Part of the Terms and Conditions of the Offer
1. Guarantee of Signatures. Except as otherwise provided below, all
signatures on this Letter of Transmittal must be guaranteed by a financial
institution (including most commercial banks, savings and loan associations and
brokerage houses) which is a participant in the Securities Transfer Agents
Medallion Program, the New York Stock Exchange Medallion Signature Guarantee
Program or the Stock Exchange Medallion Program (an "Eligible Institution").
Signatures on this Letter of Transmittal need not be guaranteed (a) if this
Letter of Transmittal is signed by the registered owners (which term, for
purposes of this document, includes any participant in the Book-Entry Transfer
Facility's system whose name appears on a security position listing as the
owner of the Shares) of Shares tendered herewith and such registered owner has
not completed the box entitled "Special Payment Instructions" or the box
entitled "Special Delivery Instructions" on this Letter of Transmittal or (b)
if such Shares are tendered for the account of an Eligible Institution. See
Instruction 5 of this Letter of Transmittal.
2. Delivery of Letter of Transmittal and Certificates or Book-Entry
Confirmations. This Letter of Transmittal is to be used either if certificates
are to be forwarded herewith or if tenders are to be made pursuant to the
procedures for tender by book-entry transfer set forth in Section 3 of the
Offer to Purchase. Certificates for all physically tendered Shares ("Share
Certificates"), or confirmation of any book-entry transfer into the
Depositary's account at the Book-Entry Transfer Facility of Shares tendered by
book-entry transfer, as well as this Letter of Transmittal properly completed
and duly executed with any required signature guarantees (or, in the case of a
book-entry transfer, an Agent's Message), and all other documents required by
this Letter of Transmittal, must be received by the Depositary at one of its
addresses set forth herein on or prior to the Expiration Date (as defined in
the Offer to Purchase).
Stockholders whose certificates for Shares are not immediately available or
who cannot deliver all other required documents to the Depositary on or prior
to the Expiration Date or who cannot comply with the procedures for book-entry
transfer on a timely basis may nevertheless tender their Shares by properly
completing and duly executing a Notice of Guaranteed Delivery pursuant to the
guaranteed delivery procedure set forth in Section 3 of the Offer to Purchase.
Pursuant to such procedure: (i) such tender must be made by or through an
Eligible Institution; (ii) a properly completed and duly executed Notice of
Guaranteed Delivery substantially in the form provided by Purchaser must be
received by the Depositary prior to the Expiration Date; and (iii) Share
Certificates or confirmation of any book-entry transfer into the Depositary's
account at the Book-Entry Transfer Facility of Shares tendered by book-entry
transfer, as well as this Letter of Transmittal properly completed and duly
executed with any required signature guarantees (or, in the case of a book-
entry transfer, an Agent's Message), and all other documents required by this
Letter of Transmittal, must be received by the Depositary within three New York
Stock Exchange trading days after the date of execution of such Notice of
Guaranteed Delivery.
If Share Certificates are forwarded separately to the Depositary, a properly
completed and duly executed Letter of Transmittal must accompany each such
delivery.
THE METHOD OF DELIVERY OF SHARE CERTIFICATES AND ALL OTHER REQUIRED
DOCUMENTS, INCLUDING DELIVERY THROUGH THE BOOK-ENTRY TRANSFER FACILITY, IS AT
THE ELECTION AND RISK OF THE TENDERING STOCKHOLDER. THE DELIVERY WILL BE DEEMED
MADE ONLY WHEN ACTUALLY RECEIVED BY THE DEPOSITARY (INCLUDING, IN THE CASE OF A
BOOK-ENTRY TRANSFER, BY BOOK-ENTRY CONFIRMATION). IF SUCH DELIVERY IS BY MAIL,
IT IS RECOMMENDED THAT SUCH CERTIFICATES AND DOCUMENTS BE SENT BY REGISTERED
MAIL, PROPERLY INSURED, WITH RETURN RECEIPT REQUESTED. IN ALL CASES, SUFFICIENT
TIME SHOULD BE ALLOWED TO ASSURE TIMELY DELIVERY.
<PAGE>
No alternative, conditional or contingent tenders will be accepted and no
fractional Shares will be purchased. All tendering stockholders, by execution
of this Letter of Transmittal (or facsimile thereof), waive any right to
receive any notice of the acceptance of their Shares for payment.
3. Inadequate Space. If the space provided herein is inadequate, the
certificate numbers and/or the number of Shares should be listed on a separate
schedule attached hereto.
4. Partial Tenders (Applicable to Certificate Stockholders Only). If fewer
than all the Shares evidenced by any certificate submitted are to be tendered,
fill in the number of Shares which are to be tendered in the box entitled
"Number of Shares Tendered." In such cases, new certificate(s) for the
remainder of the Shares that were evidenced by the old certificate(s) will be
sent to the registered owner, unless otherwise provided in the appropriate box
on this Letter of Transmittal, as soon as practicable after the Expiration
Date. All Shares represented by certificates delivered to the Depositary will
be deemed to have been tendered unless otherwise indicated.
5. Signatures on Letter of Transmittal; Stock Powers and Endorsements. If
this Letter of Transmittal is signed by the registered owners of the Shares
tendered hereby, the signature must correspond with the names as written on the
face of the certificates without alteration, enlargement or any other change
whatsoever.
If any of the Shares tendered hereby are owned of record by two or more
joint owners, all such owners must sign this Letter of Transmittal.
If any of the tendered Shares are registered in different names on several
certificates, it will be necessary to complete, sign and submit as many
separate Letters of Transmittal as there are different registrations of
certificates.
If this Letter of Transmittal or any certificates or stock powers are signed
by trustees, executors, administrators, guardians, attorneys-in-fact, officers
of corporations or others acting in a fiduciary or representative capacity,
such persons should so indicate when signing, and proper evidence satisfactory
to the Parent of their authority so to act must be submitted.
If this Letter of Transmittal is signed by the registered owner(s) of the
Shares listed and transmitted hereby, no endorsements of certificates or
separate stock powers are required unless payment is to be made to, or
certificates for Shares not tendered or accepted for payment are to be issued
in the name of, a person other than the registered owner(s). Signatures on such
certificates or stock powers must be guaranteed by an Eligible Institution.
If this Letter of Transmittal is signed by a person other than the
registered owner of the certificates(s) listed, the certificate(s) must be
endorsed or accompanied by the appropriate stock powers, in either case signed
exactly as the name or names of the registered owner or holders appears on the
certificate(s). Signatures on such certificates or stock powers must be
guaranteed by an Eligible Institution.
6. Stock Transfer Taxes. Purchaser will pay any stock transfer taxes with
respect to the transfer and sale of Shares to it or its order pursuant to the
Offer. If, however, payment of the Offer Price is to be made to, or (in the
circumstances permitted hereby) if certificates for Shares not tendered or
accepted for payment are to be registered in the name of, any person other than
the registered owner, or if tendered certificates are registered in the name of
any person other than the person(s) signing this Letter of Transmittal, the
amount of any stock transfer taxes (whether imposed on the registered owner or
such person) payable on account of the transfer to such person will be deducted
from the Offer Price if satisfactory evidence of the payment of such taxes, or
exemption therefrom, is not submitted.
Except as provided in this Instruction 6, it will not be necessary for
transfer tax stamps to be affixed to the certificates listed in this Letter of
Transmittal.
<PAGE>
7. Special Payment and Delivery Instructions. If a check is to be issued in
the name of, and/or certificates for Shares not tendered or accepted for
payment are to be issued or returned to, a person other than the signer of this
Letter of Transmittal or if a check and/or such certificates are to be mailed
to a person other than the signer of this Letter of Transmittal or to an
address other than that shown above, the appropriate boxes on this Letter of
Transmittal should be completed.
8. Requests for Assistance or Additional Copies. Questions or requests for
assistance may be directed to the Information Agent at its telephone numbers
and addresses set forth below or from your broker, dealer, commercial bank or
trust company. Additional copies of the Offer to Purchase, this Letter of
Transmittal, the Notice of Guaranteed Delivery and other tender offer materials
may be obtained from the Information Agent.
9. Substitute Form W-9. Each tendering stockholder is required to provide
the Depositary with a correct Taxpayer Identification Number ("TIN"), generally
the stockholder's social security or federal employer identification number, on
Substitute Form W-9 below. Failure to provide the information on the form may
subject the tendering stockholder to 31% federal income tax backup withholding
on the payment of the Offer Price. The box in Part 3 of the form may be checked
if the tendering stockholder has not been issued a TIN and has applied for a
TIN or intends to apply for a TIN in the near future. If the box in Part 3 is
checked and the Depositary is not provided with a TIN within 60 days, the
Depositary will withhold 31% of all payments of the Offer Price thereafter
until a TIN is provided to the Depositary.
10. Waiver of Conditions. The conditions of the Offer may be waived by
Purchaser (subject to certain limitations), in whole or in part, at any time or
from time to time, in Purchaser's sole discretion.
11. Lost or Destroyed Certificates. If any certificate(s) representing
Shares has been lost or destroyed, the holder should promptly notify the
Company's Transfer Agent. The holder will then be instructed as to the
procedure to be followed in order to replace the certificate(s). This Letter of
Transmittal and related documents cannot be processed until the procedures for
replacing lost or destroyed Certificates have been followed.
Important: This Letter of Transmittal or a manually signed facsimile thereof
(together with Share certificates or confirmation of book-entry transfer and
all other required documents) or the Notice of Guaranteed Delivery must be
received by the Depositary prior to the Expiration Date.
IMPORTANT TAX INFORMATION
Under the federal income tax law, a stockholder whose tendered Shares are
accepted for purchase is required by law to provide the Depositary (as payer)
with such stockholder's correct TIN on Substitute Form W-9 below and to certify
that such TIN is correct (or that such stockholder is awaiting a TIN) or
otherwise establish a basis for exemption from backup withholding. If such
stockholder is an individual, the TIN is his or her social security number. If
a stockholder fails to provide a TIN to the Depositary, such stockholder maybe
subject to a $50 penalty imposed by the Internal Revenue Service. In addition,
payments that are made to such stockholder with respect to Shares purchased
pursuant to the Offer may be subject to backup withholding of 31% (see below).
Certain stockholders (including, among others, all corporations and certain
foreign individuals) are not subject to these backup withholding and reporting
requirements. In order for a foreign individual to qualify as an exempt
recipient, that stockholder must generally submit a Form W-8, signed under
penalties of perjury, attesting to that individual's exempt status. A Form W-8
can be obtained from the Depositary. See the enclosed Guidelines for
Certification of Taxpayer Identification Number on Substitute Form W-9 for
additional instructions.
<PAGE>
If backup withholding applies, the Depositary is required to withhold 31% of
any payments made to the stockholder or payee. Backup withholding is not an
additional tax. Rather, the tax liability of persons subject to backup
withholding will be reduced by the amount of tax withheld. If with holding
results in an overpayment of taxes, a refund may be obtained from the Internal
Revenue Service.
The box in Part 3 of the Substitute Form W-9 may be checked if the tendering
stockholder has not been issued a TIN and has applied for a TIN or intends to
apply for a TIN in the near future. If the box in Part 3 is checked, the
stockholder or other payee must also complete the Certification of Awaiting
Taxpayer Identification Number below in order to avoid backup withholding. If a
stockholder's TIN is provided to the Depositary within 60 days of the date of
the Substitute Form W-9, payment will be made to such stockholder without the
imposition of backup withholding. If a stockholder's TIN is not provided to the
Depositary within such 60-day period, the Depositary will make such payment,
subject to backup withholding.
Purpose of Substitute Form W-9
To prevent backup withholding on payments made to a stockholder whose
tendered Shares are accepted for purchase, the stockholder is required to
notify the Depositary of its correct TIN by completing Substitute Form W-9
certifying that the TIN provided on such Form is correct (or that such
stockholder is awaiting a TIN, in which case the stockholder should check the
box in Part 3 of the Substitute Form W-9) and that (A) such stockholder is
exempt from backup withholding, (B) such stockholder has not been notified by
the Internal Revenue Service that such stockholder is subject to backup
withholding as a result of failure to report all interest or dividends or (C)
the Internal Revenue Service has notified the stockholder that the stockholder
is no longer subject to backup withholding. The stockholder must sign and date
the Substitute Form W-9 where indicated, certifying that the information on
such Form is correct.
Alternatively, a stockholder that qualifies as an exempt recipient (other
than a stockholder required to complete Form W-8 as described above) should
write "Exempt" in Part 1 of the Substitute Form W-9, enter its correct TIN and
sign and date such Form where indicated.
What Number to Give the Depositary
The stockholder is required to give the Depositary the social security
number or employer identification number of the record owner of the Shares or
of the last transferee appearing on the transfers attached to, or endorsed on,
the Shares. If the Shares are in more than one name or are not in the name of
the actual owner, consult the enclosed Guidelines for Certification of Taxpayer
Identification Number on Substitute Form W-9 for additional guidance on which
number to report.
<PAGE>
TO BE COMPLETED BY ALL TENDERING STOCKHOLDERS
(See Instruction 9)
PAYER: FIRST CHICAGO TRUST COMPANY OF NEW YORK
Part 1 -- PLEASE PROVIDE Social security number OR
YOUR TIN IN THE BOX AT Employer identification
SUBSTITUTE RIGHT AND CERTIFY BY number
SIGNING AND DATING BELOW.
Form W-9
Department of the ---------------------------
Treasury
Internal Revenue ------------------------------------------------------------
Service
Part 2 -- Certification -- Under penalties of perjury, I
certify that:
Payer's Request
for (1) The number shown on this form is my correct Taxpayer
Taxpayer Identification Number (or I am waiting for a number to
Identification be issued to me); and
Number (TIN) (2) I am not subject to backup withholding because (i) I
am exempt from backup withholding, (ii) I have not been
notified by the Internal Revenue Service (the "IRS")
that I am subject to backup withholding as a result of a
failure to report all interest or dividends, or (iii)
the IRS has notified me that I am no longer subject to
backup withholding.
------------------------------------------------------------
Certification Instructions -- You must
cross out item (2) in Part 2 above if
you have been notified by the IRS that
you are subject to backup withholding
because of under-reporting interest or
dividends on your tax return. However,
if after being notified by the IRS that
you were subject to backup withholding
you received another notification from
the IRS stating that you are no longer Part 3 --
subject to backup withholding, do not
cross out item (2).
Awaiting
TIN [_]
SIGNATURE _______________________________
DATE ____________________________________
NAME (Please Print) _____________________
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING
OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE OFFER. PLEASE REVIEW
THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL INFORMATION.
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU
CHECKED THE BOX IN PART 3 OF SUBSTITUTE FORM W-9.
CERTIFICATION OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer identification
number has not been issued to me, and either (i) I have mailed or delivered
an application to receive a taxpayer identification number to the
appropriate Internal Revenue Service Center or Social Security
Administration Office or (ii) I intend to mail or deliver an application in
the near future. I understand that if I do not provide a taxpayer
identification number within 60 days, 31% of all reportable payments made
to me thereafter will be withheld until I provide a taxpayer identification
number to the Depositary.
___________________________________ ___________________________________
Signature Date
___________________________________
Name (Please Print)
<PAGE>
Manually signed facsimile copies of this Letter of Transmittal will be
accepted. The Letter of Transmittal, certificates for Shares and any other
required documents should be sent or delivered by each stockholder of the
Company or such stockholder's broker, dealer, commercial bank, trust company or
other nominee to the Depositary at one of its addresses set forth below.
FIRST CHICAGO TRUST COMPANY OF NEW YORK
By Overnight Courier:
By Hand: By Mail:
First Chicago Trust
First Chicago Trust First Chicago Trust Company Company
Company of New York of New York
of New York Attention: Corporate Actions Attention: Corporate
Attention: Corporate Suite 4660 Actions
Actions P.O. Box 2565 Suite 4680
c/o Securities Transfer Jersey City, NJ 07303-2565 14 Wall Street, 8th
and Reporting Services Floor
Inc. New York, NY 10005
100 William Street--
Galleria
New York, NY 10038
By Facsimile Transmission
(For Eligible Institutions Only):
(201) 324-3402 or (201) 324-3403
Confirm Receipt of Facsimile
by Telephone Only:
(201) 222-4707
For Information Call:
(800) 251-4215
----------------
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS
SET FORTH ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA A FACSIMILE TO A
NUMBER OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID
DELIVERY TO THE DEPOSITARY.
Questions and requests for assistance or for additional copies of the Offer
to Purchase, this Letter of Transmittal and the Notice of Guaranteed Delivery
may be directed to the Information Agent at its telephone numbers and address
listed below. You may also contact your broker, dealer, commercial bank, trust
company or other nominee for assistance concerning the Offer.
The Information Agent for the Offer is:
MORROW & CO., INC.
445 Park Avenue, 5th Floor
New York, NY 10022
Call Collect (212) 754-8000
Banks and Brokerage Firms Please Call:
(800) 662-5200
Shareholders Please Call: (800) 566-9061
December 2, 1999
<PAGE>
EXHIBIT (a)(3)
Offer to Purchase for Cash
All of the Outstanding Shares of Common Stock
of
BOLLE INC.
at
$5.25 Net Per Share
by
SHADE ACQUISITION, INC.
a wholly owned subsidiary of
WORLDWIDE SPORTS AND RECREATION, INC.
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON JANUARY 4, 2000, UNLESS THE OFFER IS EXTENDED.
December 2, 1999
To Brokers, Dealers, Commercial Banks,
Trust Companies and Other Nominees:
We have been engaged by Shade Acquisition, Inc., a Delaware corporation
("Acquisition Sub") and a wholly owned subsidiary of Worldwide Sports and
Recreation, Inc., a Delaware corporation ("Purchaser"), to act as Information
Agent in connection with Purchaser's offer to purchase all outstanding shares
of common stock, par value $0.01 per share (the "Shares"), of Bolle Inc., a
Delaware corporation (the "Company"), at $5.25 per Share, net to the seller in
cash (the "Offer Price"), on the terms and subject to the conditions set forth
in the Offer to Purchase, dated December 2, 1999, and the related Letter of
Transmittal (which together with any amendments or supplements thereto
collectively constitute the "Offer"). Please furnish copies of the enclosed
materials to those of your clients for whom you hold Shares registered in your
name or in the name of your nominee.
Enclosed herewith are the following documents:
1. Offer to Purchase, dated December 2, 1999;
2. Letter of Transmittal to be used by stockholders of the Company in
accepting the Offer;
3. Letter to Stockholders of the Company from the Chairman of the Board
of the Company, accompanied by the Company's Solicitation/Recommendation
Statement on Schedule 14D-9;
4. A printed form of letter that may be sent to your clients for whose
account you hold Shares in your name or in the name of your nominee, with
space provided for obtaining such clients' instructions with regard to the
Offer;
5. Notice of Guaranteed Delivery;
6. Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9; and
7. Return envelope addressed to First Chicago Trust Company of New York,
the Depositary.
<PAGE>
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, (1) THERE BEING VALIDLY
TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER A NUMBER OF
SHARES WHICH, TOGETHER WITH ANY SHARES OWNED BY PURCHASER, ACQUISITION SUB OR
ANY OF THEIR AFFILIATES, CONSTITUTES MORE THAN 90% OF THE AGGREGATE OUTSTANDING
SHARES (INCLUDING ANY SHARES OUTSTANDING AS OF THE CONSUMMATION OF THE OFFER
THAT HAVE BEEN ISSUED UPON THE EXERCISE OF OPTIONS TO PURCHASE, AND THE
CONVERSION OR EXCHANGE OF ALL SECURITIES CONVERTIBLE OR EXCHANGEABLE INTO,
SHARES), (2) ANY WAITING PERIOD UNDER THE HART-SCOTT-RODINO ANTITRUST
IMPROVEMENTS ACT OF 1976, AS AMENDED, AND THE REGULATIONS THEREUNDER APPLICABLE
TO THE PURCHASE OF SHARES PURSUANT TO THE OFFER HAVING EXPIRED OR BEEN
TERMINATED, AND (3) PURCHASER HAVING OBTAINED SUFFICIENT FINANCING, ON TERMS
AND CONDITIONS SATISFACTORY TO PURCHASER, TO ENABLE CONSUMMATION OF THE OFFER
AND THE MERGER. THE OFFER IS ALSO SUBJECT TO CERTAIN OTHER CONDITIONS DESCRIBED
IN SECTION 14 OF THE OFFER TO PURCHASE.
We urge you to contact your clients promptly. Please note that the Offer and
withdrawal rights will expire at 12:00 Midnight, New York City time, on January
4, 2000 unless the Offer is extended.
The Board of Directors of the Company has determined that each of the Merger
Agreement (as defined below), the Offer and the Merger (as defined below) are
fair to and in the best interests of the Company's stockholders and has
approved the Merger Agreement and the transactions contemplated thereby
(including the Offer and the Merger) and recommends that the Company's
stockholders accept the Offer, tender their shares to Purchaser and approve and
adopt the Merger Agreement and the Merger.
The Offer is being made pursuant to the Agreement and Plan of Merger (the
"Merger Agreement"), dated as of November 24, 1999 by and among the Company,
Purchaser and Acquisition Sub, pursuant to which, after the completion of the
Offer, Acquisition Sub will be merged with and into the Company and each issued
and outstanding Share (other than Shares held in the Company's treasury or
beneficially owned by Purchaser or Acquisition Sub or Shares, if any, that are
held by stockholders who properly exercise and perfect appraisal rights
pursuant to Section 262 of the Delaware General Corporation Law) shall, by
virtue of the Merger and without any action on the part of the Company,
Purchaser or Acquisition Sub or the holder thereof, be converted into the right
to receive, without interest, the Offer Price (the "Merger"). As a result of
the Merger, the Company will become an indirect wholly owned subsidiary of
Parent. The Merger Agreement is more fully described in Section 12 of the Offer
to Purchase.
In all cases, payment for Shares accepted for payment pursuant to the Offer
will be made only after timely receipt by the Depositary of (i) certificates
for such Shares or timely confirmation of the book-entry transfer of such
Shares into the Depositary's account at the Book-Entry Transfer Facility (as
defined in the Offer to Purchase) pursuant to the procedures set forth in
Section 3 of the Offer to Purchase, (ii) the Letter of Transmittal (or a
facsimile thereof), properly completed and duly executed, with any required
signature guarantees (or, in the case of a book-entry transfer, an Agent's
Message (as defined in the Offer to Purchase)) and (iii) any other documents
required by such Letter of Transmittal. Under no circumstances will interest be
paid on the Offer Price, regardless of any extension of the Offer or any delay
in making such payment pursuant to the Offer.
2
<PAGE>
Neither Purchaser nor Acquisition Sub will pay any fees or commissions to
any broker or dealer or other person (other than the Depositary and the
Information Agent, as disclosed in the Offer to Purchase) in connection with
the solicitation of tenders of Shares pursuant to the Offer. You will be
reimbursed upon request for customary mailing and handling expenses incurred by
you in forwarding the enclosed offering materials to your clients.
Questions and requests for assistance may be directed to the Information
Agent at its addresses and telephone numbers set forth on the back cover of the
enclosed Offer to Purchase. Requests for additional copies of the enclosed
materials may be directed to the Information Agent or to brokers, dealers,
commercial banks or trust companies.
Very truly yours,
MORROW & CO., INC.
NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL RENDER YOU OR
ANY OTHER PERSON THE AGENT OF PURCHASER, ACQUISITION SUB, THE DEPOSITARY OR THE
INFORMATION AGENT, OR ANY AFFILIATE OF ANY OF THEM, OR AUTHORIZE YOU OR ANY
OTHER PERSON TO GIVE ANY INFORMATION OR USE ANY DOCUMENT OR MAKE ANY
REPRESENTATION ON BEHALF OF ANY OF THEM WITH RESPECT TO THE OFFER NOT CONTAINED
IN THE OFFER TO PURCHASE OR THE LETTER OF TRANSMITTAL.
3
<PAGE>
EXHIBIT (a)(4)
Offer to Purchase for Cash
All of the Outstanding Shares of Common Stock
of
BOLLE INC.
at
$5.25 Net Per Share
by
SHADE ACQUISITION, INC.
a wholly owned subsidiary of
WORLDWIDE SPORTS AND RECREATION, INC.
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON JANUARY 4, 2000, UNLESS THE OFFER IS EXTENDED.
To Our Clients:
Enclosed for your consideration is an Offer to Purchase, dated December 2,
1999 (the "Offer to Purchase"), and the related Letter of Transmittal (which,
together with any amendments or supplements thereto, collectively constitute
the "Offer") relating to the offer by Shade Acquisition, Inc., a Delaware
corporation ("Acquisition Sub") and a wholly owned subsidiary of Worldwide
Sports and Recreation, Inc., a Delaware corporation ("Purchaser"), to purchase
for cash all of the outstanding shares of common stock, par value $0.01 per
share (the "Shares"), of Bolle Inc., a Delaware corporation (the "Company"), on
the terms and subject to the conditions set forth in the Offer. Also enclosed
is the letter to stockholders of the Company from the Chairman of the Board of
the Company accompanied by the Company's Solicitation/Recommendation Statement
on Schedule 14D-9.
We are (or our nominee is) the holder of record of Shares held by us for
your account. A tender of such Shares can be made only by us as the holder of
record and pursuant to your instructions. The Letter of Transmittal is
furnished to you for your information only and cannot be used to tender Shares
held by us for your account.
We request instructions as to whether you wish to tender any or all of the
Shares held by us for your account, pursuant to the terms and subject to the
conditions set forth in the Offer.
Your attention is directed to the following:
1. The Offer price is $5.25 per Share, net to the seller in cash,
without interest thereon, upon the terms and subject to the conditions of
the Offer (the "Offer Price").
2. The Offer is being made for all of the outstanding Shares.
3. The Board of Directors of the Company has determined that each of the
Merger Agreement (as defined below), the Offer and the Merger (as defined
below) are fair to and in the best interests of the Company's stockholders
and has approved the Merger Agreement and the transactions contemplated
thereby (including the Offer and the Merger) and recommends that the
Company's stockholders accept the Offer, tender their shares to Purchaser
and approve and adopt the Merger Agreement and the Merger.
4. The offer is conditioned upon, among other things, (1) there being
validly tendered and not withdrawn prior to the expiration of the Offer a
number of Shares which, together with any Shares owned by Purchaser,
Acquisition Sub or any of their affiliates, constitutes more than 90% of
the aggregate outstanding Shares (including any Shares outstanding as of
the consummation of the Offer that have been
<PAGE>
issued upon the exercise of options to purchase, and the conversion or
exchange of all securities convertible or exchangeable into, Shares), (2)
any waiting period under the Hart-Scott-Rodino Antitrust Improvements Act
of 1976, as amended, and the regulations thereunder applicable to the
purchase of Shares pursuant to the Offer having expired or been terminated,
and (3) Purchaser having obtained sufficient financing, on terms and
conditions satisfactory to Purchaser, to enable consummation of the Offer
and the Merger. The Offer is also subject to certain other conditions
described in Section 14 of the Offer to Purchase.
5. The Offer and Withdrawal Rights Expire at 12:00 Midnight, New York
City Time, on January 4, 2000, Unless the Offer Is Extended by Purchaser
(The "Expiration Date").
6. The Offer is being made pursuant to the Agreement and Plan of Merger
(The "Merger Agreement"), dated as of November 24, 1999, by and among the
Company, Purchaser and Acquisition Sub, pursuant to which, after the
completion of the Offer, Acquisition Sub will be merged with and into the
Company and each issued and outstanding Share (other than Shares held in
the Company's treasury or beneficially owned by Purchaser or Acquisition
Sub or Shares, if any, that are held by stockholders who properly exercise
and perfect appraisal rights pursuant to Section 262 of the Delaware
General Corporation Law) shall, by virtue of the Merger and without any
action on the part of the Company, Purchaser, Acquisition Sub or the holder
thereof, be converted into the right to receive, without interest, the
Offer Price (the "Merger"). As a result of the Merger, the Company will
become a direct wholly owned subsidiary of Purchaser. The Merger Agreement
is more fully described in Section 12 of the Offer to Purchase.
7. Any stock transfer taxes applicable to a sale of Shares to
Acquisition Sub will be borne by Acquisition Sub, except as otherwise
provided in Instruction 6 of the Letter of Transmittal.
Your instructions to us should be forwarded promptly to permit us to submit
a tender on your behalf prior to the Expiration Date.
If you wish to have us tender any of or all of the Shares held by us for
your account, please so instruct us by completing, executing, detaching and
returning to us the instruction form on the detachable part hereof. Your
instructions should be forwarded to us in ample time to permit us to submit a
tender on your behalf prior to the Expiration Date.
Payment for Shares accepted for payment pursuant to the Offer will be in all
cases made only after timely receipt by First Chicago Trust Company of New York
(the "Depositary"), of (a) certificates for (or a timely Book-Entry
Confirmation (as defined in the Offer to Purchase) with respect to) such
Shares, (b) a Letter of Transmittal, properly completed and duly executed, with
any required signature guarantees, or, in the case of a book-entry transfer
effected pursuant to the procedure set forth in Section 3 of the Offer to
Purchase, an Agent's Message, and (c) any other documents required by the
Letter of Transmittal. Accordingly, tendering stockholders may be paid at
different times depending upon when certificates for Shares or Book-Entry
Confirmations with respect to Shares are actually received by the Depositary.
Under no circumstances will interest be paid on the Offer Price, regardless of
any extension of the Offer or any delay in making payment pursuant to the
Offer.
The Offer is not being made to, nor will tenders be accepted from, or on
behalf of, holders of Shares in any jurisdiction in which the making or
acceptance of the Offer would not be in compliance with the laws of such
jurisdiction. In any jurisdiction where the securities or blue sky laws require
the Offer to be made by a licensed broker or dealer, the Offer will be deemed
made on behalf of Acquisition Sub by Morrow & Co., Inc., the Information Agent
for the Offer, or one or more registered brokers or dealers that are licensed
under the laws of such jurisdiction. An envelope in which to return your
instructions to us is enclosed. If you authorize tender of your Shares, all
such Shares will be tendered unless otherwise indicated in such instruction
form. Please forward your instructions to us as soon as possible to allow us
ample time to tender Shares on your behalf prior to the Expiration Date.
2
<PAGE>
Instructions with Respect to the
Offer to Purchase for Cash
All of the Outstanding Shares of Common Stock
of
BOLLE INC.
The undersigned acknowledge(s) receipt of your letter, the Offer to
Purchase, dated December 2, 1999 (the "Offer to Purchase"), and the related
Letter of Transmittal relating to the Offer by Shade Acquisition, Inc., a
Delaware corporation and a wholly owned subsidiary of Worldwide Sports and
Recreation, Inc., a Delaware corporation, to purchase for $5.25 net to the
seller in cash all of the outstanding shares of common stock, par value $0.01
per share (the "Shares"), of Bolle Inc., a Delaware corporation.
This will instruct you to tender the number of Shares indicated below held
by you for the account of the undersigned, on the terms and subject to the
conditions set forth in the Offer to Purchase and the related Letter of
Transmittal.
SIGN HERE
NUMBER OF SHARES TO BE TENDERED:*
-------------------------------------
SHARES: _____________________________
-------------------------------------
Daytime Area Code and Telephone (Signature(s))
Number: _____________________________ -------------------------------------
-------------------------------------
Taxpayer Identification Number or (Please Print Name(s) and
Social Security Number: _____________ Address(es))
- --------
Date: _________________________,
*Unless otherwise indicated, it will be assumed that all your Shares are to be
tendered.
3
<PAGE>
Exhibit (a)(5)
FOR: Bolle Inc.
APPROVED BY: Martin E. Franklin
Chairman of the Board
Ian Ashken
Vice Chairman
914-967-9400
FOR IMMEDIATE RELEASE CONTACT: Investor Relations:
Shannon Moody/Natasha Boyden
Press: David Nugent
Morgen-Walke Associates
212-850-5600
BOLLE INC. RETAINS FINANCIAL ADVISOR
TO REVIEW STRATEGIC ALTERNATIVES AND ANNOUNCES MANAGEMENT CHANGES
DENVER, Colorado - November 15, 1999 - Bolle Inc. (Amex: BLE), one of
the world's leading eyewear brands, today announced that is has engaged Banc of
America Securities to advise its Board of Directors on strategic alternatives.
Martin E. Franklin, Chairman of Bolle Inc. commented, "While Bolle's
operating performance has improved significantly over the last several quarters,
our stock price has not reflected these accomplishments. Therefore, we felt it
necessary to retain Banc of America Securities to advise the Board on a number
of strategic alternatives. We have signed a non-binding letter of intent with a
private company who has offered $5.25 per share in cash to acquire Bolle Inc. We
anticipate that by the end of the month this will become a definitive agreement,
which would be subject to various conditions including financing, or that we
will be free to pursue other strategic alternatives at the time. Importantly,
management will continue to focus on operating the business and building the
Bolle brand worldwide, as we conclude our review of the various options."
Additionally, the Company announced that Gary Kiedaisch has tendered his
resignation as President and Chief Executive Officer of the Bolle Inc.,
effective November 30th, 1999, to become President and Chief Executive Officer
of Bauer Nike Hockey, Inc. Upon Mr. Kiedaisch's departure, the Office of the
Chairman will assume all CEO responsibilities on an interim basis, while current
senior management will continue to operate the business on a day-to-day basis.
Mr. Kiedaisch will continue to serve on Bolle Inc.'s Board of Directors.
Mr. Franklin concluded, "During his tenure as Chief Executive Officer
and President, Gary has been instrumental in implementing a strategic growth
plan that has positioned the Bolle brand at the forefront of active lifestyle
eyewear. Equally important has been Gary's ability to select, develop and lead
an outstanding team of senior management. He leaves the Company in a very solid
position, both financially and managerially. We thank him for his dedication
over the years and wish him well in his new position."
Bolle Inc. (Amex: BLE), is a vertically integrated designer,
manufacturer and marketer of Bolle/TM/ branded eyewear, including Bolle/TM/
premium sunglasses, goggles, and tactical and safety eyewear. Bolle is also the
exclusive North American distributor of the Reusch line of winter gloves for
sports.
Forward-looking statements (statements which are not historical facts) in this
release are made pursuant to the safe harbor provisions of the Private
Securities Litigation Reform Act of 1995. Bolle Inc.'s actual results could
differ materially from those expressed or indicated by forward-looking
statements. Factors that could cause or contribute to such differences include,
but are not limited to, changes in fashion trends, risks relating to the retail
industry, use of contract manufacturing and foreign sourcing, import
restrictions, competition, seasonality and other factors. Investors are
cautioned that all forward-looking statements involve risks and uncertainties,
including those risks and uncertainties detailed in the Company's filings with
the Securities and Exchange Commission.
<PAGE>
Exhibit (a)(6)
FOR: Bolle Inc.
APPROVED BY: Martin E. Franklin
Chairman of the Board
Ian Ashken
Vice Chairman
914-967-9400
CONTACT: Investor Relations:
Shannon Moody/Natasha Boyden
Press: David Nugent/Ellen Paz
Morgen-Walke Associates
212-850-5600
BOLLE INC. SIGNS DEFINITIVE AGREEMENT WITH
WORLDWIDE SPORTS & RECREATION, INC. TO BE ACQUIRED
FOR $5.25 PER SHARE
DENVER, Colorado - November 26, 1999 - Bolle Inc. (Amex: BLE), one of
the world's leading eyewear brands, today announced the signing of a definitive
agreement with Worldwide Sports & Recreation, Inc., a privately-held company
funded primarily by Wind Point Partners, a private equity investment firm, under
which Worldwide Sports & Recreation, Inc. will acquire Bolle Inc. for $5.25 per
share in cash, via a tender offer and merger. The completion of the transaction
is subject to various conditions, including Hart-Scott-Rodino clearance and the
purchaser obtaining financing no later than January 15, 2000. The total value of
the transaction, including assumed indebtedness, is approximately $85 million.
The tender offer is expected to close during January, 2000.
Martin E. Franklin, Chairman of Bolle Inc. commented, "Through this
agreement, we believe that we will not only be delivering significant value to
our shareholders, but also that the Company will be able to continue to
implement its current growth strategies. Worldwide Sports & Recreation Inc.
manages a strong portfolio of brand names, including Bushnell and Voit, and
enjoys an outstanding reputation for high quality products. We are confident
that they will continue to develop Bolle into a globally recognized active
lifestyle brand."
Mr. Franklin concluded, "Worldwide Sports & Recreation's proposal
represented a 62% premium over the Company's share price on the day prior to the
initial announcement of the transaction. In the board's opinion, and that of its
financial advisor, Banc of America Securities, who rendered a fairness opinion
on the transaction, this represents a fair valuation for the business today."
Joe Messner, Chief Executive Officer of Worldwide Sports & Recreation
added, "This is a significant first step towards building a portfolio of highly
recognized worldwide sports brands. Bolle, founded over 100 years ago, has a
heritage throughout the world for innovative high-quality optical products
favored by active sports enthusiasts. Both Bushnell and Bolle target the same
active lifestyle consumer, and together, we will be able to leverage our
distribution strengths around the world. We welcome the management and employees
of Bolle and value their participation in this exciting opportunity."
Bolle Inc. (Amex: BLE), is a vertically integrated designer,
manufacturer and marketer of Bolle/TM/ branded eyewear, including Bolle/TM/
premium sunglasses, goggles, and tactical and safety eyewear. Bolle is also the
exclusive North American distributor of the Reusch line of winter gloves for
sports.
Worldwide Sports & Recreation Inc. ("WSR") is a branded durable consumer
products company based in Kansas City, Kansas. WSR is a leading supplier of high
quality sports optics including binoculars, telescopes, riflescopes and laser
range finders marketed under the Bushnell, Voit and Bausch & Lomb brand names.
Wind Point Partners is a private equity investment firm with offices in
Chicago and Southfield, Michigan, that has successfully invested growth capital
in more than 70 privately-held companies. Wind Point Partners focuses on
partnering with experienced executives to buy private companies with significant
growth opportunities across a variety of industries.
Forward-looking statements (statements which are not historical facts) in this
release are made pursuant to the safe harbor provisions of the Private
Securities Litigation Reform Act of 1995. Bolle Inc.'s actual results could
differ materially from those expressed or indicated by forward-looking
statements. Factors that could cause or contribute to such differences include,
but are not limited to, changes in fashion trends, risks relating to the retail
industry, use of contract manufacturing and foreign sourcing, import
restrictions, competition, seasonality and other factors. Investors are
cautioned that all forward-looking statements involve risks and uncertainties,
including those risks and uncertainties detailed in the Company's filings with
the Securities and Exchange Commission.
<PAGE>
Tkis announcement is neither an Offer to purchase nor a solicitation of an Offer
to sell Shares (as defined below). The C (as defined below) is made solely by
the Offer to Purchase, dated December 2, 1999, and the related Lettei
Transmittal and any amendments or supplements thereto, and is being made to all
holders of Shares. The Offer is not bei made to (nor will tenders be accepted
from or on' behalf oJ9 holders of Shares in any jurisdiction in which t making
of the Offer or the acceptance thereof would not be in compliance with the laws
of such jurisdiction. In a) jurisdiction where the securities, blue sky or other
laws require the Offer to be made by a licensed broke or dealer, the Offer will
be deemed to be made on behalf of Purchaser (as defined below) by one or mon
registered brokers or dealers that are licensed under the laws of such
jurisdiction.
Notice of Offer to Purchase for Cash
All of the? Outstanding, Shares of Common Stock
of
BoIM C.
at
$5.25 Net Per Share
by
Shade Acqwsition, Inc.
a whofly owned subsidiary oi
Worldwide Sports and Recreafion, Inc.
I
a company controffed by
Wind. Point Partners
Shade Acquisition, Inc., a Delaware corporation ("Acquisition Sub") which is a
wholly owned subsidiary Worldwide Sports and Recreation, Inc., a Delaware
corporation C'Purchaser"), is offering to purchase all of the outsta~ ing shares
of Common Stock, par value $0.01 per share (the "Common Stock"), of BoI16 Inc.,
a Delaware corporation ( "Company") (the "Shares"), at $5.25 per Share, net to
the seller in cash (such price, or any such higher price per Sh, as may be paid
in the Offer (as defined below), being referred to herein as the "Offer Price"),
on the terms and subjec the conditions set forth in the Offer to Purchase, dated
December 2, 1999 (together with, any amendments or supl ments thereto, the
"Offer to Purchase"), and in the related Letter of Transmittal (which
collectively, together with " amendments or supplements thereto, constitute the
"Offer"). Tendering stockholders will not be obligated to pay brol age fees or
commissions or, subject to instruction 6 of the Letter of Transmittal, transfer
taxes on the purchase of Slia by Acquisition Sub pursuant to the Offer. The
purpose of the Offer is to acquire for cash as many outstanding Share, possible
as a first step in acquiring the entire equity interest in the Company.
Following the consummation of the Of Purchaser intends to effect the Merger
described below.
THE OFFER AND WY11IDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW
YORK Cr1Y TIME, ON TUESDAY, JANUARY 4, 2000, UNIESS THE OFIFER IS MVNDE.
The Offer is conditioned upon, among other things, (i) there being validly
tendered and not withdrawn prio the expiration of the Offer a number of Shares
which, together with any Shares owned by Purchaser, Acquisition Sul any of their
affiliates, constitutes more than 90% of the aggregate outstanding Shares
(including any Shares outstak as of the consummation of the Offer that have been
issued upon the exercise of options to purchase, and the conver, or exchange of
all securities convertible or exchangeable into, Shares) of all the securities
of the Company and Purchaser having obtained sufficient financing, on terms and
conditions satisfactory to Purchaser to enable consuin tion of the Offer and the
Merger. The Offer is also subject to certain other conditions described in
Section 14 of the 0 to Purchase.
The Offer is being made pursuant to an Agreement and Plan of Merger, dated as of
November 24, 1999
"Merger Agreement"), among Purchaser, Acquisition Sub and the Company, pursuant
to which, after the col-ripletio the Offer, Acquisition Sub will be merged with
and into the Company (the "Merger") and each Share issued and standing
immediately prior to the Effective Time (as defined in the Merger Agreement)
(other than Shares owned by Company or any of its subsidiaries, Purchaser,
Acquisition Sub or any of their affiliates or Shares that are field by st
holders exercising appraisal rights pursuant to Section 262'of the Delaware
General Corporation Law) shall, by virtt, the Merger and without -any.action on
the part of the holder thereof, be converted into the right to receive, witl
interest the Offer Price. As a result of the Merger, the Company will become a
wholly owned subsidiary of Purch~ The Merger Agreement is more fully described
in Section 12 of the Offer to Purchase.
The Board of Directors of the Company has determined that the Offer and the
Merger are fair to and in best interests of the Company and its stockholders and
has approved the -Offer and the Merger Agreement and reci mends that the
Company's stockholders accept the Offer and tender their shares pursuant to the
Offer.
For purposes of the Offer, Acquisition Sub will be deemed to have accepted for
payment Shares vali tendered and not withdrawn as, if and when Acquisition Sub
gives oral or written notice to First Chicago Trust Comp of New York (the
"Depositary") of its acceptance for payment of such Shares pursuant to the
Offer. Payment for Sh, accepted for payment pursuant to the Offer will be made
by deposit of the purchase price therefor with the Deposit which will act as
agent for the tendering stockholders for the purpose of receiving payments from
Acquisition Sub transmitting such payments to the tendering stockholders. Under
no circumstances will interest on the Offer Pric( paid, regardless of any delay
in making such payment.
In'all cases, payment for Shares accepted for payment pursuant to the Offer will
be made only after tir receipt by the Depositary of (i) certificates for such
Shares or a confirmation of the book-entry transfer of such Sh into the
Depositary's account at The Depository Trust Company pursuant to the procedures
set forth in Section 3 ol Offer to Purchase, Q the Letter of Transmittal (or a
facsimile thereof), properly completed and duly executed, with required
signature guarantees (or, in the case of a book-entry transfer, an Agent's
Message (as defined in Section 3 ol Offer to Purchase) in lieu of the Letter of
Transmittal) and (iii) any other documents required by the Lette-Transmittal.
Subject to the terms of the Merger Agreement and the applicable rules and
regulations of the Securities Exchange Commission, Acquisition Sub expressly
reserves the right, in its sole discretion, at any time or from tilil time, to
extend the period of time during which the Offer is open by giving oral or
written notice of such extension tc Depositary. Any such extension will be
followed as promptly as practicable by public announcement thereof, E
announcement to be issued no later than 9:00 a.m., New York City time, on the
next business day after the previo scheduled expiration date of the Offer.
During any such extension, all Shares previously tendered and not withdrawn
remain subject to the Offer, subject to the right of a tendering stockholder to
withdraw such stoclkholder's Shares.
Tenders of Shares made pursuant to the Offer are irrevocable except that Shares
tendered pursuant to Offer may be withdrawn at any time prior to the Expiration
Date (as defined in Section I of the Offer to Purcliase) unless theretofore
accepted for payment by Acquisition Sub pursuant to the Offer, may also be
withdrawn at atiy after January 31, 2000.
For a withdrawal to,be effective, a written, telegraphic, telex or facsimile
transmission notice of withdrawal ty be timely received by the Depositary at one
of its addresses set forth on the back cover of the Offer to Purchase. , such
notice of withdrawal must specify the name of the person having tendered the
Shares to be withdrawn, the nuni of Shares to be withdrawn and the names in
which the certificate(s) evidencing the Shares to be withdrawn registered, if
different from that of the person who tendered such Shares. The signature(s) on
the notice of withdr~ must be guaranteed by an Eligible Institution (as defined
in Section 3 of the Offer to Purchase), unless such Shares li been tendered for
the account of any Eligible Institution. If Shares have been tendered pursuant
to the procedures book-entry tender as set forth in Section 3 of the Offer to
Purchase, any notice of withdrawal must specify the name number of the account
at the Depository Institution (as defined in Section 2 of the - Offer to
Purchase) to be credited N the withdrawn Shares.'If certificates for Shares to
be withdrawn have been delivered or otherwise identified to Depositary, then
prior to the physical release of such certificates, the name of the registered
holder and the sc numbers shown on such certificates must also be furnished to
the Depositary as aforesaid prior to the physical releas such certificates. All
questions as to the form and validity (including time of receipt) of any notice
of withdrawal wit determined by Acquisition Sub, in its sole discretion, which
determination shall be final and binding. None of Purcha Acquisition Sub, the
Depositary, the Information Agent, or any other person will be under any duty to
give notificatio any defects or irregularities in any notice of withdrawal or
incur any liability for failure to give such notificat Withdrawals of tenders of
Shares may not be rescinded, and any Shares properly withdrawn will be deemed
not to ~. been validly tendered for purposes of the Offer. However, withdrawn
Shares may be retendered by following one of procedures described in Section 3
of the Offer to Purchase at any time prior to the Expiration Date.
'Me information required to be disclosed by paragraph (e) (1) (vii) of Rule
14d-6 of the General Rules Regulations under the Securities Exchange Act of
1934,- as amended, is contained in the Offer to Purchase an incorporated herein
by reference.
The Company has provided Acquisition Sub with the Company's stockholder list and
security position listi for the purpose of disseminating the Offer to holders of
Shares. The Offer to Purchase and the Letter of Transmittal , if required, other
relevant materials, will be mailed by Acquisition Sub to record holders of
Shares and will be furnis to brokers, dealers, commercial banks, trust companies
and similar persons whose names, or the names of wh nominees, appear on the
Company's stockholder list or, if applicable, who are fisted as participants in
a clearing agen security position fisting for subsequent transmittal to
beneficial owners of shares.
'Me Offer to Purchase and the Letter of Transmittal contain important
information which should be r carefully before any decision is made with respect
to the Offer.
j-XUULX-j UA,
For a withdrawal to,be effective, a written, telegraphic, telex or facsimile
transmission notice of withdrawal mu! be timely received by the Depositary at
one of its addresses set forth on the back cover of the Offer to Purchase. An
such notice of withdrawal must specify the name of the person having tendered
the Shares, to be withdrawn, the numb( of Shares to be withdrawn and the names
in which the certificate(s) evidencing the Shares to be withdrawn at registered,
if different from that of the person who tendered such Shares. 'Me signature(s)
on the notice of withdraw must be guaranteed by an Eligible Institution (as
defined in Section 3 of the Offer to Purchase), unless such Shares ha% been
tendered for the account of any Eligible Institution. If Shares have been
tendered pursuant to the procedures ft book-entry tender as set forth in Section
3 of the Offer to Purchase, any notice of withdrawal must specify the naine all
number of the account at the Depository Institution (as defined in Section 2 of
the Offer to Purchase) to be credited wit the withdrawn Shares.'If certificates
for Shares to be withdrawn have been delivered or otherwise identified to ff
Depositary, then prior to the physical release of such certificates, the name of
the registered holder and the seri numbers shown on such certificates must also
be furnished to the Depositary as aforesaid prior to the physical release such
certificates. All questions as to the form and validity (including time of
receipt) of any notice of withdrawal will l: determined by Acquisition Sub, in
its sole discretion, which determination shall be final and binding. None of
Purchas( Acquisition Sub, the Depositary, the Information Agent or any other
person will be under any duty to give notification .any defects or
irregularities in any notice of withdrawal or incur any liability for failure to
give such notificatio. Withdrawals of tenders of Shares may not be rescinded,
and any Shares properly withdrawn will be deemed not to hal been validly
tendered for purposes of the Offer. However, withdrawn Shares may be retendered
by following one of tf procedures described in Section 3 of the Offer to
Purchase at any time prior to the Expiration Date.
The information required to be disclosed by paragraph (e) (1) (vii) , of Rule
14d-6 of the General Rules ar Regulations under the Securities Exchange Act of
1934,- as amended, is contained in the Offer to Purchase and
incorporated herein by reference.
The Company has provided Acquisition Sub with the Company's stockholder list and
security position listinj for the purpose of disseminating the Offer to holders
of Shares. The Offer to Purchase and the Letter of Transmittal an if required,
other relevant materials, will be mailed by Acquisition Sub to record holders of
Shares and will be furnish( to brokers, dealers, commercial banks, trust
companies and similar persons whose names, or the names of who, nominees, appear
on the Company's stockholder Est or, if applicable, who are fisted as
participants in a clearing agency security position listing for subsequent
transmittal to beneficial owners of shares.
Ile Offer to Purchase and the Letter of Transmittal contain important
information which should be re, carefully before any decision is made with
respect to the Offer.
. Questions and requests for assistance may be directed to the Information Agent
at its address and telephot number set forth below. Requests for additional
copies of the Offer to Purchase, the related Letter of Trahsmitial at other
tender offer materials may be directed to the Information Agent or to brokers,
dealers, commercial banks or tru companies. Such additional copies will be
furnished at Acquisition Sub's expense. Acquisition Sub will not pay any fees i
commissions to any broker or dealer or any other person for soliciting tenders
of Shares pursuant to the Offer.
ne Information Agentfor the Offer is:
MORROW& CO., INC.
445 Park Avenue, 5th Floor
New York, NY 10022
Banks and Brokerage Firms Call: (800) 662-5200
Shareholders Please Call: (800) 566-9061
December 2, 1999
<PAGE>
Notice of Guaranteed Delivery
for
Tender of Shares of Common Stock
of
BOLLE INC.
Pursuant to the Offer to Purchase Dated December 2, 1999
by
SHADE ACQUISITION, INC.
a wholly owned subsidiary of
WORLDWIDE SPORTS AND RECREATION, INC.
As set forth in Section 3 of the Offer to Purchase (as defined below), this
form or one substantially equivalent may be used to accept the Offer (as
defined below) if certificates for shares of common stock, par value $0.01 per
share (the "Shares"), of Bolle Inc., a Delaware corporation (the "Company"),
are not immediately available, or if the procedure for book-entry transfer
cannot be complied with on a timely basis, or all required documents cannot be
delivered to the Depositary prior to the Expiration Date (as defined in Section
1 of the Offer to Purchase). This form may be delivered by hand to the
Depositary or transmitted by telegram, facsimile transmission or mail to the
Depositary and must include a guarantee by an Eligible Institution (as defined
in Section 3 of the Offer to Purchase). See Section 3 of the Offer to Purchase.
The Depositary:
FIRST CHICAGO TRUST COMPANY OF NEW YORK
By Mail: By Overnight Courier:
By Hand:
First Chicago Trust Company First Chicago Trust
First Chicago Trust of New York Company
Company Attention: Corporate Actions of New York
of New York Suite 4660 Attention: Corporate
Attention: Corporate P.O. Box 2565 Actions
Actions Jersey City, NJ 07303-2565 Suite 4660
c/o Securities Transfer 525 Washington Boulevard
and Reporting Services Jersey City, NJ 07310
Inc.
100 William Street--
Galleria
New York, NY 10038
By Facsimile Transmission
(For Eligible Institutions Only):
(201) 324-3402
or
(201) 324-3403
Confirm Receipt of Facsimile by
Telephone Only:
(201) 222-4707
For Information Call:
(800) 251-4215
----------------
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS, OR TRANSMISSION OF INSTRUCTIONS
VIA A FACSIMILE NUMBER, OTHER THAN AS SET FORTH ABOVE, DOES NOT CONSTITUTE A
VALID DELIVERY.
This Notice of Guaranteed Delivery is not to be used to guarantee
signatures. If a signature on a Letter of Transmittal is required to be
guaranteed by an Eligible Institution under the instructions thereto, such
signature guarantee must appear in the applicable space provided in the
signature box on the Letter of Transmittal.
<PAGE>
Ladies and Gentlemen:
The undersigned hereby tenders to Shade Acquisition, Inc., a Delaware
corporation ("Acquisition Sub") and a wholly owned subsidiary of Worldwide
Sports and Recreation, Inc. a Delaware corporation, on the terms and
subject to the conditions set forth in the Offer to Purchase, dated
December 2, 1999 (the "Offer to Purchase"), and the related Letter of
Transmittal (which, together with any amendments on supplements thereto
collectively constitute the "Offer"), receipt of which is hereby
acknowledged, the number of Shares set forth below, all pursuant to the
guaranteed delivery procedures set forth in Section 3 of the Offer to
Purchase.
Number of Shares: _________________
Name(s) of Record Holder(s): ______
Share Certificate Nos. (if -----------------------------------
available): -----------------------------------
----------------------------------- (Please Type or Print)
-----------------------------------
(Check box if Shares will be Address(es): ______________________
tendered by book-entry transfer) -----------------------------------
Zip Code
[_] The Depository Trust Company Daytime Telephone Number:
Account -----------------------------------
Number: ___________________________ (Area Code)
Dated:, ___________________________
Signature(s): _____________________
-------------------------
2
<PAGE>
GUARANTEE
(Not to be used for signature guarantee)
The undersigned, a participant in the Security Transfer Agents
Medallion Program, the New York Stock Exchange Medallion Signature
Guarantee Program or the Stock Exchange Medallion Program (each, an
"Eligible Institution"), hereby guarantees that either the certificates
representing the Shares tendered hereby in proper form for transfer, or
timely confirmation of a book-entry transfer of such Shares into the
Depositary's account at The Depository Trust Company (pursuant to
procedures set forth in Section 3 of the Offer to Purchase), together with
a properly completed and duly executed Letter of Transmittal (or facsimile
thereof) with any required signature guarantees (or, in the case of a
book-entry transfer, an Agent's Message (as defined in the Offer to
Purchase)) and any other documents required by the Letter of Transmittal,
will be received by the Depositary at one of its addresses set forth above
within three (3) New York Stock Exchange trading days after the date of
execution hereof.
The Eligible Institution that completes this form must communicate this
guarantee to the Depositary and must deliver the Letter of Transmittal,
certificates for Shares and any other required documents to the Depositary
within the time period shown herein. Failure to do so could result in a
financial loss to such Eligible Institution.
Name of Firm: _____________________________________________________________
Address: __________________________________________________________________
___________________________________________________________________________
Zip Code
Area Code and Telephone Number: ___________________________________________
Authorized Signature
Name: _____________________________________________________________________
(Please Type or Print)
Title: ____________________________________________________________________
Dated: , _______________________
NOTE: DO NOT SEND CERTIFICATES FOR SHARES WITH THIS NOTICE OF GUARANTEED
DELIVERY. CERTIFICATES FOR SHARES SHOULD BE SENT WITH YOUR LETTER OF
TRANSMITTAL.
3
<PAGE>
EXHIBIT (a)(9)
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
WHAT NAME AND NUMBER TO GIVE THE REQUESTER
- --------------------------------------- ---------------------------------------
<TABLE>
<CAPTION>
For this type of account: Give the NAME and
SOCIAL SECURITY
number of--
- -----------------------------------------------
<S> <C>
1. Individual The individual
2. Two or more individuals The actual owner
(joint account) of the account
or, if combined
funds, the first
individual on the
account(1)
3. Custodian account of a The minor(2)
minor (Uniform Gift to
Minors Act)
4. a. The usual revocable The grantor-
savings trust (grantor trustee(1)
is also trustee)
b. So-called trust account The actual
that is not a legal or owner(1)
valid trust under state
law
5. Sole proprietorship
6. Sole proprietorship The owner(3)
</TABLE>
<TABLE>
<CAPTION>
Give the NAME and
For this type of account: EMPLOYER
IDENTIFICATION
number of --
--------
<S> <C>
7. A valid trust, estate, or Legal entity(4)
pension trust
8. Corporate The corporation
9. Association, club, The organization
religious,
charitable,educational,
other tax-exempt
organization
10. Partnership The partnership
11. A broker or registered The broker or
nominee nominee
12. Account with the The public entity
Department of Agriculture
in the name of a public
entity (such as a state or
local government, school
district, or prison) that
received agricultural
program payments
</TABLE>
- ---------------------------------------
---------------------------------------
(1) List first and circle the name of the person whose number you furnish.
(2) Circle the minor's name and furnish the minor's social security number.
(3) Show the individual's name. See Item 5 or 6. You may also enter your
business name.
(4) List first and circle the name of the legal trust, estate, or pension
trust. (Do not furnish the identification number of the personal
representative or trustee unless the legal entity itself is not designated
in the account title.)
Note: If no name is circled when there is more than one name listed, the
number will be considered to be that of the first name listed.
---------------
Instructions
(Section references are to the Internal Revenue Code)
Purpose of Form.--A person who is required to file an information return with
the Internal Revenue Service (the IRS) must obtain your correct taxpayer
identification number (TIN) to report income paid to you, real estate
transactions, mortgage interest you paid, the acquisition or abandonment of
secured property, or contributions you made to an individual retirement
arrangement (IRA). Use Form W-9 to furnish your correct TIN to the requester
(the person asking you to furnish your TIN), and, when applicable, (1) to
certify that the TIN you are furnishing is correct (or that you are waiting
for a number to be issued), (2) to certify that you are not subject to backup
withholding, and (3) to claim exemption from backup withholding if you are an
exempt payee. Furnishing your correct TIN and making the appropriate
certifications will prevent certain payments from being subject to backup
withholding.
Note: If a requester gives you a form other than a W-9 to request your TIN,
you must use the requester's form.
How to Obtain a TIN.--If you do not have a TIN, apply for one immediately. To
apply, get Form SS-5, Application for a Social Security Card (SSN) (for
individuals), from your local office of the Social Security Administration, or
Form SS-4, Application for Employer Identification Number (EIN) (for
businesses and all other entities) from your local IRS office.
Generally, you will then have 60 days to obtain a TIN and furnish it to the
requester. If the requester does not receive your TIN within 60 days, backup
withholding, if applicable, will begin and continue until you furnish your TIN
to the requester. For reportable interest or dividend payments, the payer must
exercise one of the following options concerning backup withholding during
this 60-day period. Under option (1), a payer must backup withhold on any
withdrawals you make from your account after 7 business days after the
requester receives this form back from you. Under option (2), the payer must
backup withhold on any reportable interest or dividend payments made to your
account, regardless of whether YOU make any withdrawals. The backup
withholding under option (2) must begin no later than 7 business days after
the requester receives this form back. Under option (2), the payer is required
to refund the amounts withheld if your certified TIN is received within the
60-day period and you were not subject to backup withholding during the
period.
Note: Checking the box in Part II on the Substitute Form W-9 means that you
have already applied for a TIN or that you intend to apply for one in the near
future.
As soon as you receive your TIN, complete another Form W-9, include your TIN,
sign and date this form, and give it to the requester.
What is Backup Withholding?--Persons making certain payments to you are
required to withhold and pay to IRS 31% of such payments under certain
conditions. This is called "backup withholding." Payments that could be
subject to backup withholding include interest, dividends, broker and barter
exchange transactions, rents, royalties, nonemployee compensation, and certain
payments from fishing boat operators, but do not include real estate
transactions.
If you give the requester your correct TIN, make the appropriate
certifications, and report all your taxable interest and dividends on your tax
return, your payments will not be subject to backup withholding. Payments you
receive will be subject to backup withholding if:
(1) You do not furnish your TIN to the requester, or
(2) The IRS notifies the requester that you furnished an incorrect TIN, or
(3) You are notified by the IRS that you are subject to backup withholding
because you failed to report all your interest and dividends on your tax
return (for reportable interest and dividends only), or
(4) You fail to certify to the requester that you are not subject to backup
withholding under (3) above (for reportable interest and dividend accounts
opened after 1983 only), or
(5) You fail to certify your TIN. This applies only to reportable interest,
dividend, broker, or barter exchange accounts opened after 1983, or broker
accounts considered inactive in 1983.
Except as explained in (5) above, other reportable payments are subject to
backup withholding only if (1) or (2) above applies. Certain payees and
payments are exempt from backup withholding and information reporting. See
Payees and Payments Exempt From Backup Withholding, below, and Exempt Payees
and Payments under Specific Instructions, below, if you are an exempt payee.
<PAGE>
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER OF SUBSTITUTE FORM W-9
Page 2
Payees and Payments Exempt from Backup Withholding.--The following is a list
of payees exempt from backup withholding and for which no information
reporting is required. For interest and dividends, all listed payees are
exempt except Item (9). For broker transactions, payees listed in (1) through
(13) and a person registered under the Investment Advisers Act of 1940 who
regularly acts as a broker are exempt. Payments subject to reporting under
sections 6041 and 6041A are generally exempt from backup withholding only if
made to payees described in Items (1) through (7), except that a corporation
that provides medical and health care services or bills and collects payments
for such services is not exempt from backup withholding or information
reporting. Only payees described in Items (2) through (6) are exempt from
backup withholding for barter exchange transactions, patronage dividends, and
payment by certain fishing boat operators.
(1) A corporation.
(2) An organization exempt from tax under section 501(a), or an Individual
Retirement Plan (IRA), or a custodial account under section 403(b)(7).
(3) The United States or any of its agencies or instrumentalities.
(4) A state, the District of Columbia, a possession of the United States, or
any of their political subdivisions or instrumentalities.
(5) A foreign government or any of its political subdivisions, agencies, or
instrumentalities.
(6) An international organization or any of its agencies or instrumentalities.
(7) A foreign central bank of issue.
(8) A dealer in securities or commodities required to register in the U.S. or
a possession of the U.S.
(9) A futures commission merchant registered with the Commodity Futures
Trading Commission.
(10) A real estate investment trust.
(11) An entity registered at all times during the tax year under the
Investment Company Act of 1940.
(12) A common trust fund operated by a bank under section 584(a).
(13) A financial institution.
(14) A middleman known in the investment community as a nominee or listed in
the most recent publication of the American Society of Corporation
Secretaries, Inc., Nominee List.
(15) A trust exempt from tax under section 664 or described in section 4947.
Payments of dividends and patronage dividends generally not subject to backup
withholding include the following:
. Payments to nonresident aliens subject to withholding under section 1441.
. Payments to partnerships not engaged in trade or business in the U.S. and
that have at least one nonresident partner.
. Payments of patronage dividends not paid in money.
. Payments made by certain foreign organizations.
Payments of interest generally not subject to backup withholding include the
following:
. Payments of interest on obligations issued by individuals.
Note: You may be subject to backup withholding if this interest is $600 or
more and is paid in the course of the payer's trade or business and you have
not provided your correct TIN to the payer.
. Payments of tax exempt interest (including exempt interest dividends under
section 852).
. Payments described in section 6049(b)(5) to nonresident aliens.
. Payments on tax-free covenant bonds under section 1451.
. Payments made by certain foreign organizations.
. Mortgage interest paid by you.
Payments that are not subject to information reporting are also not subject
to backup withholding. For details, see sections 6041, 6041(A), 6942, 6044,
6045, 6049, 6050A, and 6050N, and their regulations.
Penalties
Failure to Furnish TIN.--If you fail to furnish your correct TIN to a
requester, you are subject to a penalty of $50 for each such failure unless
your failure is due to reasonable cause and not to willful neglect.
Civil Penalty for False Information with Respect to Withholding.--If you make
a false statement with no reasonable basis that results in no backup
withholding, you are subject to a $500 penalty.
Criminal Penalty for Falsifying Information.--Willfully falsifying
certifications or affirmations may subject you to criminal penalties including
fines and/or imprisonment.
Specific Instructions Name.--If you are an individual, you must generally
provide the name shown on your social security card. However, if you have
changed your last name, for instance, due to marriage, without informing the
Social Security Administration of the name change please enter your first
name, the last name shown on your social security card and your new last name.
If you are a sole proprietor, you must furnish your individual name and
either your SSN or TIN. You may also enter your business name on the business
name line. Enter your name(s) as shown on your social security card and/or as
it was used to apply for your TIN on Form SS4.
Signing the Certification
(1) Interest, Dividend, and Barter Exchange Accounts Opened Before 1984 and
Broker Accounts Considered Active During 1983.--You are required to furnish
your correct TIN, but you are not required to sign the certification.
(2) Interest, Dividend, Broker and Barter Exchange Accounts Opened After 1983
and Broker Accounts Considered Inactive During 1983.--You must sign the
certification or backup withholding will apply. If you are subject to backup
withholding and you are merely providing your correct TIN to the requester,
you must cross out part (2) in the certification before signing the form.
(3) Real Estate Transactions.--You must sign the certification. You may cross
out part (2) of the certification.
(4) Other Payments.--You are required to furnish your correct TIN, but you are
not required to sign the certification unless you have been notified of an
incorrect TIN. Other payments include payments made in the course of the
requester's trade or business for rents, royalties, goods (other than bills
for merchandise), medical and health care services, payments to a nonemployee
for services (including attorney and accounting fees), and payments to certain
fishing boat crew members.
(5) Mortgage Interest Paid by You, Acquisition or Abandonment of Secured
Property, or IRA Contributions.--You are required to furnish your correct TIN,
but you are not required to sign the certification.
(6) Exempt Payees and Payments.--If you are exempt from backup withholding,
you should complete this form to avoid possible erroneous backup withholding.
Enter your correct TIN in Part 1, write "EXEMPT" in the block in Part 2, sign
and date the form. If you are a nonresident alien or foreign entity not
subject to backup withholding, give the requester a completed Form W-8,
Certificate of Foreign Status.
(7) "Awaiting TIN."--Following the instructions under How To Obtain a TIN, on
page 1, check the box in Part 3 of the Substitute Form W-9 and sign and date
the form.
Signature.--For a joint account, only the person whose TIN is shown in Part I
should sign the form.
Privacy Act Notice.--Section 6109 requires you to furnish your correct TIN to
persons who must file information returns with the IRS to report interest,
dividends, and certain other income paid to you, mortgage interest you paid,
the acquisition or abandonment of secured property, cancellation of debt or
contributions you made to an individual retirement arrangement (IRA). The IRS
uses the numbers for identification purposes and to help verify the accuracy
of your tax return. You must provide your TIN whether or not you are required
to file a tax return. Payers must generally withhold 31% of taxable interest,
dividend, and certain other payments to a payee who does not furnish a TIN to
a payer. Certain penalties may also apply.
<PAGE>
EXHIBIT (b)(1)
============================================
--------------------------------------------
$84,000,000 CREDIT FACILITY
CREDIT AGREEMENT
Dated as of August 5, 1999
by and among
WORLDWIDE SPORTS & RECREATION, INC.,
as Borrower
ANTARES CAPITAL CORPORATION
for itself, as a Lender and as Agent for all Lenders
and
THE OTHER FINANCIAL INSTITUTIONS PARTY HERETO
as Lenders
--------------------------------------------
============================================
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
ARTICLE I - THE CREDITS................................................................................ 1
- -----------------------
1.1 Amounts and Terms of Commitments.............................................................. 1
--------------------------------
(a) The Term Loans.......................................................................... 1
--------------
(b) The Revolving Credit.................................................................... 2
--------------------
(c) Lender Letters of Credit and Letter of Credit Participation Agreements.................. 2
----------------------------------------------------------------------
1.2 Notes......................................................................................... 3
-----
1.3 Interest...................................................................................... 4
--------
1.4 Loan Accounts................................................................................. 5
-------------
1.5 Procedure for Revolving Credit Borrowing...................................................... 5
----------------------------------------
1.6 Conversion and Continuation Elections......................................................... 6
-------------------------------------
1.7 Optional Prepayments/Permanent Commitment Reductions.......................................... 7
----------------------------------------------------
1.8 Mandatory Prepayments of Loans and Commitment Reductions...................................... 7
--------------------------------------------------------
(a) Scheduled Term Loan Payments............................................................ 7
----------------------------
(b) Revolving Loan.......................................................................... 10
--------------
(c) Asset Dispositions...................................................................... 10
------------------
(d) Issuance of Securities.................................................................. 11
----------------------
(e) Excess Cash Flow........................................................................ 11
----------------
(f) Application of Prepayments.............................................................. 11
--------------------------
1.9 Fees.......................................................................................... 12
----
(a) Arrangement and Agent's Fees............................................................ 12
----------------------------
(b) Commitment Fee.......................................................................... 12
--------------
(c) Letter of Credit Participation Fee...................................................... 12
----------------------------------
1.10 Payments by the Borrower...................................................................... 12
------------------------
1.11 Payments by the Lenders to the Agent.......................................................... 13
------------------------------------
1.12 Disbursements of Advances; Settlements Among Agent and Lenders; Payments
------------------------------------------------------------------------
of Interest and Fees; Disgorgement Obligations................................................ 14
----------------------------------------------
ARTICLE II - CONDITIONS PRECEDENT...................................................................... 15
- ---------------------------------
2.1 Conditions of Initial Loans................................................................... 15
---------------------------
(a) Credit Agreement and Notes.............................................................. 15
--------------------------
(b) Secretary's Certificates; Resolutions; Incumbency....................................... 15
-------------------------------------------------
(c) Articles of Incorporation; By-laws and Good Standing.................................... 16
----------------------------------------------------
(d) Collateral Documents.................................................................... 16
--------------------
(e) Legal Opinions.......................................................................... 17
--------------
(f) Payment of Fees......................................................................... 17
---------------
(g) Intentionally Omitted................................................................... 17
---------------------
(h) Financial Statements.................................................................... 17
--------------------
(i) Insurance Policies...................................................................... 18
------------------
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
(j) Environmental Review.................................................................... 18
--------------------
(k) Due Diligence........................................................................... 18
-------------
(l) Accountants' Review..................................................................... 18
-------------------
(m) Insurance Review........................................................................ 18
----------------
(n) Borrowing Base Certificate.............................................................. 18
--------------------------
(o) Related Transactions.................................................................... 18
--------------------
(p) Prior Indebtedness...................................................................... 18
------------------
(q) Other Documents......................................................................... 19
---------------
(r) Merger.................................................................................. 19
------
2.2 Conditions to All Borrowings.................................................................. 19
----------------------------
(a) Notice of Borrowing..................................................................... 19
-------------------
(b) Continuation of Representations and Warranties.......................................... 19
----------------------------------------------
(c) No Existing Default..................................................................... 19
-------------------
(d) Subsidiary.............................................................................. 19
----------
(e) Syndication............................................................................. 20
-----------
ARTICLE III - REPRESENTATIONS AND WARRANTIES........................................................... 20
- --------------------------------------------
3.1 Corporate Existence and Power................................................................. 20
-----------------------------
3.2 Corporate Authorization; No Contravention..................................................... 20
-----------------------------------------
3.3 Governmental Authorization.................................................................... 21
--------------------------
3.4 Binding Effect................................................................................ 21
--------------
3.5 Litigation.................................................................................... 21
----------
3.6 No Default.................................................................................... 22
----------
3.7 ERISA Compliance.............................................................................. 22
----------------
3.8 Use of Proceeds; Margin Regulations........................................................... 22
-----------------------------------
3.9 Title to Properties........................................................................... 23
-------------------
3.10 Taxes......................................................................................... 23
-----
3.11 Financial Condition........................................................................... 23
-------------------
3.12 Environmental Matters......................................................................... 23
---------------------
3.13 Collateral Documents.......................................................................... 24
--------------------
3.14 Regulated Entities............................................................................ 24
------------------
3.15 Solvency...................................................................................... 24
--------
3.16 Labor Relations............................................................................... 24
---------------
3.17 Copyrights, Patents, Trademarks and Licenses, etc............................................. 25
-------------------------------------------------
3.18 Subsidiaries.................................................................................. 25
------------
3.19 Brokers' Fees; Transaction Fees............................................................... 25
-------------------------------
3.20 Insurance..................................................................................... 25
---------
3.21 Full Disclosure............................................................................... 26
---------------
3.22 Year 2000 Issues.............................................................................. 26
----------------
3.23 Subordinated Note Agreement and Recapitalization Agreement.................................... 26
----------------------------------------------------------
3.24 Foreign Sales................................................................................. 26
-------------
</TABLE>
ii
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE IV - AFFIRMATIVE COVENANTS..................................................................... 26
- ----------------------------------
4.1 Financial Statements.......................................................................... 27
--------------------
4.2 Certificates; Borrowing Base Certificates; Other Information.................................. 27
------------------------------------------------------------
4.3 Notices....................................................................................... 29
-------
4.4 Preservation of Corporate Existence, Etc...................................................... 31
----------------------------------------
4.5 Maintenance of Property....................................................................... 32
-----------------------
4.6 Insurance..................................................................................... 32
---------
4.7 Payment of Obligations........................................................................ 32
----------------------
4.8 Compliance with Laws.......................................................................... 33
--------------------
4.9 Inspection of Property and Books and Records.................................................. 33
--------------------------------------------
4.10 Use of Proceeds............................................................................... 34
---------------
4.11 Solvency...................................................................................... 34
--------
4.12 Further Assurances............................................................................ 34
------------------
4.13 Interest Rate Protection...................................................................... 34
------------------------
4.14 Foreign Sales................................................................................. 35
-------------
4.15 Merger........................................................................................ 35
------
4.16 Intellectual Property......................................................................... 35
---------------------
ARTICLE V - NEGATIVE COVENANTS......................................................................... 35
- ------------------------------
5.1 Limitation on Liens........................................................................... 35
-------------------
5.2 Disposition of Assets......................................................................... 37
---------------------
5.3 Consolidations and Mergers.................................................................... 37
--------------------------
5.4 Loans and Investments......................................................................... 37
---------------------
5.5 Limitation on Indebtedness.................................................................... 38
--------------------------
5.6 Transactions with Affiliates.................................................................. 39
----------------------------
5.7 Management Fees and Compensation.............................................................. 39
--------------------------------
5.8 Use of Proceeds............................................................................... 40
---------------
5.9 Contingent Obligations........................................................................ 40
----------------------
5.10 Compliance with ERISA......................................................................... 40
---------------------
5.11 Restricted Payments........................................................................... 41
-------------------
5.12 Change in Business............................................................................ 42
------------------
5.13 Change in Structure........................................................................... 42
-------------------
5.14 Accounting Changes............................................................................ 42
------------------
5.15 Amendments to Related Agreements and Subordinated Indebtedness................................ 43
--------------------------------------------------------------
5.16 Intentionally Omitted......................................................................... 43
---------------------
5.17 No Negative Pledges........................................................................... 43
-------------------
ARTICLE VI - FINANCIAL COVENANTS...................................................................... 43
- ---------------------------------
6.1 Capital Expenditures.......................................................................... 43
--------------------
6.2 Leverage Ratio................................................................................ 44
--------------
</TABLE>
iii
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
6.3 Fixed Charge Coverage Ratio................................................................... 45
---------------------------
6.4 Interest Coverage Ratio....................................................................... 46
-----------------------
6.5 Minimum EBITDA................................................................................ 47
--------------
ARTICLE VII - EVENTS OF DEFAULT........................................................................ 49
- -------------------------------
7.1 Event of Default.............................................................................. 49
----------------
(a) Non-Payment............................................................................. 49
-----------
(b) Representation or Warranty.............................................................. 49
--------------------------
(c) Specific Defaults....................................................................... 49
-----------------
(d) Other Defaults.......................................................................... 49
--------------
(e) Cross-Default........................................................................... 49
-------------
(f) Insolvency; Voluntary Proceedings....................................................... 50
---------------------------------
(g) Involuntary Proceedings................................................................. 50
-----------------------
(h) ERISA................................................................................... 50
-----
(i) Monetary Judgments...................................................................... 50
------------------
(j) Non-Monetary Judgments.................................................................. 51
----------------------
(k) Collateral.............................................................................. 51
----------
(l) Ownership............................................................................... 51
---------
(m) Invalidity of Subordination Provisions.................................................. 51
--------------------------------------
(n) B&L License............................................................................. 52
-----------
7.2 Remedies...................................................................................... 52
--------
7.3 Rights Not Exclusive.......................................................................... 52
--------------------
7.4 Cash Collateral for Letters of Credit......................................................... 52
-------------------------------------
ARTICLE VIII - THE AGENT............................................................................... 53
- ------------------------
8.1 Appointment and Authorization................................................................. 53
-----------------------------
8.2 Delegation of Duties.......................................................................... 53
--------------------
8.3 Liability of Agent............................................................................ 53
------------------
8.4 Reliance by Agent............................................................................. 54
-----------------
8.5 Notice of Default............................................................................. 54
-----------------
8.6 Credit Decision............................................................................... 54
---------------
8.7 Indemnification............................................................................... 55
---------------
8.8 Agent in Individual Capacity.................................................................. 56
----------------------------
8.9 Successor Agent............................................................................... 56
---------------
8.10 Collateral Matters............................................................................ 56
------------------
ARTICLE IX - MISCELLANEOUS............................................................................. 57
- --------------------------
9.1 Amendments and Waivers........................................................................ 57
----------------------
9.2 Notices....................................................................................... 58
-------
9.3 No Waiver; Cumulative Remedies................................................................ 59
------------------------------
9.4 Costs and Expenses............................................................................ 59
------------------
</TABLE>
iv
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
9.5 Indemnity..................................................................................... 59
---------
9.6 Marshaling; Payments Set Aside................................................................ 60
------------------------------
9.7 Successors and Assigns........................................................................ 61
----------------------
9.8 Assignments, Participations, etc.............................................................. 61
--------------------------------
9.9 Confidentiality............................................................................... 63
---------------
9.10 Set-off; Sharing of Payments.................................................................. 64
----------------------------
9.11 Notification of Addresses, Lending Offices, Etc............................................... 64
-----------------------------------------------
9.12 Counterparts.................................................................................. 64
------------
9.13 Severability.................................................................................. 64
------------
9.14 Captions...................................................................................... 65
--------
9.15 Independence of Provisions.................................................................... 65
--------------------------
9.16 Interpretation................................................................................ 65
--------------
9.17 No Third Parties Benefited.................................................................... 65
--------------------------
9.18 Governing Law and Jurisdiction................................................................ 65
------------------------------
9.19 Waiver of Jury Trial.......................................................................... 66
--------------------
9.20 Entire Agreement.............................................................................. 66
----------------
ARTICLE X - TAXES, YIELD PROTECTION AND ILLEGALITY..................................................... 67
- --------------------------------------------------
10.1 Taxes......................................................................................... 67
------
10.2 Illegality.................................................................................... 69
----------
10.3 Increased Costs and Reduction of Return....................................................... 70
---------------------------------------
10.4 Funding Losses................................................................................ 71
--------------
10.5 Inability to Determine Rates.................................................................. 71
----------------------------
10.6 Reserves on LIBOR Rate Loans.................................................................. 72
----------------------------
10.7 Certificates of Lenders....................................................................... 72
-----------------------
10.8 Survival...................................................................................... 72
--------
10.9 Replacement of Lender in Respect of Increased Costs........................................... 72
---------------------------------------------------
ARTICLE XI - DEFINITIONS............................................................................... 72
- ------------------------
11.1 Defined Terms................................................................................. 72
-------------
11.2 Other Interpretive Provisions................................................................. 90
-----------------------------
(a) Defined Terms........................................................................... 90
-------------
(b) The Agreement........................................................................... 91
-------------
(c) Certain Common Terms.................................................................... 91
--------------------
(d) Performance; Time....................................................................... 91
-----------------
(e) Contracts............................................................................... 91
---------
(f) Laws.................................................................................... 91
----
11.3 Accounting Principles......................................................................... 91
---------------------
</TABLE>
v
<PAGE>
SCHEDULES
Schedule 1.1(a) Term Loan A Commitments and Term Loan B Commitments
Schedule 1.1(b) Revolving Loan Commitments
Schedule 3.2 Capitalization
Schedule 3.5 Litigation
Schedule 3.7 ERISA
Schedule 3.17 Intellectual Property
Schedule 4.16 Certain Intellectual Property
Schedule 5.1 Liens
Schedule 5.4 Loans, Advances and Extensions of Credit
Schedule 5.5 Indebtedness
Schedule 5.9 Contingent Obligations
Schedule 11.1 Prior Indebtedness
EXHIBITS
Exhibit 1.8(e) Excess Cash Flow Certificate
Exhibit 4.1(b) Certificate
Exhibit 4.2(b) Compliance Certificate
Exhibit 11.1(a) Borrowing Base Certificate
Exhibit 11.1(b) Notice of Borrowing
Exhibit 11.1(c) Notice of Continuation/Conversion
Exhibit 11.1(d) Revolving Note
Exhibit 11.1(e) Term Note
vi
<PAGE>
CREDIT AGREEMENT
----------------
This CREDIT AGREEMENT (this "Agreement") is entered into as of August 5,
1999, by and among Worldwide Sports & Recreation, Inc., a Delaware corporation
(the "Borrower"), Antares Capital Corporation, a Delaware corporation, as agent
for the several financial institutions from time to time party to this Agreement
(collectively, the "Lenders" and individually each a "Lender") and for itself as
a Lender, and such Lenders.
W I T N E S S E T H:
WHEREAS, the Borrower has requested, and the Lenders have agreed to make
available to the Borrower, a revolving credit facility (including a letter of
credit subfacility) and term loans upon and subject to the terms and conditions
set forth in this Agreement;
NOW, THEREFORE, in consideration of the mutual agreements, provisions and
covenants contained herein, the parties agree as follows:
ARTICLE I - THE CREDITS
-----------------------
1.1 Amounts and Terms of Commitments.
--------------------------------
(a) The Term Loans.
--------------
(i) Each Lender with a Term Loan A Commitment severally and not jointly
agrees, on the terms and conditions hereinafter set forth, to lend to the
Borrower on the Closing Date the amount set forth opposite such Lender's name in
Schedule 1.1(a) under the heading "Term Loan A Commitment" (such amount being
- ---------------
referred to herein as such Lender's "Term Loan A Commitment"). Amounts borrowed
under this subsection 1.1(a)(i) are referred to as the "Term Loan A."
(ii) Each Lender with a Term Loan B Commitment severally and not jointly
agrees, on the terms and conditions hereinafter set forth, to lend to the
Borrower on the Closing Date the amount set forth opposite such Lender's name in
Schedule 1.1(a) under the heading "Term Loan B Commitment" (such amount being
- ---------------
referred to as such Lender's "Term Loan B Commitment"). Amounts borrowed under
this subsection 1.1(a)(ii) are referred to as the "Term Loan B."
(iii) Term Loan A and Term Loan B are sometimes referred to individually
as a "Term Loan" and together as the "Term Loans." Amounts borrowed as a Term
Loan which are repaid or prepaid may not be reborrowed.
<PAGE>
(b) The Revolving Credit. Each Lender with a Revolving Loan Commitment
--------------------
severally and not jointly agrees, on the terms and conditions hereinafter set
forth, to make Loans to the Borrower (each such Loan, a "Revolving Loan") from
time to time on any Business Day during the period from the Closing Date to the
Revolving Termination Date, in an aggregate amount not to exceed at any time
outstanding the applicable amount set forth opposite the Lender's name in
Schedule 1.1(b) under the heading "Revolving Loan Commitment" (such amount as
- ---------------
the same may be reduced from time to time pursuant to subsection 1.8(f) hereof
or as a result of one or more assignments pursuant to Section 9.8, being
referred to herein as such Lender's "Revolving Loan Commitment"); provided,
however, that, after giving effect to any Borrowing of Revolving Loans, the
aggregate principal amount of all outstanding Revolving Loans shall not exceed
the Maximum Revolving Loan Balance. As set forth on Schedule 1.1(b), the
---------------
Revolving Loan Commitment is seasonal in nature and fluctuates throughout the
year. Subject to the other terms and conditions hereof, amounts borrowed under
this subsection 1.1(b) may be repaid and reborrowed from time to time. The
"Maximum Revolving Loan Balance" from time to time will be the lesser of:
(i) the "Borrowing Base" (as calculated pursuant to the Borrowing Base
Certificate) in effect from time to time, or
(ii) the Aggregate Revolving Loan Commitment then in effect;
less, in either case, the amount of any Letter of Credit Participation
Liability. If at any time the Revolving Loans exceed the Maximum Revolving Loan
Balance, then Revolving Loans must be repaid within three (3) Business Days in
an amount sufficient to eliminate such excess.
(c) Lender Letters of Credit and Letter of Credit Participation
-----------------------------------------------------------
Agreements. Subject to the terms and conditions of this Agreement and in
- ----------
reliance upon the representations and warranties of Borrower herein set forth,
the Revolving Loan Commitment may, in addition to advances under the Revolving
Loan, be utilized, upon the request of Borrower, for (i) the issuance of letters
of credit by Agent (each such letter of credit, a "Lender Letter of Credit") or
(ii) the issuance of letter of credit participation agreements by Agent (each
such letter of credit participation, a "Letter of Credit Participation
Agreement") to confirm payment to banks (whether or not such banks are Lenders)
which issue letters of credit for the account of Borrower on behalf of each
Lender having a Revolving Loan Commitment (severally and not jointly) according
to such Lender's Revolving Loan Commitment. The aggregate amount of Letter of
Credit Participation Liability with respect to all Lender Letters of Credit and
Letter of Credit Participation Agreements outstanding at any time shall not
exceed $5,000,000.
The Borrower shall be irrevocably and unconditionally obligated forthwith
without presentment, demand, protest or other formalities of any kind, to
reimburse the Agent for any amounts paid by the Agent under any Lender Letter of
Credit or Letter of Credit Participation Agreement. The Borrower hereby
authorizes and directs the Lenders with Revolving Loan Commitments, at the
Agent's option, to make a Revolving Loan in the amount of any payment made by
the Agent with respect to any Lender Letter of Credit or Letter of Credit
Participation
2
<PAGE>
Agreement. All amounts paid by the Agent with respect to any Lender Letter of
Credit or Letter of Credit Participation Agreement that are not immediately
repaid by Borrower with the proceeds of a Revolving Loan or otherwise shall bear
interest at the interest rate then applicable to Revolving Loans, calculated
using the Base Rate and the Applicable Margin in effect. Agent agrees to provide
Borrower with prompt notice of any payments made by Agent with respect to any
Lender Letter of Credit or Letter of Credit Participation Agreement. Each Lender
agrees to fund its Commitment Percentage of any Revolving Loan made pursuant to
this subsection 1.1(c) and, if no such Revolving Loans are made, each Lender
with a Revolving Loan Commitment agrees to purchase, and shall be deemed to have
purchased, a participation in such Lender Letter of Credit or Letter of Credit
Participation Agreement in an amount equal to its ratable share of such Lender
Letter of Credit or Letter of Credit Participation Agreement based upon the
Revolving Loan Commitments then in effect and each Lender agrees to pay to the
Agent such share of any payments made by the Agent under such Lender Letter of
Credit or Letter of Credit Participation Agreement. The obligations of each
Lender under the preceding two (2) sentences shall be absolute and unconditional
and such remittance shall be made notwithstanding the occurrence or continuation
of an Event of Default or Default or the failure to satisfy any condition set
forth in Section 2.2 hereof.
In addition to all other terms and conditions set forth in this Agreement,
the issuance by Agent of any Lender Letter of Credit or Letter of Credit
Participation Agreement shall be subject to the conditions precedent that the
Lender Letter of Credit, Letter of Credit Participation Agreement or the letter
of credit or written contract for which Borrower requests a Letter of Credit
Participation Agreement shall support a transaction entered into by Borrower in
the Ordinary Course of Business of Borrower and shall be in such form, be for
such amount, and contain such terms as are reasonably satisfactory to Agent.
The expiration date of each Lender Letter of Credit shall be on a date
which is the earlier of (a) one year from its date of issuance, or (b) the
Revolving Termination Date. Each Letter of Credit Participation Agreement shall
provide that the Letter of Credit Participation Agreement terminates and all
demands or claims for payment must be presented by a date certain, which date
will be the earlier of (a) one year from its date of issuance, or (b) the
Revolving Termination Date.
Borrower shall give Agent at least ten (10) Business Days prior notice
specifying the date a Lender Letter of Credit or Letter of Credit Participation
Agreement is to be issued, identifying the beneficiary and describing the nature
of the transactions proposed to be supported thereby. The notice shall be
accompanied by the drawing terms for the Lender Letter of Credit or form of each
letter of credit or other written contract which will be supported by the Letter
of Credit Participation Agreement.
1.2 Notes. (a) The Term Loan A made by each Lender with a Term Loan A
-----
Commitment shall be evidenced by a Term Note A payable to the order of such
Lender in an amount equal to such Lender's Term Loan A Commitment.
3
<PAGE>
(b) The Term Loan B made by each Lender with a Term Loan B Commitment
shall be evidenced by a Term Note B payable to the order of such Lender in an
amount equal to such Lender's Term Loan B Commitment.
(c) The Revolving Loans made by each Lender with a Revolving Loan
Commitment shall be evidenced by a Revolving Note payable to the order of such
Lender in an amount equal to such Lender's Revolving Loan Commitment.
1.3 Interest. (a) Subject to subsections 1.3(c) and 1.3(d), each Loan
--------
shall bear interest on the outstanding principal amount thereof from the date
when made at a rate per annum equal to the LIBOR or the Base Rate, as the case
may be, plus the Applicable Margin, as the same may be adjusted pursuant to the
----
provisions of the definition of Applicable Margin. Commencing on August 1,
2000, and continuing thereafter, the Applicable Margin for Loans shall be
subject to adjustment as set forth in the definition of Applicable Margin. The
Agent will with reasonable promptness notify the Borrower and the Lenders of the
effective date and the amount of each such change, provided that any failure to
--------
do so shall not relieve the Borrower of any liability hereunder or provide the
basis for any claim against the Agent. Each determination of an interest rate
by the Agent shall be conclusive and binding on the Borrower and the Lenders in
the absence of demonstrable error. All computations of fees and interest
payable on LIBOR Rate Loans under this Agreement shall be made on the basis of a
360-day year and actual days elapsed. All computations of interest payable on
Base Rate Loans shall be made on the basis of a 365-366 day year. Interest and
fees shall accrue during each period during which interest or such fees are
computed from the first day thereof to the last day thereof.
(b) Interest on each Loan shall be paid in arrears on each Interest
Payment Date. Interest shall also be paid on the date of any payment or
prepayment of Loans in full, provided, however, interest shall not be required
to be paid for the date of receipt if such payment or prepayment is received by
the Agent prior to 11:00 a.m.(Chicago time).
(c) At the election of the Agent or the Required Lenders while any Event
of Default under subsection 7.1(a) exists or 7.1(c) (due to any failure by
Borrower to perform or observe any term, covenant or agreement contained in
Sections 4.1 or 4.2, or in Article VI), the Borrower shall pay interest (after
as well as before entry of judgment thereon to the extent permitted by law) on
the Obligations, at a rate per annum which is determined by adding two percent
(2.0%) per annum to the Applicable Margin then in effect for such Loans (plus
the LIBOR or Base Rate, as the case may be) and, in the case of Obligations not
subject to an Applicable Margin (other than the fees described in Section 1.9),
at a rate per annum equal to the Base Rate plus two percent (2.0%); provided,
--------
however, that, on and after the expiration of any Interest Period applicable to
- -------
any LIBOR Rate Loan outstanding on the date of occurrence of such Event of
Default, the principal amount of such Loan shall, during the continuation of
such Event of Default, bear interest at a rate per annum equal to the Base Rate
plus the Applicable Margin plus two percent (2.0%).
4
<PAGE>
(d) Anything herein to the contrary notwithstanding, the obligations of
the Borrower hereunder shall be subject to the limitation that payments of
interest shall not be required, for any period for which interest is computed
hereunder, to the extent (but only to the extent) that contracting for or
receiving such payment by the respective Lender would be contrary to the
provisions of any law applicable to such Lender limiting the highest rate of
interest which may be lawfully contracted for, charged or received by such
Lender, and in such event the Borrower shall pay such Lender interest at the
highest rate permitted by applicable law.
1.4 Loan Accounts. The Agent, on behalf of the Lenders, shall record on
-------------
its books and records the amount of each Loan made, the interest rate
applicable, all payments of principal and interest thereon and the principal
balance thereof from time to time outstanding. The Agent shall deliver to the
Borrower on a monthly basis a loan statement setting forth such record for the
immediately preceding month. Such record shall, absent demonstrable error, be
conclusive evidence of the amount of the Loans made by the Lenders to the
Borrower and the interest and payments thereon. Any failure to so record or any
error in doing so, or any failure to deliver such loan statement shall not,
however, limit or otherwise affect the obligation of the Borrower hereunder (and
under any Note) to pay any amount owing with respect to the Loans or provide the
basis for any claim against the Agent.
1.5 Procedure for Revolving Credit Borrowing. (a) Each Borrowing under
----------------------------------------
the Revolving Loan shall be made upon the Borrower's irrevocable (subject to
Section 10.5 hereof) written notice delivered to the Agent in the form of a
Notice of Borrowing, which notice must be received by the Agent prior to 11:00
a.m. (Chicago time) (i) on the requested Borrowing date in the case of each Base
Rate Loan equal to or less than $3,000,000 and in the case of the initial Loans
to be made on the Closing Date, (ii) on the date which is one (1) Business Day
prior to the requested Borrowing date of each Base Rate Loan in excess of
$3,000,000 but equal to or less than $5,000,000 and (iii) on the day which is
three (3) Business Days prior to the requested Borrowing date in the case of
each LIBOR Rate Loan and each Base Rate Loan in excess of $5,000,000; provided,
that with respect to Loans subsequent to the initial Loans, the Borrower may
give notice of the requested Borrowing to the Agent by telephone call, with such
notice confirmed not later than the following Business Day by delivery to the
Agent of a signed Notice of Borrowing. Such Notice of Borrowing shall specify:
(I) the amount of the Borrowing (which shall be in an aggregate
minimum principal amount of $100,000 and multiples of $50,000 in excess
thereof);
(II) the requested Borrowing date, which shall be a Business Day;
(III) whether the Borrowing is to be comprised of LIBOR Rate Loans or
Base Rate Loans; and
(IV) if the Borrowing is to be LIBOR Rate Loans, the Interest Period
applicable to such Loans.
5
<PAGE>
provided, however, that with respect to the Borrowing to be made on the Closing
- -------- -------
Date, such Borrowing will consist of Base Rate Loans only and shall remain so
for not less than three (3) Business Days. Thereafter, Borrower may request
that Revolving Loans be made as LIBOR Rate Loans and that Loans be converted to
or continued as LIBOR Rate Loans provided only LIBOR Rate Loans having an
Interest Period of one (1) month shall be permitted during the first sixty (60)
days after the Closing Date.
(b) Upon receipt of the Notice of Borrowing, the Agent will promptly
notify each Lender with a Commitment affected thereby of such Notice and of the
amount of such Lender's Commitment Percentage of the Borrowing.
(c) Unless Agent is otherwise directed in writing by Borrower, the
proceeds of each requested Borrowing after the Closing Date will be made
available to the Borrower by the Agent by wire transfer (or ACH transfer) of
such amount to the Borrower pursuant to the wire transfer instructions specified
on the signature page hereto, or such other wire transfer instructions as are,
from time to time, given to Agent by Borrower in writing.
1.6 Conversion and Continuation Elections. (a) The Borrower may upon
-------------------------------------
irrevocable (subject to subsection 10.2(c) and Section 10.5) written notice to
the Agent in accordance with subsection 1.6(b) elect to convert on any Business
Day, any Base Rate Loans into LIBOR Rate Loans or elect to continue on the last
day of the applicable Interest Period any LIBOR Rate Loans having Interest
Periods maturing on such day, in each instance, in whole or in part in an amount
not less than $100,000, or that is in an integral multiple of $50,000 in excess
thereof.
(b) The Borrower shall deliver a Notice of Conversion/Continuation to be
received by the Agent not later than 11:00 a.m. (Chicago time) at least three
(3) Business Days in advance of the requested Conversion Date or continuation
date, specifying:
(i) the proposed Conversion Date or continuation date;
(ii) the aggregate amount of Loans to be converted or renewed; and
(iii) the duration of the requested Interest Period with respect to
the Loans to be converted or continued as LIBOR Rate Loans.
(c) If upon the expiration of any Interest Period applicable to LIBOR Rate
Loans, the Borrower has failed to select timely a new Interest Period to be
applicable to such LIBOR Rate Loans or if any Event of Default shall then exist,
the Borrower shall be deemed to have elected to convert such LIBOR Rate Loans
into Base Rate Loans effective as of the expiration date of such current
Interest Period.
(d) Upon receipt of a Notice of Conversion/Continuation, the Agent will
promptly notify each Lender thereof. In addition, the Agent will, with
reasonable promptness, notify the
6
<PAGE>
Borrower and the Lenders of each determination of a LIBOR Rate; provided that
--------
any failure to do so shall not relieve the Borrower of any liability hereunder
or provide the basis for any claim against the Agent. All conversions and
continuations shall be made pro rata according to the respective outstanding
principal amounts of the Loans with respect to which the notice was given held
by each Lender.
(e) Unless the Required Lenders shall otherwise agree, during the
existence of an Event of Default, the Borrower may not elect to have a Loan
converted into or continued as a LIBOR Rate Loan.
(f) Notwithstanding any other provision contained in this Agreement, after
giving effect to any Borrowing, or to any continuation or conversion of any
Loans, there shall not be more than seven (7) different Interest Periods in
effect.
1.7 Optional Prepayments/Permanent Commitment Reductions. (a) Subject to
----------------------------------------------------
Section 10.4, the Borrower may at any time (i) upon at least one (1) Business
Day's written notice to the Agent, prepay the Loans in whole or in part in an
amount greater than $1,000,000 and (ii) prepay the Loans in part in an amount
less than $1,000,000 but greater than or equal to $100,000 without notice, in
each instance, without penalty or premium except as provided in Section 10.4.
Optional partial prepayments of Term Loans shall be applied pursuant to
subsection 1.8(f). Optional partial prepayments in amounts less than $100,000
shall not be permitted.
(b) The notice of any prepayment shall not thereafter be revocable by the
Borrower and the Agent will promptly notify each Lender thereof and of such
Lender's Commitment Percentage of such prepayment. The payment amount specified
in such notice shall be due and payable on the date specified therein, together
with any amounts required to be paid in connection therewith pursuant to Section
10.4.
(c) The Borrower shall have the right from time to time, without fee, cost
or expense, to terminate in whole or permanently reduce ratably in part, the
Aggregate Revolving Loan Commitment, upon at least three (3) Business Days'
prior written notice delivered to the Agent provided that (i) such reduction
shall be in an amount greater than or equal to $2,000,000, (ii) after giving
effect to such reduction the Maximum Revolving Loan Balance exceeds the
aggregate outstanding principal balance of Revolving Loans by not less than
$3,000,000 and (iii) there shall not be more than two (2) reductions within any
twelve (12) month period.
1.8 Mandatory Prepayments of Loans and Commitment Reductions.
--------------------------------------------------------
(a) Scheduled Term Loan Payments. The principal amount of the Term Loan
----------------------------
shall be paid in installments on the dates and in the respective amounts shown
below:
7
<PAGE>
Term Loan A
-----------
Date of Payment Amount of Payment
--------------- -----------------
October 31, 1999 $ 625,000
January 31, 2000 625,000
April 30, 2000 625,000
July 31, 2000 625,000
October 31, 2000 750,000
January 31, 2001 750,000
April 30, 2001 750,000
July 31, 2001 750,000
October 31, 2001 875,000
January 31, 2002 875,000
April 30, 2002 875,000
July 31, 2002 875,000
October 31, 2002 1,125,000
January 31, 2003 1,125,000
April 30, 2003 1,125,000
July 31, 2003 1,125,000
October 31, 2003 1,250,000
January 31, 2004 1,250,000
April 30, 2004 1,250,000
July 31, 2004 1,250,000
8
<PAGE>
October 31, 2004 1,375,000
January 31, 2005 1,375,000
April 30, 2005 1,375,000
July 31, 2005 1,375,000
Term Loan B
-----------
Date of Payment Amount of Payment
--------------- -----------------
October 31, 1999 $ 62,500
January 31, 2000 62,500
April 30, 2000 62,500
July 31, 2000 62,500
October 31, 2000 62,500
January 31, 2001 62,500
April 30, 2001 62,500
July 31, 2001 62,500
October 31, 2001 62,500
January 31, 2002 62,500
April 30, 2002 62,500
July 31, 2002 62,500
October 31, 2002 62,500
January 31, 2003 62,500
April 30, 2003 62,500
9
<PAGE>
July 31, 2003 62,500
October 31, 2003 62,500
January 31, 2004 62,500
April 30, 2004 62,500
July 31, 2004 62,500
October 31, 2004 62,500
January 31, 2005 62,500
April 30, 2005 62,500
July 31, 2005 62,500
October 31, 2005 7,125,000
January 31, 2006 7,125,000
April 30, 2006 7,125,000
July 31, 2006 7,125,000
(b) Revolving Loan. The Borrower shall repay to the Lenders in full
--------------
on the date specified in clause (a) of the definition of "Revolving Termination
Date" the aggregate principal amount of the Revolving Loans outstanding on the
Revolving Termination Date.
(c) Asset Dispositions. If the Borrower or any of its Subsidiaries
------------------
shall at any time or from time to time:
(i) make or agree to make a Disposition; or
(ii) suffer an Event of Loss;
and the aggregate amount of the Net Proceeds received by Borrower and its
Subsidiaries in connection with such Disposition or Event of Loss and all other
Dispositions and Events of Loss occurring during the fiscal year exceeds
$500,000, then (A) the Borrower shall promptly notify the Agent of such proposed
Disposition or Event of Loss (including the amount of the estimated
10
<PAGE>
Net Proceeds to be received by the Borrower in respect thereof) and (B) promptly
upon receipt by the Borrower or its Subsidiary of the Net Proceeds of such
Disposition or Event of Loss, the Borrower shall deliver such Net Proceeds to
the Agent for distribution to the Lenders as a prepayment of the Loans, which
prepayment shall be applied in accordance with subsection 1.8(f) hereof.
Notwithstanding the foregoing, such prepayment shall not be required to the
extent the Borrower reinvests the Net Proceeds of such Disposition, or a portion
thereof, in productive assets of a kind then used or usable in the business of
the Borrower, within one hundred eighty (180) days after the date of such
Disposition or enters into a binding commitment thereof within said one hundred
eighty (180) day period and subsequently makes such reinvestment.
(d) Issuance of Securities. Immediately upon the receipt by Borrower
----------------------
or any of its Subsidiaries after the Closing Date of the Net Issuance Proceeds
of the issuance of equity securities or debt securities (other than Net Issuance
Proceeds from (i) the issuance of debt securities in respect of Indebtedness
permitted hereunder and (ii) any Permitted Equity Securities Issuance), Borrower
shall deliver to Agent an amount equal to such proceeds, net of underwriting
discounts associated therewith, for application to the Loans in accordance with
subsection 1.8(f).
(e) Excess Cash Flow. Within five (5) days after the annual financial
----------------
statements are required to be delivered under subsection 4.1(a) hereof, the
Borrower shall deliver to the Agent a written calculation of Excess Cash Flow of
the Borrower for such year in the form of Exhibit 1.8(e) and certified as
correct on behalf of Borrower by a Responsible Officer and concurrently
therewith shall deliver to the Agent, for distribution to the Lenders, an amount
equal to 75% of such Excess Cash Flow, for application to the Loans in
accordance with the provisions of subsection 1.8(e) hereof; provided, however,
in the event the Leverage Ratio (as calculated on Exhibit 4.2(b)) as of the last
day of such year is less than 4.0, such percentage shall be decreased from 75%
to 50%. Excess Cash Flow shall be calculated in the manner set forth in Exhibit
1.8(e).
(f) Application of Prepayments. Any prepayments pursuant to
--------------------------
subsection 1.7, 1.8(c), (d) and (e) shall be applied first to prepay
installments of the Term Loans coming due pro rata against all such scheduled
installments based upon the respective amounts thereof, and then in permanent
reduction of the Revolving Loan, whereupon the Revolving Loan Commitment of each
Lender shall automatically and permanently be reduced by an amount equal to such
Lender's ratable share of the aggregate of principal repaid, effective as of the
earlier of the date that such prepayment is made or the date by which such
prepayment is due and payable hereunder. Notwithstanding the foregoing, at any
time that Term Loan A remains outstanding any Lender holding any portion of Term
Loan B may elect, by notice to Agent and Borrower at least one Business Day
prior to any prepayment of Term Loans required or permitted to be made by
Borrower for the account of such Lender pursuant to this Agreement, to cause all
or a portion of such prepayment to be applied instead to prepay such Lender's
Term Loan A, in which case such prepayment shall be applied in payment of Term
Loan A pro rata against all remaining scheduled installments of Term Loan A. To
the extent permitted by the foregoing sentence, amounts prepaid shall be applied
first to any Base Rate Loans then outstanding and then to outstanding LIBOR Rate
11
<PAGE>
Loans with the shortest Interest Periods remaining. Together with each
prepayment under this Section 1.8, the Borrower shall pay any amounts required
pursuant to Section 10.4 hereof.
1.9 Fees.
----
(a) Arrangement and Agent's Fees. The Borrower shall pay to the Agent
----------------------------
for the Agent's own account a closing fee and an agent's fee in the amounts and
at the times set forth in a letter agreement between the Borrower and the Agent
dated of even date herewith (the "Fee Letter").
----------
(b) Commitment Fee. Borrower shall pay to Agent, for the ratable benefit
--------------
of the Lenders having Revolving Loan Commitments, a fee (the "Commitment Fee")
--------------
in an amount equal to
(i) the Aggregate Revolving Loan Commitment, less
(ii) the sum of (x) the average daily balance of all Revolving Loans
outstanding plus (y) the average daily amount of the Letter of Credit
Participation Liability, in each case, during the preceding month,
multiplied by one-half of one percent (0.5%) per annum, such fee to be payable
monthly in arrears on the first day of the month following the date hereof and
the first day of each month thereafter. The Commitment Fee shall accrue at all
times after the Closing Date.
(c) Letter of Credit Participation Fee. Borrower shall pay to Agent, for
----------------------------------
the ratable benefit of the Lenders having Revolving Loan Commitments, fees for
each Lender Letter of Credit and each Letter of Credit Participation Agreement
(the "Letter of Credit Participation Fee") for the period from and including the
----------------------------------
date of issuance of same to and excluding the date of expiration or termination,
equal to the average daily amount of Letter of Credit Participation Liability
multiplied by two and one-half percent (2.50%) per annum; provided, however, at
Agent's or Required Lenders' option, while an Event of Default exists such
percent shall be increased to four and one half percent 4.50% per annum, such
fees to be payable monthly in arrears on the first day of the month following
the date hereof and the first day of each month thereafter. Borrower shall also
reimburse Agent for any and all out-of-pocket fees and expenses, if any, paid by
Agent to the issuer of any letter of credit subject to a Letter of Credit
Participation Agreement.
1.10 Payments by the Borrower. (a) All payments (including prepayments) to
------------------------
be made by the Borrower on account of principal, interest, fees and other
amounts required hereunder shall be made without set-off, recoupment or
counterclaim, shall, except as otherwise expressly provided herein, be made to
the Agent for the ratable account of the Lenders at the address for payment
specified in the signature page hereof in relation to the Agent (or such other
address as Agent may from time to time specify in accordance with Section 9.2),
and shall be made in dollars and in immediately available funds, no later than
11:00 a.m. (Chicago time) on the date due. The
12
<PAGE>
Agent will promptly distribute to each Lender its Commitment Percentage (or
other applicable share as expressly provided herein) of such principal,
interest, fees or other amounts, in like funds as received. Any payment which is
received by the Agent later than 11:00 a.m. (Chicago time) shall be deemed to
have been received on the immediately succeeding Business Day and any applicable
interest or fee shall continue to accrue. Borrower hereby authorizes Agent and
each Lender to make a Revolving Loan (which shall be a Base Rate Loan) to pay
(i) interest, principal, agent fees, Commitment Fees and Letter of Credit
Participation Fees, in each instance, on the date due, or (ii) after fifteen
(15) days prior notice to Borrower, other fees, costs or expenses payable by
Borrower or any of its Subsidiaries hereunder or under the other Loan Documents.
(b) Subject to the provisions set forth in the definition of "Interest
Period" herein, if any payment hereunder shall be stated to be due on a day
other than a Business Day, such payment shall be made on the next succeeding
Business Day, and such extension of time shall in such case be included in the
computation of interest or fees, as the case may be.
1.11 Payments by the Lenders to the Agent. (a) Unless the Agent shall have
------------------------------------
received notice from a Lender on the Closing Date or, with respect to each
Borrowing after the Closing Date, at least one (1) Business Day prior to the
date of any proposed Borrowing, that such Lender will not make available to the
Agent as and when required hereunder for the account of the Borrower the amount
of that Lender's Commitment Percentage of the Borrowing, the Agent may assume
that each Lender has made such amount available to the Agent in immediately
available funds on the applicable Borrowing date and the Agent may (but shall
not be so required), in reliance upon such assumption, make available to the
Borrower on such date a corresponding amount. If and to the extent any Lender
shall not have made its full amount available to the Agent in immediately
available funds and the Agent in such circumstances has made available to the
Borrower such amount, that Lender shall on the next Business Day following the
date of such Borrowing make such amount available to the Agent, together with
interest at the Agent's cost of funds for and determined as of each day during
such period. A notice of the Agent submitted to any Lender with respect to
amounts owing under this subsection 1.11(a) shall be conclusive, absent manifest
error. If such amount is so made available, such payment to the Agent shall
constitute such Lender's Loan on the date of Borrowing for all purposes of this
Agreement. If such amount is not made available to the Agent on the next
Business Day following the date of such Borrowing, the Agent shall notify the
Borrower of such failure to fund and, upon demand by the Agent, the Borrower
shall pay such amount to the Agent for the Agent's account, together with
interest thereon for each day elapsed since the date of such Borrowing, at a
rate per annum equal to the interest rate applicable at the time to the Loans
comprising such Borrowing.
(b) The failure of any Lender to make any Loan on any date of Borrowing
shall not relieve any other Lender of any obligation hereunder to make a Loan on
the date of such Borrowing, but no Lender shall be responsible for the failure
of any other Lender to make the Loan to be made by such other Lender on the date
of any Borrowing. Without limiting the generality of the foregoing, each Lender
shall be obligated to fund its Commitment Percentage of any Revolving Loan made
after any acceleration of the Obligations with respect to any draw on
13
<PAGE>
any Lender Letter of Credit or any payment made under any Letter of Credit
Participation Agreement.
1.12 Disbursements of Advances; Settlements Among Agent and Lenders;
---------------------------------------------------------------
Payments of Interest and Fees; Disgorgement Obligations. (a) The Revolving Loan
- -------------------------------------------------------
balance may fluctuate from day to day through the Agent's disbursement of funds
to, and receipt of funds from, the Borrower. In order to minimize the frequency
of transfers of funds between the Agent and each Lender, Revolving Loan advances
and payments will be settled according to the procedures described in this
Section 1.12. Notwithstanding these procedures, each Lender's obligation to fund
its portion of any advances made by the Agent to the Borrower will commence on
the date such advances are made by the Agent. Such payments will be made by each
Lender without setoff, counterclaim or reduction of any kind.
(b) On the first Business Day of each week, or more frequently (including
daily) if the Agent so elects (each such day being a "Settlement Date"), the
Agent will advise each Lender by telephone or telecopy of the amount of each
such Lender's Commitment Percentage of the Revolving Loan balance as of the
close of business of the Business Day immediately preceding the Settlement Date.
In the event that payments are necessary to adjust the amount of such Lender's
share of the Revolving Loan balance to equal such Lender's Commitment Percentage
of the Revolving Loan Obligations as of any Settlement Date, such Lender will
pay to the Agent, or the Agent will pay to such Lender (as applicable) the
amount necessary in same day funds by wire transfer to the other's account not
later than 2:00 p.m. Chicago time on the Business Day following the Settlement
Date.
(c) Notwithstanding the foregoing and with respect to Borrowings requiring
notice in advance of the Borrowing date, the Agent, at its option, may elect to
require that each Lender provide funds in connection with any requested
Borrowing hereunder on the scheduled Borrowing date, and in such event the Agent
shall advise each Lender by telephone or telecopy of the amount to be funded by
such Lender no later than one (1) Business Day prior to the Borrowing date
applicable thereto, and each such Lender shall pay to the Agent such Lender's
Commitment Percentage of the Borrowing in same day funds by wire transfer to the
Agent's account not later than 10:30 a.m. Chicago time on such Borrowing date.
(d) On the first Business Day of each month (each, an "Interest Settlement
Date"), the Agent will advise each Lender by telephone or telecopy of the amount
of such Lender's Commitment Percentage of interest and fees on each Loan as of
the end of the last day of the immediately preceding month. Provided that such
Lender has made all payments required to be made by it under this Agreement, the
Agent will pay to such Lender, by wire transfer to such Lender's account (as
specified by such Lender on the signature page of this Agreement or the
applicable Assignment and Acceptance) not later than 2:00 p.m. Chicago time on
the next Business Day following the Interest Settlement Date, such Lender's
Commitment Percentage of interest, Commitment Fees and Letter of Credit
Participation Fees, in each instance, received by Agent in the immediately
preceding month.
14
<PAGE>
(e) Unless the Agent shall have received notice from the Borrower prior to
the date on which any payment is due to the Lenders hereunder that the Borrower
will not make such payment in full as and when required hereunder, the Agent may
assume that the Borrower has made such payment in full to the Agent on such date
in immediately available funds and the Agent may (but shall not be so required),
in reliance upon such assumption, cause to be distributed to each Lender on such
due date an amount equal to the amount then due such Lender. If the Agent pays
an amount to a Lender under this Agreement in the belief or expectation that a
related payment has been or will be received by the Agent from the Borrower and
such related payment is not received by the Agent, the Agent shall be entitled
to recover such amount from such Lender, and each Lender shall repay to Agent on
demand such amount, together with interest thereon for each day from the date
such amount is distributed to such Lender until the date such Lender repays such
amount to the Agent, at the Agent's cost of funds, without setoff, counterclaim
or deduction of any kind. If the Agent determines at any time that any amount
received by the Agent under this Agreement must be returned to the Borrower or
paid to any other Person pursuant to any solvency, fraudulent conveyance or
similar law or otherwise, then, notwithstanding any other term or condition of
this Agreement, the Agent will not be required to distribute any portion of such
payment to any Lender. In addition, each Lender will repay to the Agent on
demand any portion of such amount that the Agent has distributed to such Lender,
together with interest thereon at such rate, if any, as the Agent is required to
pay to the Borrower or such other Person, without setoff, counterclaim or
deduction of any kind.
ARTICLE II - CONDITIONS PRECEDENT
---------------------------------
2.1 Conditions of Initial Loans. The obligation of each Lender to make
---------------------------
its initial Loan and of the Agent to issue the initial Lender Letter of Credit
or Letter of Credit Participation Agreement hereunder is subject to the
condition that the Agent shall have received on or before the Closing Date all
of the following, in form and substance reasonably satisfactory to the Agent and
each Lender and (except for the Notes and any instruments or documents which are
Pledged Collateral) in sufficient counterparts for each Lender, duly executed by
all parties thereto:
(a) Credit Agreement and Notes. This Agreement executed by the Borrower,
--------------------------
the Agent and each of the Lenders, and the Notes executed by the Borrower;
(b) Secretary's Certificates; Resolutions; Incumbency. A certificate
-------------------------------------------------
of the Secretary or Assistant Secretary of the Borrower, and each Subsidiary of
the Borrower which is a party to any Loan Documents, certifying:
(i) the names and true signatures of the officers of the Borrower
and each such Subsidiary authorized to execute, deliver and perform, as
applicable, this Agreement, and all other Loan Documents to be delivered
hereunder; and
15
<PAGE>
(ii) Copies of the resolutions of the board of directors of the
Borrower and each such Subsidiary approving and authorizing the execution,
delivery and performance by the Borrower or such Subsidiary of this
Agreement and the other Loan Documents to be executed or delivered by it
hereunder;
(c) Articles of Incorporation; By-laws and Good Standing. Each of the
----------------------------------------------------
following documents:
(i) the Organization Documents of the Borrower and each Subsidiary
of the Borrower which is party to any Loan Documents, as such Organization
Documents are in effect on the Closing Date, certified by the Secretary of
State (or similar, applicable Governmental Authority) of the state of
incorporation of the Borrower or such Subsidiary as of a recent date, if
and as applicable, all certified by the Secretary or Assistant Secretary of
the Borrower or such Subsidiary as of the Closing Date; and
(ii) a good standing and, if available, tax good standing
certificate for the Borrower and each Subsidiary of the Borrower from the
Secretary of State (or similar, applicable Governmental Authority) of its
state of incorporation and each state where the Borrower or such Subsidiary
is qualified to do business as a foreign corporation as of a recent date;
(d) Collateral Documents. The Collateral Documents, executed by the
--------------------
Borrower or such other Persons party thereto, as applicable, in appropriate form
for recording, where necessary, together with:
(i) all UCC-l financing statements to be filed, registered or
recorded on or after the Closing Date to perfect the security interests of
the Agent, for the benefit of Agent and the Lenders, granted pursuant to
the Collateral Documents, or other evidence reasonably satisfactory to the
Agent that there has been filed, registered or recorded all financing
statements and other filings, registrations and recordings reasonably
necessary and advisable to perfect the Liens of the Agent, for the benefit
of Agent and the Lenders, granted pursuant to the Collateral Documents, in
accordance with applicable law;
(ii) uniform commercial code financing statement, federal and
state tax lien and judgment searches as the Agent shall have reasonably
requested of the Borrower and its Subsidiaries, and such termination
statements or other documents as may be reasonably necessary to confirm
that the Collateral is subject to no other Liens in favor of any Persons
(other than Permitted Liens);
(iii) all certificates and instruments representing the Pledged
Collateral, irrevocable proxies and stock transfer powers executed in blank
or other executed endorsements reasonably satisfactory to the Agent;
16
<PAGE>
(iv) evidence that all other actions reasonably necessary or, in
the reasonable opinion of the Agent, desirable to perfect and protect the
Liens created by the Collateral Documents have been taken;
(v) funds sufficient to pay any filing or recording tax or fee in
connection with any and all UCC-1 financing statements and, if applicable,
the Mortgages, all title insurance premiums, documentary stamp or
intangible taxes, recording fees and mortgage taxes payable in connection
with the recording of any Mortgage or filing of any financing statements or
the issuance of the title insurance policies (whether due on the Closing
Date or in the future) including sums due in connection with any future
advances;
(vi) with respect to each parcel of real Property in respect of
which there is delivered a Mortgage, if any, an A.L.T.A. mortgagee policy
of title insurance or a binder issued by a title insurance company
reasonably satisfactory to the Agent insuring (or undertaking to insure, in
the case of a binder) that the Mortgage creates and constitutes a valid
first Lien against such real Property in favor of the Agent, for the
benefit of Agent and the Lenders, subject only to exceptions reasonably
acceptable to the Agent, with such endorsements and affirmative insurance
as the Agent may reasonably request;
(vii) if required by the Agent, flood insurance and earthquake
insurance on terms satisfactory to the Agent;
(viii) current ALTA surveys and surveyor's certification as to all
real Property in respect of which there is delivered a Mortgage, if any,
each in form and substance reasonably satisfactory to the Agent; and
(ix) such consents, estoppels, subordination agreements and other
documents and instruments executed by landlords, tenants and other Persons
party to material contracts relating to any Collateral as to which the
Agent shall be granted a Lien for the benefit of the Lenders, as reasonably
requested by the Agent;
(e) Legal Opinions. Such opinions of counsel to the Borrower and its
--------------
Subsidiaries, and counsel to the seller, in each instance addressed to the Agent
and the Lenders, in form and substance reasonably satisfactory to Agent;
(f) Payment of Fees. The Borrower shall have paid all accrued and unpaid
---------------
fees, costs and expenses to the extent then due and payable on the Closing Date,
together with Attorney Costs of the Agent;
(g) Intentionally Omitted.
---------------------
(h) Financial Statements. Copies of all of the financial statements
--------------------
of the Borrower and its Subsidiaries referred to in Section 3.11 together with a
pro forma balance sheet giving effect
17
<PAGE>
to the transactions contemplated hereby and by the Related Agreements, certified
on behalf of Borrower by a Responsible Officer;
(i) Insurance Policies. Standard lenders' loss payable endorsements
------------------
in favor of the Agent with respect to the insurance policies or other
instruments or documents evidencing insurance coverage on the properties of the
Borrower in accordance with Section 4.6 and endorsements to all liability
insurance policies naming the Agent and the Lenders as additional insureds
thereunder;
(j) Environmental Review. An environmental site assessment with respect to
--------------------
any real Property owned or operated by Borrower or any of its Subsidiaries,
dated as of a recent date prior to the Closing Date, prepared by a qualified
firm reasonably acceptable to the Agent and the Lenders, stating, among other
things, that such real property is free from Hazardous Materials and that
operations conducted thereon are in compliance with all Environmental Laws and
showing all costs associated with performing work to remediate contamination
thereat;
(k) Due Diligence. Evidence of completion to the satisfaction of the
-------------
Agent of such investigations, reviews and audits with respect to the Borrower
and the transactions contemplated by the Related Agreements as the Agent or any
Lender may deem appropriate;
(l) Accountants' Review. An accountants' review of the books and records
-------------------
of the Borrower and its Subsidiaries prepared by a "Big Five" accounting firm
selected by the Agent, dated as of a recent date prior to the Closing Date and
otherwise in form and substance reasonably satisfactory to the Agent;
(m) Insurance Review. A review of the Borrower's insurance coverages,
----------------
prepared by a qualified firm reasonably acceptable to the Agent, dated as of a
recent date prior to the Closing Date and otherwise in form and substance
reasonably satisfactory to the Agent;
(n) Borrowing Base Certificate. A duly completed Borrowing Base
--------------------------
Certificate setting forth the Borrowing Base as of a date not more than 30 days
prior to the Closing Date. Not more than $20,000,000 in Revolving Loans shall
be advanced on the Closing Date, and after giving effect to the consummation of
the Related Transactions and funding of the initial Loans, the Maximum Revolving
Loan Balance shall exceed the outstanding principal balance of Revolving Loans
by not less than $10,000,000.
(o) Related Transactions. The Related Transactions shall have closed
--------------------
in the manner contemplated by the Related Agreements and shall otherwise be in
form and substance reasonably satisfactory to the Agent;
(p) Prior Indebtedness. A payoff letter from each lender of any Prior
------------------
Indebtedness in form and substance reasonably satisfactory to the Agent,
together with such UCC-3 termination statements, releases of mortgage Liens and
other instruments, documents and/or agreements
18
<PAGE>
necessary or appropriate to terminate any Liens in favor of such lenders
securing Prior Indebtedness which is to be paid off on the Closing Date as the
Agent may reasonably request, duly executed and in form and substance reasonably
satisfactory to the Agent;
(q) Other Documents. Such other approvals, opinions, documents or
---------------
materials as the Agent or any Lender may reasonably request; and
(r) Merger. Evidence of the consummation of the Merger which shall have
------
occurred on or prior to the Closing Date.
2.2 Conditions to All Borrowings. The obligation of each Lender to make
----------------------------
any Loan and of the Agent to issue any Lender Letter of Credit or Letter of
Credit Participation Agreement, or to continue or convert any Loan hereunder, is
subject to the satisfaction of the following conditions precedent on the
relevant Borrowing or continuation or conversion date:
(a) Notice of Borrowing or Continuation/Conversion. The Agent shall
----------------------------------------------
have received (with, in the case of the initial Loan only, a copy for each
Lender) a Notice of Borrowing or a Notice of Continuation/Conversion, as
applicable, in accordance with Section 1.5 or Section 1.6;
(b) Continuation of Representations and Warranties. The representations
----------------------------------------------
and warranties made by the Borrower contained in Article III shall be true and
correct in all material respects on and as of such Borrowing, or continuation or
conversion date with the same effect as if made on and as of such Borrowing or
continuation or conversion date (except to the extent such representations and
warranties (i) expressly refer to an earlier date, in which case they shall be
true and correct in all material respects as of such earlier date, or (ii) are
not true and correct due to events or conditions, the occurrence or existence of
which are not prohibited by this Agreement or the other Loan Documents and which
do not, in and of themselves, constitute a Default or an Event of Default);
(c) No Existing Default. (i) In the case of a Borrowing, no Default or
-------------------
Event of Default shall exist or shall result from such Borrowing or (ii) in
the case of a continuation or conversion of any Loan, no Event of Default shall
exist or shall result from such continuation or conversion;
(d) Subsidiary. Borrower shall have pledged the stock or other equity
----------
interest of each of its Subsidiaries to the Agent, for the benefit of Agent and
the Lenders, and shall have delivered, or caused to be delivered, to the Agent
the items described in subsection 2.1(d)(iii) and, to the extent not previously
delivered, the items described in subsections 2.1(b) and 2.1 (c), with respect
to each such Subsidiary. In addition, each such Subsidiary shall have
guaranteed the Obligations and shall have granted to the Agent, for the benefit
of Agent and the Lenders, a security interest in all of such Subsidiary's
property to secure such guaranty; and
19
<PAGE>
(e) Syndication. Borrower, Agent, the Lenders and such other persons as
-----------
Agent may request shall have executed and delivered such amendments, as
necessary, in accordance with the Fee Letter.
Each Notice of Borrowing and Notice of Continuation/Conversion submitted by the
Borrower hereunder shall constitute a representation and warranty by the
Borrower hereunder, as of the date of each such notice or application and as of
the date of each Borrowing or continuation or conversion, as applicable, that
the conditions in Section 2.2 are satisfied.
ARTICLE III - REPRESENTATIONS AND WARRANTIES
--------------------------------------------
The Borrower represents and warrants to the Agent and each Lender that the
following are, and after giving effect to the Related Transactions will be,
true, correct and complete:
3.1 Corporate Existence and Power. The Borrower and each of its
-----------------------------
Subsidiaries:
(a) is a corporation, limited liability company or limited partnership, as
applicable, duly organized, validly existing and in good standing under the laws
of the jurisdiction of its incorporation or formation, as applicable;
(b) has the power and authority and all governmental licenses,
authorizations, consents and approvals to (i) own its assets, carry on its
business and (ii) execute, deliver, and perform its obligations under, the Loan
Documents and the Related Agreements to which it is a party;
(c) is duly qualified as a foreign corporation, limited liability company
or limited partnership, as applicable, and licensed and in good standing, under
the laws of each jurisdiction where its ownership, lease or operation of
property or the conduct of its business requires such qualification or license;
and
(d) is in compliance with all Requirements of Law;
except, in each case referred to in clause (b)(i), (c) or clause (d), to the
extent that the failure to do so could not reasonably be expected to have a
Material Adverse Effect.
3.2 Corporate Authorization; No Contravention. (a) The execution, delivery
-----------------------------------------
and performance by the Borrower of this Agreement, and Borrower and its
Subsidiaries of any other Loan Document and Related Agreement to which such
Person is party, have been duly authorized by all necessary action, and do not
and will not:
(i) contravene the terms of any of that Person's Organization
Documents;
20
<PAGE>
(ii) conflict with or result in any breach or contravention of,
or the creation of any Lien under, any document evidencing any material
Contractual Obligation to which such Person is a party or any order,
injunction, writ or decree of any Governmental Authority to which such
Person or its Property is subject, except to the extent that such breach
would not reasonably be expected to have either individually or in the
aggregate, a Material Adverse Effect;
(iii) violate any material Requirement of Law in any material
respect.
(b) Schedule 3.2 sets forth, both prior to and after giving effect to
------------
the Related Transactions including without limitation, the consummation of the
Merger, the authorized equity securities of Borrower and its Subsidiaries. All
issued and outstanding equity securities of Borrower and its Subsidiaries are
duly authorized and validly issued, fully paid, non-assessable, and free and
clear of all Liens other than, with respect to the equity securities of
Subsidiaries of Borrower, those in favor of Agent, for the benefit of Agent and
Lenders, and such securities were issued in compliance with all applicable state
and federal laws concerning the issuance of securities. All of the issued and
outstanding equity securities of Borrower is owned by the Persons and in the
amounts set forth on Schedule 3.2. Except as set forth on Schedule 3.2, there
------------ ------------
are no pre-emptive or other outstanding rights, options, warrants, conversion
rights or other similar agreements or understandings for the purchase or
acquisition of any shares of capital stock or other securities of any such
entity.
3.3 Governmental Authorization. No approval, consent, exemption,
--------------------------
authorization, or other action by, or notice to, or filing with, any
Governmental Authority is necessary or required in connection with the
execution, delivery or performance by, or enforcement against, the Borrower or
any of its Subsidiaries of this Agreement, any other Loan Document or Related
Agreement except (a) for recordings and filings in connection with the Liens
granted to the Agent under the Collateral Documents, (b) those obtained or made
on or prior to the Closing Date and (c) in the case of any Related Agreement,
those which, if not obtained or made, could not reasonably be expected to have,
either individually or in the aggregate, a Material Adverse Effect.
3.4 Binding Effect. This Agreement and each other Loan Document and
--------------
Related Agreement to which the Borrower or any of its Subsidiaries is a party
constitute the legal, valid and binding obligations of the Borrower and each
Subsidiary which is a party thereto, enforceable against such Person in
accordance with their respective terms, except as enforceability may be limited
by applicable bankruptcy, insolvency, fraudulent conveyance or similar laws
affecting the enforcement of creditors' rights generally or by equitable
principles relating to enforceability.
3.5 Litigation. Except as specifically disclosed in Schedule 3.5, there
---------- ------------
are no actions, suits, proceedings, claims or disputes pending, or to the best
knowledge of the Borrower, threatened or contemplated, at law, in equity, in
arbitration or before any Governmental Authority, against the Borrower, or its
Subsidiaries or any of their respective Properties which:
21
<PAGE>
(a) purport to affect or pertain to this Agreement, any other
Loan Document or Related Agreement, or any of the transactions contemplated
hereby or thereby; or
(b) if determined adversely to Borrower or any of its Subsidiaries,
could reasonably be expected to result in equitable relief or monetary
judgment(s), individually or in the aggregate, in excess of $500,000.
No injunction, writ, temporary restraining order or any order of any nature has
been issued by any court or other Governmental Authority purporting to enjoin or
restrain the execution, delivery or performance of this Agreement, any other
Loan Document or any Related Agreement, or directing that the transactions
provided for herein or therein not be consummated as herein or therein provided.
3.6 No Default. No Default or Event of Default exists or would result
----------
from the incurring of any Obligations by the Borrower or the grant or perfection
of the Agent's Liens on the Collateral. Neither the Borrower nor any of its
Subsidiaries is in default under or with respect to any Contractual Obligation
in any respect which, individually or together with all such defaults, could
reasonably be expected to have a Material Adverse Effect or that would, if such
default had occurred after the Closing Date, create an Event of Default under
subsection 7.1(e).
3.7 ERISA Compliance. (a) Schedule 3.7 lists all Qualified Plans and
---------------- ------------
Multiemployer Plans. Borrower and each of its Subsidiaries is in compliance in
all material respects with all requirements of each Plan, and each Plan complies
in all material respects, and is operated in compliance in all material
respects, with all applicable provisions of law. Borrower is not aware, after
due inquiry, of any item of non-compliance which could potentially result in the
loss of Plan qualification or tax-exempt status, or give rise to a material
excise tax or other penalty imposed by a Governmental Authority. No material
proceeding, claim, lawsuit and/or investigation is pending concerning any Plan.
All required contributions have been and will be made in accordance with the
provisions of each Qualified Plan and Multiemployer Plan, and with respect to
Borrower or any ERISA Affiliate, there are, have been and will be no material
Unfunded Pension Liabilities or Withdrawal Liabilities.
(b) No ERISA Event has occurred or is expected to occur with respect to
any Qualified Plan, Multiemployer Plan or Plan.
(c) Members of the Controlled Group currently comply and have complied in
all material respects with the notice and continuation coverage requirements of
Section 4980B of the Code.
3.8 Use of Proceeds; Margin Regulations. The proceeds of the Loans are
-----------------------------------
intended to be and shall be used solely for the purposes set forth in and
permitted by Section 4.10, and are intended to be and shall be used in
compliance with Section 5.8. Neither the Borrower nor any
22
<PAGE>
of its Subsidiaries is generally engaged in the business of purchasing or
selling Margin Stock or extending credit for the purpose of purchasing or
carrying Margin Stock.
3.9 Title to Properties. The Borrower and each of its Subsidiaries have
-------------------
good record and marketable title in fee simple to, or valid leasehold interests
in, all real Property necessary or used in the ordinary conduct of their
respective businesses, except for Permitted Liens. As of the Closing Date, the
Property of the Borrower and its Subsidiaries is subject to no Liens, other than
Permitted Liens.
3.10 Taxes. The Borrower and its Subsidiaries have filed all Federal and
-----
other material tax returns and reports required to be filed, and have paid all
Federal and other material taxes, assessments, fees and other governmental
charges levied or imposed upon them or their Properties, income or assets
otherwise due and payable, except those which are being contested in good faith
by appropriate proceedings diligently prosecuted and for which adequate reserves
have been provided in accordance with GAAP and no notice of Lien has been filed
or recorded. There is no proposed tax assessment against the Borrower or any of
its Subsidiaries which would, if the assessment were made, have a Material
Adverse Effect.
3.11 Financial Condition. (a) Each of (i) the audited consolidated balance
-------------------
sheet of the Borrower and its Subsidiaries dated December 31, 1998, and the
related audited consolidated statements of income or operations, shareholders'
equity and cash flows for the fiscal year ended on that date and (ii) the
unaudited interim consolidated balance sheet of Borrower and its Subsidiaries
dated May 31, 1999 and the related unaudited consolidated statements of income,
shareholders' equity and cash flows for the three months then ended:
(x) were prepared in accordance with GAAP consistently applied
throughout the respective periods covered thereby, except as otherwise
expressly noted therein, subject to, in the case of the unaudited interim
financial statements, normal year-end adjustments and the lack of footnote
disclosures; and
(y) present fairly the consolidated financial condition of the
Borrower and its Subsidiaries as of the dates thereof and results of
operations for the periods covered thereby.
(b) Since December 31, 1998, here has been no Material Adverse Effect.
(c) Borrower and its Subsidiaries have no Indebtedness other than
Indebtedness permitted pursuant to Section 5.5 and have no Contingent
Obligations other than Contingent Obligations permitted pursuant to Section 5.9.
3.12 Environmental Matters. (a) The on-going operations of the Borrower
---------------------
and each of its Subsidiaries comply in all respects with all Environmental Laws,
except such non-compliance
23
<PAGE>
which could not (if enforced in accordance with applicable law) reasonably be
expected to result in a Material Adverse Effect.
(b) The Borrower and each of its Subsidiaries have obtained all licenses,
permits, authorizations and registrations required under any Environmental Law
("Environmental Permits") and necessary for their respective ordinary course
---------------------
operations, all such Environmental Permits are in good standing, and the
Borrower and each of its Subsidiaries are in compliance with all material terms
and conditions of such Environmental Permits, except where the failure to obtain
or to be in compliance with such Environmental Permits could not reasonably be
expected to result in material liability to Borrower or any of its Subsidiaries
and could not reasonably be expected to result in a Material Adverse Effect.
(c) None of the Borrower, any of its Subsidiaries or any of their
respective present Property or operations, is subject to any outstanding written
order from or agreement with any Governmental Authority, nor subject to any
judicial or docketed administrative proceeding, respecting any Environmental
Law, Environmental Claim or Hazardous Material.
(d) There are no Hazardous Materials or other conditions or circumstances
existing with respect to any Property, or arising from operations prior to the
Closing Date, of the Borrower or any of its Subsidiaries that would reasonably
be expected to result in a Material Adverse Effect. In addition, neither the
Borrower nor any of its Subsidiaries has any underground storage tanks (i) that
are not properly registered or permitted under applicable Environmental Laws, or
(ii) that are leaking or disposing of Hazardous Materials.
3.13 Collateral Documents. All representations and warranties of the
--------------------
Borrower, any of its Subsidiaries contained in the Collateral Documents are true
and correct in all material respects.
3.14 Regulated Entities. None of the Borrower, any Person controlling the
------------------
Borrower, or any Subsidiary of the Borrower, is (a) an "investment company"
within the meaning of the Investment Company Act of 1940; or (b) 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.
3.15 Solvency. The Borrower, individually, is and the Borrower and its
--------
Subsidiaries, on a consolidated basis, are, Solvent.
3.16 Labor Relations. There are no strikes, lockouts or other labor
---------------
disputes against the Borrower or any of its Subsidiaries, or, to the best of the
Borrower's knowledge, threatened against or affecting the Borrower or any of its
Subsidiaries, in any case which would reasonably be expected to have a Material
Adverse Effect and no significant unfair labor practice complaint is pending
against the Borrower or any of its Subsidiaries or, to the best knowledge of the
24
<PAGE>
Borrower, threatened against any of them before any Governmental Authority in
any case which could reasonably be expected to have a Material Adverse Effect.
3.17 Copyrights, Patents, Trademarks Licenses, etc. Schedule 3.17
--------------------------------------------- -------------
identifies all United States and foreign patents, trademarks, service marks,
trade names and copyrights, and all registrations and applications for
registration thereof and all licenses thereof, owned or held by Borrower or any
of its Subsidiaries on the Closing Date after giving effect to the Related
Transactions, and identifies the jurisdictions in which such registrations and
applications have been filed. Except as otherwise disclosed in Schedule 3.17, as
-------------
of the Closing Date, Borrower and its Subsidiaries are the sole beneficial
owners of, or have the right to use, free from any restrictions, claims, rights
encumbrances or burdens, the intellectual property identified on Schedule 3.17
-------------
and all other processes, designs, formulas, computer programs, computer software
packages, trade secrets, inventions, product manufacturing instructions,
technology, research and development, know-how and all other intellectual
property that are necessary for the operation of Borrower's and its
Subsidiaries' businesses as being operated on the Closing Date after giving
effect to the Related Transactions. Each patent, trademark, service mark, trade
name, copyright and license listed on Schedule 3.17 is in full force and effect
-------------
except to the extent the failure to be in effect will not and could not
reasonably be expected to have a Material Adverse Effect. Except as set forth in
Schedule 3.17, to the best knowledge of Borrower, as of the Closing Date (a)
- -------------
none of the present or contemplated products or operations of Borrowers or its
Subsidiaries infringes any patent, trademark, service mark, trade name,
copyright, license of intellectual property or other right owned by any other
Person, and (b) there is no pending or threatened claim or litigation against or
affecting Borrower or any of its Subsidiaries contesting the right of any of
them to manufacture, process, sell or use any such product or to engage in any
such operation except for claims and/or litigation which will not and could not
reasonably be expected to have a Material Adverse Effect. None of the trademark
registrations set forth on Schedule 3.17 is an "intent-to-use" registration.
3.18 Subsidiaries. The Borrower has no Subsidiaries or equity investments
------------
in any other corporation or entity other than those specifically disclosed in
Schedule 3.2.
- ------------
3.19 Brokers' Fees; Transaction Fees. Neither the Borrower nor any of its
-------------------------------
Subsidiaries has any obligation to any Person in respect of any finder's,
broker's or investment banker's fee in connection with the transactions
contemplated hereby.
3.20 Insurance. The Borrower and its Subsidiaries and their respective
---------
Properties are insured with financially sound and reputable insurance companies
which are not Affiliates of the Borrower, 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
Borrower or such Subsidiary operates. A true and complete listing of such
insurance, including issuers, coverages and deductibles, has been provided to
the Agent.
25
<PAGE>
3.21 Full Disclosure. None of the representations or warranties made by
---------------
the Borrower or any of its Subsidiaries in the Loan Documents as of the date
such representations and warranties are made or deemed made, and none of the
statements contained in each exhibit, report, statement or certificate furnished
by or on behalf of the Borrower or any of its Subsidiaries in connection with
the Loan Documents (including the offering and disclosure materials, if any,
delivered by or on behalf of the Borrower to the Lenders prior to the Closing
Date), contains any untrue statement of a material fact or omits any material
fact required to be stated therein or necessary to make the statements made
therein, in light of the circumstances under which they are made, not materially
misleading as of the time when made or delivered.
3.22 Year 2000 Issues. Borrower has reviewed its operations and those of
----------------
its Subsidiaries with a view to assessing whether its businesses, or the
businesses of any of its Subsidiaries, will be vulnerable to a Year 2000 Problem
and has a reasonable basis to believe that no Year 2000 Problem exists. Borrower
shall take all actions necessary and commit adequate resources to assure that
its computer-based and other systems (and those of all Subsidiaries) are able to
effectively process data, including dates before, on or after January 1, 2000,
without experiencing any Year 2000 Problem that could cause a Material Adverse
Effect. At the request of Agent, Borrower will provide Agent with assurances and
substantiations (including, but not limited to, the results of internal or
external audit reports) reasonably acceptable to Agent as to the capability of
Borrower and its Subsidiaries to conduct its and their businesses and operations
before, on and after January 1, 2000 without experiencing a Year 2000 Problem.
"Year 2000 Problem" means any significant risk that computer hardware, software
or equipment containing embedded microchips essential to the business or
operations of Borrower or any of its Subsidiaries will not, in the case of dates
or time periods occurring after December 31, 1999, function at least as
effectively and reliably as in the case of times or time periods occurring
before January 1, 2000, including the making of accurate leap year calculations.
3.23 Subordinated Note Agreement and Recapitalization Agreement. As of the
----------------------------------------------------------
date hereof, each of the representations and warranties contained in the
Subordinated Note Agreement and Recapitalization Agreement is true, correct, and
complete in all material respects and is hereby incorporated herein by reference
thereto with the same effect as though set forth herein.
3.24 Foreign Sales. Foreign Sales of Borrower and its Subsidiaries do not
-------------
exceed 15% of aggregate sales of Borrower and its Subsidiaries as of the Closing
Date.
ARTICLE IV - AFFIRMATIVE COVENANTS
----------------------------------
The Borrower covenants and agrees that, so long as any Lender shall have
any Commitment hereunder, or any Loan or other Obligation (other than contingent
indemnification Obligations to the extent no claim giving rise thereto has been
asserted) shall remain unpaid or unsatisfied, unless the Required Lenders waive
compliance in writing:
26
<PAGE>
4.1 Financial Statements. The Borrower shall maintain, and shall cause
--------------------
each of its Subsidiaries to maintain, a system of accounting established and
administered in accordance with sound business practices to permit the
preparation of financial statements in conformity with GAAP (provided that
monthly financial statements shall not be required to have footnote disclosure
and are subject to normal year-end adjustments). The Borrower shall deliver to
the Agent and each Lender in form and detail reasonably satisfactory to the
Agent and the Required Lenders:
(a) as soon as available, but not later than one hundred and five (105)
days after the end of each fiscal year, a copy of the audited consolidated
balance sheet of the Borrower as at the end of such year and the related
consolidated statements of income or operations, shareholders' equity and cash
flows for such fiscal year, setting forth in each case in comparative form the
figures for the previous fiscal year, and accompanied by the opinion of any "Big
Five" or other nationally-recognized independent public accounting firm
reasonably acceptable to the Agent which report shall state that such
consolidated financial statements present fairly in all material respects the
financial position for the periods indicated in conformity with GAAP applied on
a basis consistent with prior years. Such opinion shall not be qualified or
limited because of a restricted or limited examination by such accountant of any
material portion of the Borrower's or any Subsidiary's records; and
(b) as soon as available, but not later than thirty (30) days after
the end of each fiscal month of each year, a copy of the unaudited consolidated
and consolidating balance sheets of the Borrower and each of its Subsidiaries,
and the related consolidated and consolidating statements of income,
shareholders' equity and cash flows as of the end of such month and for the
portion of the fiscal year then ended, all certified on behalf of Borrower by an
appropriate Responsible Officer, in the form of Exhibit 4.1(b), as being
complete and correct and fairly presenting, in accordance with GAAP, the
financial position and the results of operations of the Borrower and the
Subsidiaries, subject to normal year-end adjustments and absence of footnote
disclosure.
4.2 Certificates; Borrowing Base Certificates; Other Information. The
------------------------------------------------------------
Borrower shall furnish to the Agent and each Lender:
(a) simultaneously, with Borrower's delivery of reports, statements and
other information required to be delivered pursuant to the Subordinated Note
Agreement, the Borrower shall deliver to the Agent copies of such reports,
statements and other information, without duplication with that which has been
delivered to Agent in accordance with the terms hereof;
(b) concurrently with the delivery of the financial statements referred to
in subsection 4.1(a) above, and the monthly financial statements required to be
delivered pursuant to subsection 4.1(b) for the months of October 1999, January
2000, April 2000 and the last month of each calendar quarter thereafter,
commencing June 2000, a fully and properly completed Compliance Certificate in
the form of Exhibit 4.2(b), certified on behalf of Borrower by a Responsible
Officer;
27
<PAGE>
(c) promptly after the same are sent, copies of all financial statements
and reports which the Borrower sends to its shareholders generally; and promptly
after the same are filed, copies of all financial statements and regular,
periodic or special reports which the Borrower may make to, or file with, the
Securities and Exchange Commission or any successor or similar Governmental
Authority and copies of any orders in any proceedings to which the Borrower or
any of its Subsidiaries is a party, issued by any governmental agency, foreign,
Federal or state, having jurisdiction over the Borrower or any of its
Subsidiaries;
(d) as soon as available and in any event within fifteen (15) days after
the end of each calendar month, and at such other times as the Agent may
require, a Borrowing Base Certificate, certified on behalf of Borrower by a
Responsible Officer, setting forth the Borrowing Base of Borrower as at the end
of the most-recently ended fiscal month or as at such other date as the Agent
may reasonably require concurrently with the delivery of the financial
statements pursuant to subsection 4.1(b);
(e) together with each delivery of financial statements pursuant to
subsection 4.1(a) and (b): (i) to the extent prepared by Borrower or its
management, a management report, in reasonable detail, signed by the chief
financial officer of the Borrower, describing the operations and financial
condition of the Borrower and its Subsidiaries for the month and the portion of
the fiscal year then ended (or for the fiscal year then ended in the case of
annual financial statements), and (ii) a report setting forth in comparative
form the corresponding figures for the corresponding periods of the previous
fiscal year and the corresponding figures from the most recent projections for
the current fiscal year delivered pursuant to subsection 4.2(g) and discussing
the reasons for any significant variations;
(f) upon the request of the Agent, at any time if an Event of Default
shall have occurred and be continuing but otherwise not more often than once a
year, the Borrower will obtain and deliver to the Agent a report of an
independent collateral auditor satisfactory to the Agent with respect to the
Accounts and Inventory, which report shall indicate whether or not the
information set forth in the Borrowing Base Certificate most recently delivered
is accurate and complete in all material respects;
(g) as soon as available and in any event no later than thirty (30) days
subsequent to each fiscal year of each fiscal year of the Borrower, projections
of the Borrower's (and its Subsidiaries') consolidated and consolidating
financial performance for the forthcoming fiscal year on a month by month basis;
(h) annually, concurrently with the Borrower's delivery of the projections
under subsection 4.2(g), the Borrower shall supplement in writing and deliver to
the Agent revisions of and supplements to the Schedules hereto related to
Article III hereof to the extent necessary to disclose new or changed facts or
circumstances after the Closing Date; provided that delivery or receipt of such
--------
subsequent disclosure shall not constitute a waiver by the Agent or any Lender
or a cure of any Default or Event of Default resulting in connection with the
matters disclosed;
28
<PAGE>
(i) promptly upon receipt thereof, copies of any reports submitted by the
Borrower's certified public accountants in connection with each annual, interim
or special audit or review of any type of the financial statements or internal
control systems of the Borrower made by such accountants, including any comment
letters submitted by such accountants to management of the Borrower in
connection with their services;
(j) from time to time, if the Agent in good faith determines that
obtaining appraisals is necessary in order for the Agent or any Lender to comply
with applicable laws or regulations, and at any time if an Event of Default
shall have occurred and be continuing, the Agent may, or may require the
Borrower to, in either case at the Borrower's expense, obtain appraisals in form
and substance and from appraisers reasonably satisfactory to the Agent stating
the then current fair market value of all or any portion of the real or personal
property of the Borrower or any of its Subsidiaries;
(k) within the period provided in subsection 4.1(a) above, a certificate
of the accountants who render an opinion with respect to such financial
statements, stating that they have reviewed this Agreement and stating further
whether, in making their audit, such accountants have become aware of any
Defaults or Event of Default under any of the terms or provisions of this
Agreement insofar as any such terms or provisions pertain to or involve
accounting matters or determinations, and if any such condition or event then
exists, specifying the nature and period of existence thereof;
(l) (i) written notice of any payment made in respect of Subordinated
Indebtedness Liabilities (as defined in the Subordinated Note
Agreement), such notice to be provided within thirty (30) days
after the date on which such payment is made;
(ii) written notice of any change of address of any Subordinated
Noteholder, within ten (10) days of Borrower receipt of notice
of such change; and
(iii) written notice of any transfer of a Subordinated Note, including
the name and address of the transferee within ten (10) days of
Borrower's receipt of notice of such transfer.
(m) promptly, such additional business, financial, corporate affairs and
other information as the Agent may from time to time reasonably request.
4.3 Notices. The Borrower shall promptly notify the Agent and each
-------
Lender of any of the following, promptly (and in no event later than five (5)
Business Days after a Responsible Officer becoming aware thereof):
29
<PAGE>
(a) the occurrence or existence of any Default or Event of Default, or any
event or circumstance that foreseeably will become a Default or Event of
Default, under any of Sections 5.1, 5.2, 5.3, 5.4, 5.5, 5.9, 5.11 or Article VI;
(b) any breach or non-performance of, or any default under, any
Contractual Obligation of the Borrower or any of its Subsidiaries, or any
violation of, or non-compliance with, any Requirement of Law (in each case,
after the expiration of all applicable notice, grace and cure periods), which
would reasonably be expected to result, either individually or in the aggregate,
in a Material Adverse Effect, including a description of such breach, non-
performance, default, violation or non-compliance and the steps, if any, the
Borrower or such Subsidiary has taken, is taking or proposes to take in respect
thereof;
(c) any dispute, litigation, investigation, proceeding or suspension which
may exist at any time between the Borrower or any of its Subsidiaries and any
Governmental Authority which would reasonably be expected to result, either
individually or in the aggregate, in a Material Adverse Effect;
(d) the commencement of, or any material development in, any litigation or
proceeding affecting the Borrower or any Subsidiary (i) in which the amount of
damages claimed is $500,000 (or its equivalent in another currency or
currencies) or more, (ii) in which injunctive or similar relief is sought and
which, if adversely determined, would reasonably be expected to have a Material
Adverse Effect, or (iii) in which the relief sought is an injunction or other
stay of the performance of this Agreement, any Loan Document or any Related
Agreement;
(e) any of the following if the same would reasonably be expected to have
a Material Adverse Effect: (i) any enforcement, cleanup, removal or other
governmental or regulatory actions instituted, completed or threatened against
the Borrower or any of its Subsidiaries or any of their respective Properties
pursuant to any applicable Environmental Laws, (ii) any other Environmental
Claims, and (iii) any environmental or similar condition on any real property
adjoining the property of the Borrower or any Subsidiary that would reasonably
be anticipated to cause Borrower's or any of its Subsidiaries' property or any
part thereof to be subject to any material restrictions on the ownership,
occupancy, transferability or use of such property under any Environmental Laws;
(f) any of the following if the same would reasonably be expected to have
a Material Adverse Effect, together with a copy of any notice with respect to
such event that may be required to be filed with a Governmental Authority and
any notice delivered by a Governmental Authority to the Borrower or any member
or its Controlled Group with respect to such event:
(i) an ERISA Event;
(ii) the adoption of any new Qualified Plan that is subject to Title
IV of ERISA or Section 412 of the Code by any member of the Controlled
Group;
30
<PAGE>
(iii) the adoption of any amendment to a Qualified Plan that is
subject to Title IV of ERISA or Section 412 of the Code, if such amendment
results in a material increase in benefits or unfunded liabilities; or
(iv) the commencement of contributions by any member of the
Controlled Group to any Qualified Plan that is subject to Title IV of ERISA
or Section 412 of the Code;
(g) any Material Adverse Effect subsequent to the date of the most recent
audited financial statements of the Borrower delivered to the Lenders pursuant
to this Agreement;
(h) any material change in accounting policies or financial reporting
practices by the Borrower or any of its Subsidiaries;
(i) any labor controversy resulting in or threatening to result in any
strike, work stoppage, boycott, shutdown or other labor disruption against or
involving the Borrower or any of its Subsidiaries if the same could reasonably
be expected to have a Material Adverse Effect; and
(j) the creation, establishment or acquisition of any Subsidiary.
Each notice pursuant to this Section shall be accompanied by a written statement
by a Responsible Officer on behalf of Borrower setting forth details of the
occurrence referred to therein, and stating what action the Borrower proposes to
take with respect thereto and at what time.
4.4 Preservation of Corporate Existence, Etc. The Borrower shall, and
-----------------------------------------
shall cause each of its Subsidiaries to:
(a) preserve and maintain in full force and effect its corporate existence
and good standing under the laws of its state or jurisdiction of incorporation
except, with respect to Subsidiaries, in connection with transactions permitted
by Section 5.3;
(b) preserve and maintain in full force and effect all rights, privileges,
qualifications, permits, licenses and franchises necessary in the normal conduct
of its business except in connection with transactions permitted by Section 5.3
and sales of assets permitted by Section 5.2 and except as could not reasonably
be expected to have a Material Adverse Effect;
(c) use its reasonable efforts, in the Ordinary Course of Business, to
preserve its business organization and preserve the goodwill and business of the
customers, suppliers and others having material business relations with it; and
(d) preserve or renew all of its registered trademarks, trade names and
service marks, the non-preservation of which could reasonably be expected to
have a Material Adverse Effect.
31
<PAGE>
4.5 Maintenance of Property. The Borrower shall maintain, and shall cause
-----------------------
each of its Subsidiaries to maintain, and preserve all its Property which is
used or useful in its business in good working order and condition, ordinary
wear and tear excepted and make all necessary repairs thereto and renewals and
replacements thereof except where the failure to do so could not reasonably be
expected to have a Material Adverse Effect.
4.6 Insurance. The Borrower shall maintain, and shall cause each of its
---------
Subsidiaries to maintain, with financially sound and reputable independent
insurers, insurance with respect to its Properties and business against loss or
damage of the kinds customarily insured against by Persons engaged in the same
or similar business, of such types and in such amounts as are customarily
carried under similar circumstances by such other Persons, including workers'
compensation insurance, public liability and property and casualty insurance,
which amounts shall not be reduced by the Borrower or any of its Subsidiaries in
the absence of thirty (30) days' prior notice to the Agent and business
interruption insurance in an amount not less than projected EBITDA (EBITDA is
computed in the manner set forth in Exhibit 4.2(b)) for a period of not less
than six months and, in any event, in an amount not less than $10,000,000. All
property damage and casualty insurance shall name the Agent as loss
payee/mortgagee, all liability insurance shall name the Agent and the Lenders as
additional insureds and all business interruption insurance shall name Agent as
assignee. Upon request of the Agent or any Lender, the Borrower shall furnish
the Agent, with sufficient copies for each Lender, at reasonable intervals (but
not more than once per calendar year) a certificate of a Responsible Officer on
behalf of Borrower (and, if requested by the Agent, any insurance broker of the
Borrower) setting forth the nature and extent of all insurance maintained by the
Borrower and its Subsidiaries in accordance with this Section 4.6. Unless
Borrower provides Agent with evidence of the insurance coverage required by this
Agreement, Agent may purchase insurance at Borrower's expense to protect Agent's
and Lenders' interests in Borrower's and its Subsidiaries' properties. This
insurance may, but need not, protect Borrower's and its Subsidiaries' interests.
The coverage that Agent purchases may not pay any claim that Borrower or any
Subsidiary makes or any claim that is made against Borrower or any Subsidiary in
connection with said property. Borrower may later cancel any insurance purchased
by Agent, but only after providing Agent with evidence that Borrower has
obtained insurance as required by this Agreement. If Agent purchases insurance,
Borrower will be responsible for the costs of that insurance, including interest
and any other charges Agent may impose in connection with the placement of
insurance, until the effective date of the cancellation or expiration of the
insurance. The costs of the insurance may be added to the Obligations. The costs
of the insurance may be more than the cost of insurance Borrower may be able to
obtain on its own.
4.7 Payment of Obligations. The Borrower shall, and shall cause its
----------------------
Subsidiaries to, pay, discharge and perform as the same shall become due and
payable or required to be performed, all their respective obligations and
liabilities, including:
(a) all tax liabilities, assessments and governmental charges or levies
upon it or its properties or assets, unless the same are being contested in good
faith by appropriate proceedings
32
<PAGE>
diligently prosecuted which stay the enforcement of any Lien and for which
adequate reserves in accordance with GAAP are being maintained by the Borrower
or such Subsidiary;
(b) all lawful claims which, if unpaid, would by law become a Lien upon
its Property unless the same are being contested in good faith by appropriate
proceedings diligently prosecuted which stay the imposition or enforcement of
the Lien and for which adequate reserves in accordance with GAAP are being
maintained by Borrower;
(c) (i) all Indebtedness evidenced by Subordinated Notes, as and when due
and payable, but subject to any subordination provisions contained herein and/or
in any instrument or agreement evidencing such Indebtedness and (ii) all other
Indebtedness, as and when due and payable, but subject to any subordination
provisions contained herein and/or in any instrument or agreement evidencing
such other Indebtedness except where the failure to pay would not reasonably be
expected to have a Material Adverse Effect; and
(d) the performance of all obligations under any Contractual Obligation to
which Borrower or any of its Subsidiaries is bound, or to which it or any of its
properties is subject, including the Related Agreements, except where the
failure to perform would not reasonably be expected to have a Material Adverse
Effect.
4.8 Compliance with Laws. The Borrower shall comply, and shall cause
--------------------
each of its Subsidiaries to comply, in all material respects, with all
Requirements of Law of any Governmental Authority having jurisdiction over it or
its business (including, without limitation, all Environmental Laws), except (a)
such as may be contested in good faith by appropriate proceedings diligently
prosecuted without risk of loss of any Collateral, (b) as to which a bona fide
dispute exists, (c) for which appropriate reserves have been established on the
Borrower's financial statements and (d) where the failure to comply could not
reasonably be expected to have, either individually or in the aggregate, a
Material Adverse Effect.
4.9 Inspection of Property and Books and Records. The Borrower shall
--------------------------------------------
maintain and shall cause each of its Subsidiaries to maintain proper books of
record and account, in which full, true and correct entries in conformity with
GAAP consistently applied shall be made of all financial transactions and
matters involving the assets and business of the Borrower and such Subsidiaries.
The Borrower shall permit, and shall cause each of its Subsidiaries to permit,
representatives and independent contractors of the Agent (at the expense of the
Borrower not to exceed one (1) time per year unless an Event of Default has
occurred and is continuing), and any Lender (at such Lender's expense unless an
Event of Default shall have occurred and be continuing) which may accompany
Agent, to visit and inspect any of their respective Properties, to examine their
respective corporate, financial and operating records, and make copies thereof
or abstracts therefrom, and to discuss their respective affairs, finances and
accounts with their respective directors, officers, and independent public
accountants, at such reasonable times during normal business hours and as often
as may be reasonably desired, upon reasonable advance notice to the Borrower;
provided, however, when an Event of Default exists the Agent or any Lender
- -------- -------
33
<PAGE>
may do any of the foregoing at the expense of the Borrower at any time during
normal business hours and without advance notice.
4.10 Use of Proceeds. The Borrower shall use the proceeds of the Loans
---------------
solely as follows: (a) fund the Merger, (b) pay costs and expenses of the
Related Transactions and costs and expenses required to be paid pursuant to
subsection 2.1, and (c) for working capital and other general corporate purposes
not in contravention of any Requirement of Law and not in violation of this
Agreement, including, but not limited to, refinancing existing debt and
financing certain Capital Expenditures.
4.11 Solvency. The Borrower, individually, and the Borrower and its
--------
Subsidiaries, on a consolidated basis, shall at all times be Solvent.
4.12 Further Assurances. (a) The Borrower shall ensure that all written
------------------
information, exhibits and reports furnished to the Agent or the Lenders do not
and will not contain any untrue statement of a material fact and do not and will
not omit to state any material fact or any fact necessary to make the statements
contained therein not misleading in light of the circumstances in which made,
and will promptly disclose to the Agent and the Lenders and correct any defect
or error that may be discovered therein or in any Loan Document or in the
execution, acknowledgment or recordation thereof.
(b) Promptly upon request by the Agent, the Borrower shall (and shall
cause any of its Subsidiaries to) take such additional actions as the Agent may
reasonably require from time to time in order: (i) to carry out more effectively
the purposes of this Agreement or any other Loan Document; (ii) to subject to
the Liens created by any of the Collateral Documents any of the Properties,
rights or interests covered by any of the Collateral Documents; (iii) to perfect
and maintain the validity, effectiveness and priority of any of the Collateral
Documents and the Liens intended to be created thereby; and (iv) to better
assure, convey, grant, assign, transfer, preserve, protect and confirm to the
Agent and Lenders the rights granted or now or hereafter intended to be granted
to the Agent and the Lenders under any Loan Document or under any other document
executed in connection therewith. Without limiting the generality of the
foregoing and except as otherwise approved in writing by Agent and Required
Lenders, Borrower shall cause each of its Subsidiaries to guaranty the
Obligations and to cause each such Subsidiary to grant to Agent, for the benefit
of Agent and Lenders, a security interest in all of such Subsidiary's property
to secure such guaranty. Furthermore and except as otherwise approved in
writing by Lenders, Borrower shall pledge the stock or other equity interest of
each of its Subsidiaries to Agent, for the benefit of Agent and Lenders, to
secure the Obligations. In connection with each pledge of stock or other equity
interests, Borrower shall deliver, or cause to be delivered, to Agent, the items
described in subsection 2.1(d)(iii), if applicable.
4.13 Interest Rate Protection. Within ninety (90) days of the Closing
------------------------
Date, the Borrower shall enter into Rate Contracts providing protection against
fluctuations in interest rates with one or more financial institutions
reasonably satisfactory to Agent with respect to at least 50% of the
34
<PAGE>
amount of the Aggregate Term Loan Commitment on the date hereof, which
agreements shall provide for not less than a three (3) year term and containing
such other terms as are customary and are reasonably satisfactory to the Agent.
4.14 Foreign Sales. In the event, Foreign Sales of Borrower and its
-------------
Subsidiaries exceeds 15% of aggregate sales of Borrower and its Subsidiaries,
Borrower covenants and agrees to (i) grant to Agent, for the benefit of Lenders
upon Agent's reasonable request therefor, a security interest in foreign assets
of Borrower and its Subsidiaries (i.e., assets located outside the United States
----
of America or Canada, which shall be governed by the provisions of Section
4.12), including copyrights, patents, trademarks, and licenses, and shall take
such additional actions as Agent may reasonably require to grant to the Agent
and Lenders such rights granted in foreign assets and to perfect the security
interests of the Agent, for the benefit of Agent and the Lenders, in accordance
with the applicable law and (ii) provide to Agent prompt written notice of such
event together with such other information as Agent may reasonably request with
respect thereto.
4.15 Merger. Borrower shall cause the Merger to occur on the Closing Date
------
and shall comply with the provisions of subsection 5.3.
4.16 Intellectual Property. Borrower covenants and agrees to (a) use
---------------------
commercially reasonable efforts to obtain and record as soon as reasonably
possible releases of all Liens encumbering intellectual property identified on
Schedule 4.16, and, if obtained, to provide evidence thereto to Agent; and
(b) cause to be recorded, as soon as reasonably possible but in no event
later than 90 days after the Closing Date, assignments from B&L to Bushnell of
intellectual property identified in the intellectual property searches delivered
by Borrower to Agent as being owned by B&L which were previously to have been
assigned to Bushnell, and to provide evidence thereof to Agent.
ARTICLE V - NEGATIVE COVENANTS
------------------------------
The Borrower covenants and agrees that, so long as any Lender shall
have any Commitment hereunder, or any Loan or other Obligation (other than
contingent indemnification Obligations to the extent no claim giving rise
thereto has been asserted) shall remain unpaid or unsatisfied, unless the
Required Lenders waive compliance in writing:
5.1 Limitation on Liens. The Borrower shall not, and shall not suffer or
-------------------
permit any of its Subsidiaries to, directly or indirectly, make, create, incur,
assume or suffer to exist any Lien upon or with respect to any part of its
Property, whether now owned or hereafter acquired, other than the following
("Permitted Liens"):
---------------
35
<PAGE>
(a) any Lien existing on the Property of the Borrower or its Subsidiaries
on the Closing Date and set forth in Schedule 5.1 securing Indebtedness
------------
outstanding on such date and permitted by Section 5.5(c), including replacement
Liens on the Property currently subject to such Liens;
(b) any Lien created under any Loan Document;
(c) Liens for taxes, fees, assessments or other governmental charges (i)
which are not delinquent or remain payable without penalty, or (ii) the non-
payment thereof is permitted by Section 4.7, provided that, in respect of this
--------
clause (ii), all such Liens secure claims in the aggregate at any time
outstanding for Borrower and its Subsidiaries not exceeding $100,000;
(d) carriers', warehousemen's, mechanics', landlords', materialmen's,
repairmen's or other similar Liens arising in the Ordinary Course of Business
which are not delinquent for more than ninety (90) days or remain payable
without penalty or which are being contested in good faith and by appropriate
proceedings diligently prosecuted, which proceedings have the effect of
preventing the forfeiture or sale of the Property subject thereto and for which
adequate reserves in accordance with GAAP are being maintained;
(e) Liens (other than any Lien imposed by ERISA) consisting of pledges or
deposits required in the Ordinary Course of Business in connection with workers'
compensation, unemployment insurance and other social security legislation or to
secure the performance of tenders, statutory obligations, surety, stay, customs
and appeals bonds, bids, leases, governmental contract, trade contracts,
performance and return of money bonds and other similar obligations (exclusive
of obligations for the payment of borrowed money) or to secure liability to
insurance carriers;
(f) Liens consisting of judgment or judicial attachment liens, provided
that the enforcement of such Liens is effectively stayed and all such Liens
secure claims in the aggregate at any time outstanding for the Borrower or its
Subsidiaries do not exceed $500,000;
(g) easements, rights-of-way, zoning and other restrictions, minor defects
or other irregularities in title, and other similar encumbrances incurred in the
Ordinary Course of Business which, in the aggregate, are not substantial in
amount, and which do not in any case materially detract from the value of the
Property subject thereto or interfere in any material respect with the ordinary
conduct of the businesses of the Borrower and its Subsidiaries;
(h) Liens on any Property acquired or held by the Borrower or its
Subsidiaries in the Ordinary Course of Business, securing Indebtedness incurred
or assumed for the purpose of financing (or refinancing) all or any part of the
cost of acquiring such Property and permitted under subsection 5.5(d); provided
--------
that (i) any such Lien attaches to such Property concurrently with or within
- ----
twenty (20) days after the acquisition thereof, (ii) such Lien attaches solely
to the Property so acquired in such transaction, and (iii) the principal amount
of the debt secured thereby does not exceed 100% of the cost of such Property;
36
<PAGE>
(i) Liens securing Capital Lease Obligations permitted under subsection
5.5(d);
(j) any interest or title of a lessor or sublessor under any lease
permitted by this Agreement;
(k) Liens arising from precautionary UCC financing statements filed under
any lease permitted by this Agreement; and
(l) Liens arising solely by virtue of any statutory or common law
provision relating to banker's liens, rights of set-off or similar rights and
remedies as to deposit accounts or other funds maintained with a creditor
depository institution.
5.2 Disposition of Assets. The Borrower shall not, and shall not suffer
---------------------
or permit any of its Subsidiaries to, directly or indirectly, sell, assign,
lease, convey, transfer or otherwise dispose of (whether in one or a series of
transactions) any Property (including accounts and notes receivable, with or
without recourse) or enter into any agreement to do any of the foregoing,
except, in each instance, to the extent permitted under the Subordinated Note
Agreement:
(a) dispositions of inventory, or used, worn-out or surplus equipment, all
in the Ordinary Course of Business;
(b) dispositions not otherwise permitted hereunder which are made for fair
market value and the mandatory prepayment in the amount of the Net Proceeds of
such disposition is made as provided in subsection 1.8; provided, that (i) at
--------
the time of any disposition, no Event of Default shall exist or shall result
from such disposition, (ii) the aggregate sales price from such disposition
shall be paid in cash, and (iii) the aggregate value of all assets so sold by
the Borrower and its Subsidiaries, together, shall not exceed in any fiscal year
$1,000,000 and; (iv) after giving effect to such disposition, Borrower is in
compliance on a proforma basis with the covenants set forth in Article 6,
recomputed for the most recent month for which financial statements have been
delivered; and
(c) mergers, consolidations and dispositions permitted by Section 5.3.
5.3 Consolidations and Mergers. The Borrower shall not, and shall not
--------------------------
suffer or permit any of its Subsidiaries to, merge, consolidate with or into, or
convey, transfer, lease or otherwise dispose of (whether in one transaction or
in a series of transactions) all or substantially all of its assets (whether now
owned or hereafter acquired) to or in favor of any Person, except upon not less
than five (5) Business Days prior written notice to Agent, any Subsidiary of the
Borrower may merge with, or dissolve or liquidate into, a Wholly-Owned
Subsidiary of Borrower, provided that such Wholly-Owned Subsidiary shall be the
--------
continuing or surviving corporation.
5.4 Loans and Investments. The Borrower shall not and shall not suffer or
---------------------
permit any of its Subsidiaries to (i) purchase or acquire, or make any
commitment therefor, any capital stock,
37
<PAGE>
equity interest, or any obligations or other securities of, or any interest in,
any Person, including the establishment or creation of a Subsidiary, or (ii)
make or commit to make any Acquisitions, or any other acquisition of all or
substantially all of the assets of another Person, or of any business or
division of any Person, including without limitation, by way of merger,
consolidation or other combination or (iii) make or commit to make any advance,
loan, extension of credit or capital contribution to or any other investment in,
any Person including any Affiliate of the Borrower (the items described in
clauses (i), (ii) and (iii) are referred to as "Investments"), except for:
(a) Investments in cash and Cash Equivalents;
(b) extensions of credit by the Borrower to any of its Wholly-Owned
Subsidiaries provided the obligations of each obligor shall be evidenced by
notes, which notes shall be pledged to Agent, for the benefit of Agent and
Lenders, and have such other terms as Agent may reasonably require;
(c) loans and advances to employees in the Ordinary Course of Business not
to exceed $200,000 in the aggregate at any time outstanding;
(d) reasonable travel, relocation and similar advance to officers and
employees of Borrower made in the Ordinary Course of Business;
(e) loans and advances to customers, distributors and sales
representatives of Borrower in the Ordinary Course of Business, not to exceed
$200,000 at any one time outstanding;
(f) loans, advances and extensions of credit existing on the date hereof
and listed in Schedule 5.4 attached hereto and made a part hereof; and
(g) non-cash loans and advances to employees of Borrower used to acquire
stock of Borrower.
5.5 Limitation on Indebtedness. The Borrower shall not, and shall not
--------------------------
suffer or permit any of its Subsidiaries to, create, incur, assume, suffer to
exist, or otherwise become or remain directly or indirectly liable with respect
to, any Indebtedness, except:
(a) Indebtedness incurred pursuant to this Agreement;
(b) Indebtedness consisting of Contingent Obligations described in clause
(i) of the definition thereof and permitted pursuant to Section 5.9;
(c) Indebtedness existing on the Closing Date and set forth in Schedule
--------
5.5 including extensions and refinancings thereof which do not increase the
- ---
principal amount of such Indebtedness as of the date of such extension or
refinancing;
38
<PAGE>
(d) Indebtedness not to exceed $2,000,000 in the aggregate at any time
outstanding, consisting of Capital Lease Obligations or secured by Liens
permitted by subsection 5.1(h);
(e) unsecured intercompany Indebtedness permitted pursuant to Section
5.4(b);
(f) other unsecured Indebtedness not exceeding in the aggregate at any
time outstanding $500,000;
(g) Subordinated Indebtedness not to exceed the principal amount of
$22,800,000 evidenced by the Subordinated Notes; and
(h) Indebtedness not to exceed the principal amount of $5,000,000, as the
same may be increased as the result of the accrual of interest, evidenced by the
Seller Notes.
5.6 Transactions with Affiliates. The Borrower shall not, and shall not
----------------------------
suffer or permit any of its Subsidiaries to, enter into any transaction with any
Affiliate of the Borrower or of any such Subsidiary, except:
(a) as expressly permitted by this Agreement; or
(b) in the Ordinary Course of Business and pursuant to the reasonable
requirements of the business of the Borrower or such Subsidiary;
and, in the case of clause (b), upon fair and reasonable terms no less favorable
to the Borrower or such Subsidiary than would obtain in a comparable arm's-
length transaction with a Person not an Affiliate of the Borrower or such
Subsidiary and which are disclosed in writing to Agent.
5.7 Management Fees and Compensation. The Borrower shall not, and shall
--------------------------------
not permit any of its Subsidiaries to pay any management, consulting or similar
fees to any Affiliate of the Borrower or to any officer, director or employee of
the Borrower or any of its Subsidiaries or any Affiliate of the Borrower except,
in each instance to the extent permitted under the Subordinated Note Agreement
(a) payment of reasonable compensation to officers and employees for actual
services rendered to Borrower and its Subsidiaries in the Ordinary Course of
Business, (b) payment of directors' fees and reimbursement of actual out-of-
pocket expenses incurred in connection with attending board of director meetings
not to exceed in the aggregate, with respect to all such items, $100,000 in any
fiscal year of Borrower, (c) payment on the Closing Date of a transaction fee to
the WPP Group in the amount of $1,000,000 in the aggregate, (d) a transaction
fee to the WPP Group in the amount of one percent of cash equity contributed to
Borrower after the Closing Date, payable from such cash equity proceeds and (e)
annual management fee to Wind Point Investors, L.L.C. and/or Wind Point
Investors IV, L.P., in the aggregate amount of $360,000 payable in equal
quarterly installments on the 15th day of each January, April, July and October;
provided, however, that no such fees described in clause (e) shall be paid
during any period while any Default or Event of Default under subsection 7.1(a)
or 7.1(c) (due to any failure
39
<PAGE>
by Borrower to perform or observe any term, covenant or agreement contained in
Article VI) has occurred and is continuing or would arise as a result of such
payment.
5.8 Use of Proceeds. The Borrower shall not and shall not suffer or permit
---------------
any of its Subsidiaries to use any portion of the Loan proceeds, directly or
indirectly, to purchase or carry Margin Stock or repay or otherwise refinance
Indebtedness of the Borrower or others incurred to purchase or carry Margin
Stock, or otherwise in any manner which is in contravention of any Requirement
of Law or in violation of this Agreement.
5.9 Contingent Obligations. The Borrower shall not, and shall not suffer
----------------------
or permit any of its Subsidiaries to, create, incur, assume or suffer to exist
any Contingent Obligations except in respect of the Obligations and except:
(a) endorsements for collection or deposit in the Ordinary Course of
Business;
(b) Rate Contracts entered into in the Ordinary Course of Business with
Agent's prior written consent not to be unreasonably withheld or pursuant to
Section 4.13;
(c) Contingent Obligations of the Borrower and its Subsidiaries existing
as of the Closing Date and listed in Schedule 5.9, including extension and
------------
renewals thereof which do not increase the amount of such Contingent Obligations
as of the date of such extension or renewal;
(d) Contingent Obligations incurred in the Ordinary Course of Business
with respect to surety and appeal bonds, performance bonds and other similar
obligations;
(e) Contingent Obligations arising under indemnity agreements to title
insurers to cause such title insurers to issue to Agent title insurance
policies;
(f) Contingent Obligations arising with respect to customary
indemnification obligations in favor of (i) sellers in connection with
Acquisitions permitted hereunder and (ii) purchasers in connection with
dispositions permitted under subsection 5.2(b); and
(g) Contingent Obligations in favor of Subordinated Noteholders evidenced
by subordinated Subsidiary Guaranty Agreements executed and delivered pursuant
to the Subordinated Note Agreement provided in the event a Subsidiary of
Borrower is released of its obligations under the corresponding guaranty
executed and delivered such Subsidiary in favor of Agent and Lenders, such
Subsidiary shall be released of its obligations under the Subsidiary Guaranty
Agreement.
5.10 Compliance with ERISA. The Borrower shall not, and shall not suffer or
---------------------
permit any of its Subsidiaries to:
40
<PAGE>
(a) terminate any Plan subject to Title IV of ERISA so as to result in any
material liability to the Borrower;
(b) permit to exist any ERISA Event or any other event or condition, which
would reasonably be expected to have a Material Adverse Effect;
(c) make a complete or partial withdrawal (within the meaning of ERISA
Section 4201) from any Multiemployer Plan so as to result in any material
liability to the Borrower;
(d) enter into any new Plan or modify any existing Plan so as to increase
its obligations thereunder which would reasonably be expected to have a Material
Adverse Effect; or
(e) permit the present value of all nonforfeitable accrued benefits under
any Plan (using the actuarial assumptions utilized by the PBGC upon termination
of a Plan) materially to exceed the fair market value of Plan assets allocable
to such benefits, all determined as of the most recent valuation date for each
such Plan.
5.11 Restricted Payments. The Borrower shall not, and shall not suffer or
-------------------
permit any of its Subsidiaries to, (i) declare or make any dividend payment or
other distribution of assets, properties, cash, rights, obligations or
securities on account of any shares of any class of its capital stock,
partnership interests, membership interests or other equity securities, (ii)
purchase, redeem or otherwise acquire for value any shares of its capital stock,
partnership interests, membership interests or other equity securities or any
warrants, rights or options to acquire such shares, interests or securities now
or hereafter outstanding or (iii) make any payment or prepayment of principal
of, premium, if any, interest, redemption, exchange, purchase, retirement,
defeasance, sinking fund or similar payment with respect to, Subordinated
Indebtedness (the items described in clauses (i), (ii) and (iii) are referred to
as "Restricted Payments"); except that any Wholly-Owned Subsidiary of the
Borrower may declare and pay dividends to the Borrower or any Wholly-Owned
Subsidiary of the Borrower, and except that the Borrower may in each instance in
(b), (c), (d) or (e) below, to the extent permitted under the Subordinated Note
Agreement:
(a) declare and make dividend payments or other distributions payable
solely in its common stock;
(b) redeem from management stockholders shares of Borrower common stock or
warrants or options to acquire any such shares provided all of the following
conditions are satisfied:
(i) no Default or Event of Default has occurred and is continuing or
would arise as a result of such redemption;
41
<PAGE>
(ii) after giving effect to such redemption, Borrower is in
compliance on a pro forma basis with the covenants set forth in
Article 6, recomputed for the most recent quarter for which
financial statements have been delivered;
(iii) the aggregate redemptions permitted (x) in any fiscal year of
Borrower shall not exceed $500,000 and (y) during the term of
this Agreement shall not exceed $2,000,000; and
(iv) after giving effect to such redemption, the Maximum Revolving
Loan Balance exceeds the aggregate outstanding principal
balance of Revolving Loans by not less than $3,000,000;
(c) make regularly scheduled payments of interest with respect to
Subordinated Indebtedness evidenced by Subordinated Notes and Seller Notes
provided no Default or Event of Default has occurred and is continuing or would
arise as a result of such payment;
(d) redeem stock in accordance with Sections 1.1 and/or 1.2 of the WSR
Stockholders Agreement provided the aggregate redemptions permitted during the
term of this Agreement pursuant to Sections 1.1 and 1.2 of the WSR Stockholders
Agreement shall not exceed $310,000; and
(e) issue common stock of Borrower in connection with the exercise of
warrants initially issued to Subordinated Noteholders.
5.12 Change in Business. The Borrower shall not, and shall not permit any
------------------
of its Subsidiaries to, engage in any material line of business substantially
different from those lines of business carried on by it on the date hereof.
5.13 Change in Structure. Except as expressly permitted under Section 5.3,
-------------------
the Borrower shall not and shall not permit any of its Subsidiaries to, make any
material changes in its equity capital structure (including in the terms of its
outstanding stock), or amend its certificate of incorporation or by-laws in a
manner adverse to, or which would reasonably be expected to be adverse to, Agent
or any Lender or which would, or would be reasonably expected to, adversely
affect Borrower's or any of its Subsidiaries' ability to perform their
respective Obligations hereunder or under the other Loan Documents unless
required by law.
5.14 Accounting Changes. The Borrower shall not, and shall not suffer or
------------------
permit any of its Subsidiaries to, make any significant change in accounting
treatment or reporting practices, except as required by GAAP, or change the
fiscal year of the Borrower or of any of its consolidated Subsidiaries.
42
<PAGE>
5.15 Amendments to Related Agreements and Subordinated Indebtedness.
--------------------------------------------------------------
(a) The Borrower shall not and shall not permit any of its
Subsidiaries, to (i) amend, supplement, waive or otherwise modify any provision
of, the Related Agreements in a manner adverse to Agent or Lenders or which
would reasonably be expected to have a Material Adverse Effect, or (ii) take or
fail to take any action under the Related Agreements that could reasonably be
expected to have a Material Adverse Effect.
(b) Borrower shall not and shall not permit any of its Subsidiaries
directly or indirectly to change or amend the terms of any Subordinated
Indebtedness if the effect of such amendment is to: (i) increase the interest
rate on such Indebtedness (excluding the application of the original default
rate of interest); (ii) shorten or accelerate the dates upon which payments of
principal or interest are due on such Indebtedness; (iii) change any event of
default or add or make more restrictive any covenant with respect to such
Indebtedness; (iv) change the prepayment provisions of such Indebtedness; (v)
change the subordination provisions thereof (or the subordination terms of any
guaranty thereof); or (vi) change or amend any other term if such change or
amendment would materially increase the obligations of the obligor or confer
additional material rights on the holder of such Indebtedness in a manner
adverse to Borrower, any of its Subsidiaries, Agent or Lenders.
(c) Borrower shall not and shall not permit any of its Subsidiaries
to amend or otherwise modify the B&L License Agreement in a manner materially
adverse to Borrower or any of its Subsidiaries.
5.16 Intentionally Omitted.
---------------------
5.17 No Negative Pledges. Borrower will not, and will not permit any of its
-------------------
Subsidiaries, directly or indirectly, to create or otherwise cause or suffer to
exist or become effective any consensual restriction or encumbrance of any kind
on the ability of any such Subsidiary to pay dividends or make any other
distribution on any of such Subsidiary's equity securities or to pay fees,
including management fees, or make other payments and distributions to Borrower
or any of its Subsidiaries.
ARTICLE VI - FINANCIAL COVENANTS
--------------------------------
The Borrower covenants and agrees that, so long as any Lender shall have
any Commitment hereunder, or any Loan or other Obligation (other than contingent
indemnification Obligations to the extent no claim giving rise thereto has been
asserted) shall remain unpaid or unsatisfied, unless the Required Lenders waive
compliance in writing:
6.1 Capital Expenditures. The Borrower and its Subsidiaries shall not make
--------------------
or commit to make Capital Expenditures for any calendar year (or shorter period)
set forth below to exceed
43
<PAGE>
the amount set forth in the table below (the "Capital Expenditure Limitation")
with respect to such calendar year (or shorter period):
Fiscal Period Capital Expenditure Limitation
------------- ------------------------------
August 1, 1999 through
December 31, 1999 $1,050,000
Calendar Year 2000 2,000,000
Calendar Year 2001 3,000,000
Calendar Year 2002 3,500,000
Each calendar year thereafter 4,000,000
"Capital Expenditures" shall be calculated in the manner set forth in Exhibit
4.2(b).
6.2 Leverage Ratio. The Borrower shall not permit its Leverage Ratio
--------------
determined as of any date set forth below for the twelve months then ended to be
greater than the maximum ratio set forth in the table below opposite such date:
Date Maximum Leverage Ratio
---- ----------------------
October 31, 1999 6.1
January 31, 2000 6.0
April 30, 2000 5.9
June 30, 2000 5.8
September 30, 2000 5.7
December 31, 2000 5.6
March 31, 2001 5.5
June 30, 2001 5.25
September 30, 2001 5.0
December 31, 2001 4.75
44
<PAGE>
March 31, 2002 4.6
June 30, 2002 4.4
September 30, 2002 4.3
December 31, 2002 4.1
March 31, 2003 4.0
June 30, 2003 3.8
September 30, 2003 3.6
December 31, 2003 3.4
March 31, 2004 3.2
Last day of each calendar quarter
thereafter 3.0
"Leverage Ratio" shall be calculated in the manner set forth in Exhibit 4.2(b).
6.3 Fixed Charge Coverage Ratio. (a) The Borrower shall not permit its
---------------------------
Fixed Charge Coverage Ratio determined for any period set forth below to be less
than the minimum ratio set forth in the table below opposite such date:
Date Minimum Fixed Charge Ratio
---- --------------------------
August 1, 1999 through
October 31, 1999 1.05
August 1, 1999 through
January 31, 2000 1.05
August 1, 1999 through
April 30, 2000 1.05
August 1, 1999 through
June 30, 2000 1.05
45
<PAGE>
(b) The Borrower shall not permit its Fixed Charge Coverage Ratio
determined as of the last day of any calendar quarter set forth below for the
twelve months then ended to be less than the minimum ratio set forth in the
table below opposite such date:
Date Minimum Fixed Coverage Ratio
---- ----------------------------
Calendar quarter ending
September 30, 2000 1.05
Each calendar quarter commencing
December 31, 2000 and ending
December 31, 2001 1.1
Each calendar quarter commencing
March 31, 2002 and ending
December 31, 2002 1.15
Each calendar quarter thereafter 1.2
"Fixed Charge Coverage Ratio" shall be calculated in the manner set forth in
Exhibit 4.2(b).
6.4 Interest Coverage Ratio. (a) The Borrower shall not permit its
-----------------------
Interest Coverage Ratio determined for any period set forth below to be less
than the minimum ratio set forth in the table below opposite such period:
Period Ending Minimum Interest Coverage Ratio
------------- -------------------------------
August 1, 1999 through
October 31, 1999 1.6
August 1, 1999 through
January 31, 2000 1.6
August 1, 1999 through
April 30, 2000 1.6
August 1, 1999 through
June 30, 2000 1.6
(b) The Borrower shall not permit its Interest Coverage Ratio determined
as of the last day of any calendar quarter set forth below for the twelve months
then ended to be less than the minimum ratio set forth in the table below
opposite such date:
46
<PAGE>
Period Ending Minimum Interest Coverage Ratio
------------- -------------------------------
September 30, 2000 1.75
December 31, 2000 1.75
March 31, 2001 1.75
June 30, 2001 1.75
September 30, 2001 1.85
December 31, 2001 1.85
March 31, 2002 2.0
June 30, 2002 2.0
September 30, 2002 2.25
December 31, 2002 2.25
March 31, 2003 2.25
June 30, 2003 2.25
Each calendar quarter
thereafter 2.50
"Interest Coverage Ratio" shall be calculated in the manner set forth in Exhibit
4.2(b).
6.5 Minimum EBITDA. (a) Borrower shall not permit EBITDA for any period
--------------
set forth below to be less than the amount set forth below for such period:
Period Minimum EBITDA
------ --------------
August 1, 1999 through
October 31, 1999 $ 6,000,000
August 1, 1999 through
January 31, 2000 9,500,000
47
<PAGE>
August 1, 1999 through
April 30, 2000 10,750,000
August 1, 1999 through
June 30, 2000 12,500,000
(b) The Borrower shall not permit EBITDA for the twelve month period
ending on last of any calendar quarter set forth below to be less than the
amount set forth below for such period:
Period Minimum EBITDA
------ --------------
September 30, 2000 $14,750,000
December 31, 2000 15,125,000
March 31, 2001 15,500,000
June 30, 2001 16,000,000
September 30, 2001 17,000,000
December 31, 2001 18,000,000
March 31, 2002 18,250,000
June 30, 2002 19,000,000
September 30, 2002 20,000,000
December 31, 2002 20,750,000
March 31, 2003 21,750,000
June 30, 2003 22,500,000
September 30, 2003 23,250,000
December 31, 2003 23,750,000
March 31, 2004 24,000,000
June 30, 2004 24,500,000
48
<PAGE>
September 30, 2004 25,000,000
Each calendar quarter
thereafter 26,000,000
ARTICLE VII - EVENTS OF DEFAULT
-------------------------------
7.1 Event of Default. Any of the following shall constitute an "Event of
---------------- --------
Default":
- -------
(a) Non-Payment. The Borrower fails to pay, (i) when and as required to be
-----------
paid herein, any amount of principal of any Loan, including after maturity of
the Loans, whether by acceleration or otherwise, (ii) within five (5) days after
the same shall become due, any interest on any Loan, provided, however, such
five (5) day grace period shall only apply and be available not more than two
(2) times within any twelve (12) month period, or (iii) within five (5) days
after the same shall become due, any fee or any other amount payable hereunder
or pursuant to any other Loan Document; or
(b) Representation or Warranty. Any representation or warranty by the
--------------------------
Borrower or any of its Subsidiaries made or deemed made herein, in any Loan
Document, or which is contained in any certificate, document or financial or
other statement by the Borrower, any of its Subsidiaries, or their respective
Responsible Officers, furnished at any time under this Agreement, or in or under
any Loan Document, shall prove to have been incorrect in any material respect on
or as of the date made or deemed made; or
(c) Specific Defaults. The Borrower fails to perform or observe any term,
-----------------
covenant or agreement contained in Sections 4.1, 4.2(b), 4.2(d), 4.2(l), 4.6,
4.9, 4.13, 4.14 or Article V or Article VI hereof; or
(d) Other Defaults. The Borrower or any of its Subsidiaries fails to
--------------
perform or observe any other term, covenant or agreement contained in this
Agreement or any Loan Document, and such default shall continue unremedied for a
period of thirty (30) days after the date upon which written notice thereof is
given to the Borrower by the Agent or Required Lenders; or
(e) Cross-Default. The Borrower or any of its Subsidiaries (i) fails to
-------------
make any payment in respect of any Indebtedness (other than the Obligations) or
Contingent Obligation having an aggregate principal amount (including undrawn
committed or available amounts and including amounts owing to all creditors
under any combined or syndicated credit arrangement) of more than $1,000,000
when due (whether by scheduled maturity, required prepayment, acceleration,
demand, or otherwise) and such failure continues after the applicable grace or
notice period, if any, specified in the document relating thereto on the date of
such failure; or (ii) fails to perform or observe any other condition or
covenant, or any other event shall occur or condition exist, under any agreement
or instrument relating to any such Indebtedness or Contingent
49
<PAGE>
Obligation, if the effect of such failure, event or condition is to cause, or to
permit the holder or holders of such Indebtedness or beneficiary or
beneficiaries of such Indebtedness (or a trustee or agent on behalf of such
holder or holders or beneficiary or beneficiaries) to cause such Indebtedness to
be declared to be due and payable prior to its stated maturity, or such
Contingent Obligation to become payable or cash collateral in respect thereof to
be demanded; or
(f) Insolvency; Voluntary Proceedings. The Borrower or any of its
---------------------------------
Subsidiaries (i) ceases or fails to be Solvent, (ii) generally fails to pay, or
admits in writing its inability to pay, its debts as they become due, subject to
applicable grace periods, if any, whether at stated maturity or otherwise; (iii)
voluntarily ceases to conduct its business in the ordinary course; (iv)
commences any Insolvency Proceeding with respect to itself; or (v) takes any
action to effectuate or authorize any of the foregoing; or
(g) Involuntary Proceedings. (i) Any involuntary Insolvency Proceeding is
-----------------------
commenced or filed against the Borrower or any Subsidiary of the Borrower, or
any writ, judgment, warrant of attachment, execution or similar process, is
issued or levied against a substantial part of the Borrower's or any of its
Subsidiaries' Properties, and any such proceeding or petition shall not be
dismissed, or such writ, judgment, warrant of attachment, execution or similar
process shall not be released, vacated or fully bonded within sixty (60) days
after commencement, filing or levy; (ii) the Borrower or any of its Subsidiaries
admits the material allegations of a petition against it in any Insolvency
Proceeding, or an order for relief (or similar order under non-U.S. law) is
ordered in any Insolvency Proceeding; or (iii) the Borrower or any of its
Subsidiaries acquiesces in the appointment of a receiver, trustee, custodian,
conservator, liquidator, mortgagee in possession (or agent therefor), or other
similar Person for itself or a substantial portion of its Property or business;
or
(h) ERISA. (i) A member of the Controlled Group shall fail to pay when
-----
due, after the expiration of any applicable grace period, any installment
payment with respect to its Withdrawal Liability under a Multiemployer Plan;
(ii) a member of the Controlled Group shall fail to satisfy its contribution
requirements under Section 412(c)(11) of the Code, whether or not it has sought
a waiver under Section 412(d) of the Code; (iii) the occurrence of an ERISA
Event; (iv) a Plan that is intended to be qualified under Section 401(a) of the
Code shall lose its qualification; (v) any member of the Controlled Group
engages in or otherwise becomes liable for a non-exempt prohibited transaction;
(vi) a violation of section 404 or 405 of ERISA or the exclusive benefit rule
under section 401(a) of the Code; (vii) any member of the Controlled Group is
assessed a tax under section 4980B of the Code or incurs a liability under
Section 601 et seq of ERISA; and, the occurrence of any such event listed in
clauses (i) through (vii), or the occurrence of any combination of events listed
in clauses (i) through (vii) results in, or could reasonably be expected to
result in, a Material Adverse Effect or result in exposure to Borrower in an
amount in excess of $1,000,000; or
(i) Monetary Judgments. One or more judgments, non-interlocutory
------------------
orders, decrees or arbitration awards shall be entered against the Borrower or
any of its Subsidiaries involving in
50
<PAGE>
the aggregate a liability (to the extent not covered by independent third-party
insurance) as to any single or related series of transactions, incidents or
conditions, of $500,000 or more, and the same shall remain unsatisfied,
unvacated, undischarged and unstayed pending appeal for a period of thirty (30)
days after the entry thereof; or
(j) Non-Monetary Judgments. Any non-monetary judgment, order or
----------------------
decree shall be rendered against the Borrower or any of its Subsidiaries, or
Borrower or any of its Subsidiaries shall lose export privileges, in any such
instance which does or would reasonably be expected to have a Material Adverse
Effect, and there shall be any period of ten (10) consecutive days during which
a stay of enforcement of such judgment or order, by reason of a pending appeal
or otherwise, shall not be in effect; or
(k) Collateral. Any material provision of any Collateral Document
----------
shall for any reason cease to be valid and binding on or enforceable against the
Borrower or any Subsidiary of the Borrower party thereto or the Borrower or any
Subsidiary of the Borrower shall so state in writing or bring an action to limit
its obligations or liabilities thereunder; or any Collateral Document shall for
any reason (other than pursuant to the terms thereof) cease to create a valid
security interest in the Collateral purported to be covered thereby or such
security interest shall for any reason (other than the failure of the Agent to
take any action within its control) cease to be a perfected and first priority
security interest subject only to Permitted Liens; or
(l) Ownership. (i) prior to a Qualifying Initial Public Offering, WPP
---------
Group at any time ceases to maintain in the aggregate a direct or indirect
beneficial equity interest in the Borrower at least equal to 40% of the
aggregate equity interests of Borrower, or (ii) subsequent to a Qualifying
Initial Public Offering, WPP Group at any time ceases to maintain in the
aggregate a direct or indirect beneficial equity interest in the Borrower at
least equal to 33% of the aggregate equity interests of Borrower, (iii) prior to
a Qualifying Initial Public Offering, WPP Group (a) fails to own beneficially,
directly or indirectly, capital stock representing voting control of the
Borrower or (b) at any time ceases to have the right, either through the
ownership of voting securities or by contract, to designate or approve a
majority (or such greater percentage as shall constitute control) of the members
of the board of directors of Borrower, or (iv) Wind Point ceases to have a cash
equity investment in Borrower of at least $22,750,000, in each instance, in (i),
(ii), (iii) and (iv) free and clear of all Liens, rights, options, warrants or
other similar agreements or understandings, other than Liens in favor of Agent,
for the benefit of Agent and Lenders; or (v) a Change of Control (as defined in
the Subordinated Note Agreement) occurs; or
(m) Invalidity of Subordination Provisions. The subordination
--------------------------------------
provisions of any agreement or instrument governing any Subordinated
Indebtedness shall for any reason be revoked or invalidated, or otherwise cease
to be in full force and effect in any material respect, or any Person shall
contest in any manner the validity or enforceability thereof or deny that it has
any further liability or obligation thereunder, or the Obligations shall for any
reason shall not have the priority contemplated by this Agreement or such
subordination provisions; or
51
<PAGE>
(n) B&L License. The B&L License Agreement shall have terminated or
-----------
otherwise be in full force and effect unless Borrower shall have demonstrated to
the reasonable satisfaction of Agent and Required Lenders that Borrower would be
in compliance on a proforma basis (i.e., without giving effect to EBITDA
----
attributable to "Licensed Products" (as defined in the B&L License Agreement))
with each of the financial covenants set forth in Sections 6.2, 6.3, 6.4 and 6.5
(i) for each of the 4 most recent financial covenant testing dates, and (ii) on
a prospective basis, based on the projections most recently delivered to Agent,
and agreed to by Agent and Required Lenders in their sole discretion, as being
reasonable, for each of the next 4 financial covenant testing dates (assuming
for such purpose no change in financial performance if such projections do not
extend to the entire period covered by the next 4 financial covenant testing
dates).
7.2 Remedies. Upon the occurrence and during the continuance of any
--------
Event of Default, the Agent may, and shall at the request of the Required
Lenders:
(a) declare all or any portion of the Commitment of each Lender to make
Loans or issue Lender Letters of Credit or Letter of Credit Participation
Agreements to be terminated, whereupon such Commitments shall forthwith be
terminated;
(b) declare the unpaid principal amount of all outstanding Loans, all
interest accrued and unpaid thereon, and all other amounts owing or payable
hereunder or under any other Loan Document to be immediately due and payable;
without presentment, demand, protest or other notice of any kind, all of which
are hereby expressly waived by the Borrower; and
(c) exercise on behalf of itself and the Lenders all rights and remedies
available to it and the Lenders under the Loan Documents or applicable law;
provided, however, that upon the occurrence of any event specified in
- -------- -------
subsections 7.1(f) and (g) above (in the case of clause (i) of paragraph (g)
upon the expiration of the 60-day period mentioned therein), the obligation of
Lender to make Loans and the obligation of Agent to issue Lender Letters of
Credit and Letter of Credit Participation Agreements shall automatically
terminate and the unpaid principal amount of all outstanding Loans and all
interest and other amounts as aforesaid shall automatically become due and
payable without further act of the Agent or any Lender.
7.3 Rights Not Exclusive. The rights provided for in this Agreement and
--------------------
the other Loan Documents are cumulative and are not exclusive of any other
rights, powers, privileges or remedies provided by law or in equity, or under
any other instrument, document or agreement now existing or hereafter arising.
7.4 Cash Collateral for Letters of Credit. If an Event of Default has
-------------------------------------
occurred and is continuing or this Agreement shall be terminated for any reason,
then the Agent may, and upon request of Lenders holding at least sixty six and
two-thirds percent (66-2/3%) of the Revolving
52
<PAGE>
Loan Commitments shall, demand (which demand shall be deemed to have been
delivered automatically upon any acceleration of the Loans and other obligations
hereunder pursuant to Section 7.2 hereof), and Borrower shall thereupon deliver
to the Agent, to be held for the benefit of the Agent and the Lenders entitled
thereto, an amount of cash equal to the amount of Letter of Credit Participation
Liability (determined in accordance with subsection 1.1(c) hereof) as additional
collateral security for Borrower's Obligations in respect of any outstanding
Lender Letter of Credit and Letter of Credit Participation Agreement. The Agent
may at any time apply any or all of such cash and cash collateral to the payment
of any or all of Borrower's Obligations in respect of any Lender Letters of
Credit or Letter of Credit Participation Agreements. Pending such application,
the Agent may (but shall not be obligated to) invest the same in an interest
bearing account in the Agent's name, for the benefit of the Agent and the
Lenders entitled thereto, under which deposits are available for immediate
withdrawal, at such bank or financial institution as the Agent may, in its
discretion, select.
ARTICLE VIII - THE AGENT
------------------------
8.1 Appointment and Authorization. Each Lender hereby irrevocably
-----------------------------
appoints, designates and authorizes the Agent to take such action on its behalf
under the provisions of this Agreement and each other Loan Document and to
exercise such powers and perform such duties as are expressly delegated to it by
the terms of this Agreement or any other Loan Document, together with such
powers as are reasonably incidental thereto. Notwithstanding any provision to
the contrary contained elsewhere in this Agreement or in any other Loan
Document, the Agent shall not have any duties or responsibilities, except those
expressly set forth herein, nor shall the Agent have or be deemed to have any
fiduciary relationship with any Lender, and no implied covenants, functions,
responsibilities, duties, obligations or liabilities shall be read into this
Agreement or any other Loan Document or otherwise exist against the Agent.
8.2 Delegation of Duties. The Agent may execute any of its duties under
--------------------
this Agreement or any other Loan Document by or through agents, employees or
attorneys-in-fact and shall be entitled to advice of counsel concerning all
matters pertaining to such duties. The Agent shall not be responsible for the
negligence or misconduct of any agent or attorney-in-fact that it selects with
reasonable care.
8.3 Liability of Agent. None of the Agent-Related Persons shall (i) be
------------------
liable for any action taken or omitted to be taken by any of them under or in
connection with this Agreement or any other Loan Document (except for its own
gross negligence or willful misconduct), or (ii) be responsible in any manner to
any of the Lenders for any recital, statement, representation or warranty made
by the Borrower or any Subsidiary or Affiliate of the Borrower, or any officer
thereof, contained in this Agreement or in any other Loan Document, or in any
certificate, report, statement or other document referred to or provided for in,
or received by the Agent under or in connection with, this Agreement or any
other Loan Document, or for the value of any Collateral or the validity,
effectiveness, genuineness, enforceability or sufficiency of this Agreement or
any
53
<PAGE>
other Loan Document, or for any failure of the Borrower or any other party to
any Loan Document to perform its obligations hereunder or thereunder. No Agent-
Related Person shall 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, this Agreement or any other Loan Document, or to inspect
the Properties, books or records of the Borrower or any of the Borrower's
Subsidiaries or Affiliates.
8.4 Reliance by Agent. The Agent shall be entitled to rely, and shall be
-----------------
fully protected in relying, upon any writing, resolution, notice, consent,
certificate, affidavit, letter, telegram, facsimile or telephone message,
statement or other document or conversation believed by it to be genuine and to
have been signed, sent or made by the proper Person or Persons, and upon advice
and statements of legal counsel (including counsel to the Borrower), independent
accountants and other experts selected by the Agent. The Agent shall be fully
justified in failing or refusing to take any action under this Agreement or any
other Loan Document unless it shall first receive such advice or concurrence of
the Lenders (or, where an action or waiver need only be approved by the Required
Lenders, by the Required Lenders) as it deems appropriate and, if it so
requests, it shall first be indemnified to its satisfaction by the Lenders
against any and all liability and expense which may be incurred by it by reason
of taking or continuing to take any such action. The Agent shall in all cases be
fully protected in acting, or in refraining from acting, under this Agreement or
any other Loan Document in accordance with a request or consent of the Lenders
(or, where an action or waiver need only be approved by the Required Lenders, by
the Required Lenders) and such request and any action taken or failure to act
pursuant thereto shall be binding upon all of the Lenders.
8.5 Notice of Default. The Agent shall not be deemed to have knowledge
-----------------
or notice of the occurrence of any Default or Event of Default, except with
respect to defaults in the payment of principal, interest and fees required to
be paid to the Agent for the account of the Lenders, unless the Agent shall have
received written notice from a Lender or the Borrower referring to this
Agreement, describing such Default or Event of Default and stating that such
notice is a "notice of default". In the event that the Agent receives such a
notice, the Agent shall give notice thereof to the Lenders. The Agent shall take
such action with respect to such Default or Event of Default as shall be
requested by the Required Lenders in accordance with Article VII; provided,
--------
however, that unless and until the Agent shall have received any such request,
- -------
the 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 or in the best interest of the Lenders.
8.6 Credit Decision. Each Lender expressly acknowledges that none of the
---------------
Agent-Related Persons has made any representation or warranty to it and that no
act by the Agent hereinafter taken, including any review of the affairs of the
Borrower and its Subsidiaries shall be deemed to constitute any representation
or warranty by the Agent to any Lender. Each Lender represents to the Agent that
it has, independently and without reliance upon the Agent and based on such
documents and information as it has deemed appropriate, made its own appraisal
of and investigation into the business, prospects, operations, property,
financial and other condition and
54
<PAGE>
creditworthiness of the Borrower and its Subsidiaries, and all applicable bank
regulatory laws relating to the transactions contemplated thereby, and made its
own decision to enter into this Agreement and extend credit to the Borrower
hereunder. Each Lender also represents that it will, independently and without
reliance upon the Agent and based on such documents and information as it shall
deem appropriate at the time, continue to make its own credit analysis,
appraisals and decisions in taking or not taking action under this Agreement and
the other Loan Documents, and to make such investigations as it deems necessary
to inform itself as to the business, prospects, operations, property, financial
and other condition and creditworthiness of the Borrower. Except for notices,
reports and other documents expressly herein required to be furnished to the
Lenders by the Agent, the Agent shall not have any duty or responsibility to
provide any Lender with any credit or other information concerning the business,
prospects, operations, property, financial and other condition or
creditworthiness of the Borrower which may come into the possession of the
Agent.
8.7 Indemnification. Whether or not the transactions contemplated hereby
---------------
shall be consummated, upon demand therefor the Lenders shall indemnify the Agent
(to the extent not reimbursed by or on behalf of the Borrower and without
limiting the obligation of the Borrower to do so), ratably from and against any
and all liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses and disbursements of any kind whatsoever which
may at any time (including at any time following the repayment of the Loans and
the termination or resignation of the Agent) be imposed on, incurred by or
asserted against the Agent in any way relating to or arising out of this
Agreement or any document contemplated by or referred to herein or the
transactions contemplated hereby or thereby or any action taken or omitted
by the Agent under or in connection with any of the foregoing; provided,
--------
however, that no Lender shall be liable for the payment to the Agent of any
- -------
portion of such liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements resulting solely from the
Agent's gross negligence or willful misconduct. In addition, each Lender shall
reimburse the Agent upon demand for its ratable share of any costs or out-of-
pocket expenses (including Attorney Costs) incurred by the Agent in connection
with the preparation, execution, delivery, administration, modification,
amendment or enforcement (whether through negotiations, legal proceedings or
otherwise) of, or legal advice in respect of rights or responsibilities under,
this Agreement, any other Loan Document, or any document contemplated by or
referred to herein to the extent that the Agent is not reimbursed for such
expenses by or on behalf of the Borrower. Without limiting the generality of
the foregoing, if the Internal Revenue Service or any other Governmental
Authority of the United States or other jurisdiction asserts a claim that the
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 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 Agent
fully for all amounts paid, directly or indirectly, by the Agent as tax or
otherwise, including penalties and interest, and including any taxes imposed by
any jurisdiction on the amounts payable to the Agent under this Section 8.7,
together with all related costs and expenses (including
55
<PAGE>
Attorney Costs). The obligation of the Lenders in this Section 8.7 shall survive
the payment of all Obligations hereunder.
8.8 Agent in Individual Capacity. Antares and its Affiliates may make
----------------------------
loans to, issue letters of credit for the account of, accept deposits from,
acquire equity interests in and generally engage in any kind of banking, trust,
financial advisory or other business with the Borrower and its Subsidiaries and
Affiliates as though Antares were not the Agent hereunder and without notice to
or consent of the Lenders. With respect to its Loans, Antares shall have the
same rights and powers under this Agreement as any other Lender and may exercise
the same as though it were not the Agent, and the terms "Lender" and "Lenders"
shall include Antares in its individual capacity.
8.9 Successor Agent. The Agent may resign as Agent upon thirty (30) days'
---------------
prior notice to the Lenders and to Borrower. If the Agent shall resign as Agent
under this Agreement, the Required Lenders shall appoint from among the Lenders
a successor agent for the Lenders reasonably acceptable to Borrower, provided,
however, consent of Borrower is not required if an Event of Default has occurred
and is continuing. If no successor agent is appointed prior to the effective
date of the resignation of the Agent, the Agent may thereupon appoint a
successor agent from among the Lenders reasonably acceptable to Borrower. Upon
the acceptance of its appointment as successor agent hereunder, such successor
agent shall succeed to all the rights, powers and duties of the retiring Agent
and the term "Agent" shall mean such successor agent and the retiring Agent's
appointment, powers and duties as Agent shall be terminated. After any retiring
Agent's resignation hereunder as Agent, the provisions of this Article VIII and
Sections 9.4 and 9.5 shall inure to its benefit as to any actions taken or
omitted to be taken by it while it was Agent under this Agreement. If no
successor agent has accepted appointment as Agent by the date which is thirty
(30) days following a retiring Agent's notice of resignation (or, if later, ten
(10) days after the date upon which the Agent designates a successor agent), the
retiring Agent's resignation shall nevertheless thereupon become effective and
the Lenders shall perform all of the duties of the Agent hereunder until such
time, if any, as the Required Lenders appoint a successor agent as provided for
above.
8.10 Collateral Matters.
------------------
(a) The Agent is authorized (but not required) on behalf of all the
Lenders, without the necessity of any notice to or further consent from the
Lenders, from time to time to take any action with respect to any Collateral or
the Collateral Documents which may be necessary to perfect and maintain
perfected the security interest in and Liens upon the Collateral granted
pursuant to the Collateral Documents.
(b) The Lenders irrevocably authorize the Agent, at its option and in its
discretion, to release any Lien granted to or held by the Agent upon any
Collateral:
56
<PAGE>
(i) upon termination of the Commitments and payment in full of
all Loans and all other Obligations then payable under this Agreement and
under any other Loan Document;
(ii) constituting Property sold or to be sold or disposed of as
part of or in connection with any disposition permitted hereunder;
(iii) consisting of an instrument evidencing Indebtedness or of
any other debt instrument, if the indebtedness evidenced thereby has been
paid in full; or
(iv) if approved, authorized or ratified in writing by the
Required Lenders or all the Lenders, as the case may be, as provided in
subsection 9.1(f).
Upon request by the Agent at any time, the Lenders will confirm in writing the
Agent's authority to release particular types or items of Collateral pursuant to
this subsection 8.10(b).
(c) Each Lender agrees with and in favor of each other Lender (which
agreement shall not be for the benefit of the Borrower or any of its
Subsidiaries) that the Borrower's obligation to such Lender under this Agreement
and the other Loan Documents shall be equally and ratably secured by any real
property and/or other collateral now or hereafter securing any obligations of
the Borrower or any of its Subsidiaries to such Lender, whether or not the same
constitutes Collateral hereunder.
ARTICLE IX - MISCELLANEOUS
--------------------------
9.1 Amendments and Waivers. No amendment or waiver of any provision of
----------------------
this Agreement or any other Loan Document, and no consent with respect to any
departure by the Borrower therefrom, shall be effective unless the same shall be
in writing and signed by the Required Lenders, the Borrower and acknowledged by
the Agent, and then such waiver shall be effective only in the specific instance
and for the specific purpose for which given; provided, however, that no such
-------- -------
waiver, amendment, or consent shall, unless in writing and signed by all the
Lenders, the Borrower and acknowledged by the Agent, do any of the following:
(a) increase or extend the Commitment of any Lender (or reinstate any
Commitment terminated pursuant to subsection 7.2(a)) or subject any Lender to
any additional obligations;
(b) postpone or delay any date fixed for, or waive, any payment of
principal, interest, fees or other amounts due to the Lenders (or any of them)
hereunder or under any Loan Document (other than any postponement or delay of
any date fixed for any mandatory prepayment of the Loans pursuant to subsection
1.8(c), 1.8(d), 1.8(e) or 1.8(g));
57
<PAGE>
(c) reduce the principal of, or the rate of interest specified herein or
the amount of interest payable in cash specified herein on any Loan, or of any
fees or other amounts payable hereunder or under any Loan Document;
(d) change the percentage of the Commitments or of the aggregate unpaid
principal amount of the Loans which shall be required for the Lenders or any of
them to take any action hereunder;
(e) amend this Section 9.1 or the definition of Required Lenders or any
provision providing for consent or other action by all Lenders; or
(f) discharge any Subsidiary from their respective Obligations under
the Loan Documents, or release all or substantially all of the Collateral except
as otherwise may be provided in this Agreement or the other Loan Documents;
and, provided further, that no amendment, waiver or consent shall, unless in
-------- -------
writing and signed by the Agent in addition to the Required Lenders or all the
Lenders, as the case may be, affect the rights or duties of the Agent under this
Agreement or any other Loan Document.
9.2 Notices. (a) All notices, requests and other communications provided
-------
for hereunder shall be in writing (including, unless the context expressly
otherwise provides, by facsimile transmission) and mailed by certified or
registered mail, faxed or delivered by personal or overnight delivery, to the
address or facsimile number specified for notices on the applicable signature
page hereof; or, if directed to the Borrower or the Agent, to such other address
as shall be designated by such party in a written notice to each of the other
parties hereto given in compliance herewith, or, if directed to any other party
hereto, to such other address as shall be designated by such party in a written
notice given in compliance herewith to the Borrower and the Agent.
(b) All such notices, requests and communications shall be effective (i)
if delivered in person, when delivered, (ii) if delivered by telecopy, on the
date of transmission if transmitted on a Business Day before 4:00 p.m. Chicago
Time, otherwise on the next Business Day, (iii) if delivered by overnight
courier, one (1) Business Day after delivery to the courier properly addressed
and (iv) if mailed, upon the third Business Day after the date deposited into
the U.S. Mail, certified or registered; except that notices pursuant to Article
I shall not be effective until actually received by the Agent.
(c) The Borrower acknowledges and agrees that any agreement of the Agent
and the Lenders in Article I hereof to receive certain notices by telephone and
facsimile is solely for the convenience and at the request of the Borrower. The
Agent and the Lenders shall be entitled to rely on the authority of any Person
purporting to be a Person authorized by the Borrower to give such notice and the
Agent and the Lenders shall not have any liability to the Borrower or other
Person on account of any action taken or not taken by the Agent or the Lenders
in reliance upon
58
<PAGE>
such telephonic or facsimile notice. The obligation of the Borrower to repay the
Loans shall not be affected in any way or to any extent by any failure by the
Agent and the Lenders to receive written confirmation of any telephonic or
facsimile notice or the receipt by the Agent and the Lenders of a confirmation
which is at variance with the terms understood by the Agent and the Lenders to
be contained in the telephonic or facsimile notice.
9.3 No Waiver; Cumulative Remedies. No failure to exercise and no delay
------------------------------
in exercising, on the part of the Agent or any Lender, any right, remedy, power
or privilege hereunder, shall operate as a waiver thereof; nor shall any single
or partial exercise of any right, remedy, power or privilege hereunder preclude
any other or further exercise thereof or the exercise of any other right,
remedy, power or privilege.
9.4 Costs and Expenses. Whether or not the transactions contemplated
------------------
hereby shall be consummated, the Borrower shall pay or reimburse:
(a) Antares (including in its capacity as Agent) within fifteen (15) days
after demand (except as otherwise provided in subsection 2.1(f)) for all
reasonable out-of-pocket costs and expenses incurred by Antares (including in
its capacity as Agent) in connection with the development, preparation,
syndication, delivery, administration and execution of, and any amendment,
supplement, waiver or modification to (in each case, whether or not
consummated), this Agreement, any Loan Document and any other documents prepared
in connection herewith or therewith, and the consummation of the transactions
contemplated hereby and thereby, including the Attorney Costs incurred by
Antares (including in its capacity as Agent) with respect thereto;
(b) pay or reimburse each Lender and the Agent within five (5) Business
Days after demand for all out-of-pocket costs and expenses incurred by them in
connection with the enforcement, attempted enforcement, or preservation of any
rights or remedies during the existence of an Event of Default (including in
connection with any "workout" or restructuring regarding the Loans, and
including in any Insolvency Proceeding or appellate proceeding) under this
Agreement, any other Loan Document, and any such other documents, including
Attorney Costs, incurred by the Agent and/or any Lender; and
(c) pay or reimburse Agent within five (5) Business Days after demand for
all out-of-pocket appraisal, audit, environmental inspection and review
(including the allocated cost of such internal services), search and filing
costs, fees and expenses, incurred or sustained by Agent in connection with the
matters referred to under subsections (a) and (b) of this Section 9.4.
9.5 Indemnity. Whether or not the transactions contemplated hereby shall
---------
be consummated, the Borrower shall indemnify, defend and hold harmless each
Lender, the Agent and each of their respective officers, directors, employees,
counsel, agents and attorneys-in-fact (each, an "Indemnified Person") from and
------------------
against any and all liabilities, obligations, losses,
59
<PAGE>
damages, penalties, actions, judgments, suits, costs, charges, expenses or
disbursements (including Attorney Costs):
(a) of any kind or nature whatsoever with respect to the execution,
delivery, enforcement, performance and administration of this Agreement and any
other Loan Documents, or the transactions contemplated hereby and thereby, and
with respect to any investigation, litigation or proceeding (including any
Insolvency Proceeding or appellate proceeding) related to this Agreement or the
Loans or the use of the proceeds thereof, whether or not any Indemnified Person
is a party thereto; and
(b) which may be incurred by or asserted against such Indemnified Person
in connection with or arising out of any pending or threatened investigation,
litigation or proceeding, or any action taken by any Person, with respect to any
Environmental Claim arising out of or related to any Property of Borrower or any
of its Subsidiaries;
(all the foregoing, collectively, the "Indemnified Liabilities"); provided, that
----------------------- --------
the Borrower shall have no obligation hereunder to any Indemnified Person with
respect to Indemnified Liabilities to the extent arising from the gross
negligence or willful misconduct of such Indemnified Person.
No action taken by legal counsel chosen by the Agent or any Lender in
defending against any investigation, litigation or proceeding or requested
remedial, removal or response action shall vitiate or any way impair the
Borrower's obligation and duty hereunder to indemnify and hold harmless the
Agent and each Lender. In no event shall any site visit, observation, or testing
by the Agent or any Lender (or any contractee of the Agent or any Lender) be
deemed a representation or warranty that Hazardous Materials are or are not
present in, on, or under, the site, or that there has been or shall be
compliance with any Environmental Law. Neither the Borrower nor any other Person
is entitled to rely on any site visit, observation, or testing by the Agent or
any Lender. Neither the Agent nor any Lender owes any duty of care to protect
the Borrower or any other Person against, or to inform the Borrower or any other
party of, any Hazardous Materials or any other adverse condition affecting any
site or Property. Neither the Agent nor any Lender shall be obligated to
disclose to the Borrower or any other Person any report or findings made as a
result of, or in connection with, any site visit, observation, or testing by the
Agent or any Lender.
The obligations in this Section 9.5 shall survive payment of all other
Obligations. At the election of any Indemnified Person, the Borrower shall
defend such Indemnified Person using legal counsel reasonably satisfactory to
such Indemnified Person in such Person's sole discretion, at the sole cost and
expense of the Borrower. All amounts owing under this Section 9.5 shall be paid
within thirty (30) days after demand.
9.6 Marshaling; Payments Set Aside. Neither the Agent nor any Lender
------------------------------
shall be under any obligation to marshal any assets in favor of the Borrower or
any other Person or against or in payment of any or all of the Obligations. To
the extent that the Borrower makes a payment or
60
<PAGE>
payments to the Agent or any Lender, or the Agent or any Lender enforces its
Liens or exercises its rights of setoff, and such payment or payments or the
proceeds of such enforcement or setoff 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 Agent in its
discretion) to be repaid to a trustee, receiver or any other party in connection
with any Insolvency Proceeding, or otherwise, then:
(a) 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 setoff
had not occurred; and
(b) each Lender severally agrees to pay to the Agent upon demand its
ratable share of the total amount so recovered from or repaid by the Agent.
9.7 Successors and Assigns. The provisions of this Agreement shall be
----------------------
binding upon and inure to the benefit of the parties hereto and their respective
successors and permitted assigns; provided that any assignment by any Lender
--------
shall be subject to the provisions of Section 9.8 hereof, and provided further
-------- -------
that the Borrower may not assign or transfer any of its rights or obligations
under this Agreement without the prior written consent of the Agent and each
Lender.
9.8 Assignments, Participations, etc. (a) Any Lender may, with the
---------------------------------
written consent of Agent, and the written consent of Borrower, which consent of
Borrower shall not be unreasonably withheld and shall not be required if an
Event of Default has occurred and is continuing, at any time assign and delegate
to one or more Eligible Assignees (provided that no written consent of the Agent
or Borrower shall be required in connection with any assignment and delegation
by a Lender to an Eligible Assignee that is an Affiliate of such Lender) (each
an "Assignee") all, or any ratable part of all, of the Loans, the Commitments
--------
and the other rights and obligations of such Lender hereunder, in a minimum
amount of $5,000,000 or, if less, the entire Commitment of such Lender;
provided, however, that the Borrower and the 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 Borrower and the Agent by such
Lender and the Assignee;
(ii) such Lender and its Assignee shall have delivered to the
Borrower and the Agent an Assignment and Acceptance in form and substance
reasonably satisfactory to Agent, such Lender and its Assignee (an
"Assignment and Acceptance"); and
-------------------------
(iii) the assignor Lender or the Assignee has paid to the Agent a
processing fee in the amount of $3,500.
61
<PAGE>
(b) From and after the date that the Agent notifies the assignor Lender
that the Agent has received and provided its consent with respect to 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 have been assigned to it
pursuant to such Assignment and Acceptance, shall have the rights and
obligations of a Lender under this Agreement and the other 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, relinquish its rights and
be released from its obligations under the Loan Documents.
(c) Immediately upon the making of the processing fee payment to the Agent
in respect of the Assignment and Acceptance, this 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 Commitments arising
therefrom. The Commitment allocated to each Assignee shall reduce such
Commitment of the assigning Lender to the same extent.
(d) Any Lender may at any time sell to one or more commercial banks or
other Persons not Affiliates of the Borrower (a "Participant") participating
-----------
interests in any Loans, the Commitment of that Lender and the other interests of
that Lender (the "Originating Lender") hereunder and under the other Loan
------------------
Documents; provided, however, that:
-------- -------
(i) the Originating Lender's obligations under this Agreement shall
remain unchanged;
(ii) the Originating Lender shall remain solely responsible for the
performance of such obligations;
(iii) the Borrower and the Agent shall continue to deal solely and
directly with the Originating Lender in connection with the Originating
Lender's rights and obligations under this Agreement and the other Loan
Documents; and
(iv) no Lender shall transfer or grant any participating interest
under which the Participant shall have rights to approve any amendment to,
or any consent or waiver with respect to, this Agreement or any other Loan
Document, except to the extent such amendment, consent or waiver would
require unanimous consent of the Lenders as described in the first proviso
----- -------
to Section 9.1.
62
<PAGE>
In the case of any such participation, the Participant shall not have any rights
under this Agreement, or any of the other Loan Documents, and all amounts
payable by the Borrower hereunder shall be determined as if such Lender had not
sold such participation.
(e) Notwithstanding any other provision contained in this Agreement or any
other Loan Document to the contrary, any Lender may assign all or any portion of
the Loans held by it to any Federal Reserve Lender or the United States Treasury
as collateral security pursuant to Regulation A of the Federal Reserve Board and
any Operating Circular issued by such Federal Reserve Lender, provided that any
--------
payment in respect of such assigned Loans made by the Borrower to or for the
account of the assigning or pledging Lender in accordance with the terms of this
Agreement shall satisfy the Borrower's obligations hereunder in respect to such
assigned Loans to the extent of such payment. No such assignment shall release
the assigning Lender from its obligations hereunder.
9.9 Confidentiality. Each of the Agent and the Lenders shall maintain in
---------------
confidence in accordance with its customary procedures for handling confidential
information, all written information that Borrower or any of its Subsidiaries,
or any of their authorized representatives, furnishes to the Agent or any Lender
on a confidential basis clearly marked as such ("Confidential Information"),
------------------------
other than any such Confidential Information that becomes generally available to
the public other than as a result of a breach by the Agent or any Lender of its
obligations hereunder or that is or becomes available to the Agent or such
Lender from a source other than Borrower or any of its Subsidiaries, or any of
their authorized representatives, and that is not, to the actual knowledge of
the recipient thereof, subject to obligations of confidentiality with respect
thereto; provided, however, that the Agent and each Lender shall in any event
--------
have the right to deliver copies of any such documents, and to disclose any such
information, to:
(a) its directors, officers, trustees, partners, employees, agents,
attorneys and professional consultants;
(b) any other Lender and any successor Agent;
(c) any Person to which such Lender offers to sell any Loan or any part
thereof or interest or participation therein (provided such Person agrees to
--------
keep such information confidential on the terms set forth in this Section 9.9);
(d) any federal or state regulatory authority or examiner, or any
insurance industry association, regulating or having jurisdiction over the Agent
or such Lender; and
(e) any other Person to which such delivery or disclosure may be
necessary or appropriate (i) in compliance with any applicable law, rule,
regulation or order, (ii) in response to any subpoena or other legal process or
informal investigative demand, (iii) in connection with any litigation to which
the Agent or such Lender is a party, or (iv) in connection with the enforcement
of the rights and remedies of the Agent or the Lenders under this Agreement and
the
63
<PAGE>
other Loan Documents at any time when an Event of Default shall have occurred
and be continuing.
9.10 Set-off; Sharing of Payments. In addition to any rights and remedies
----------------------------
now or hereafter granted under applicable law, and not by way of limitation of
any such rights or remedies at any time and from time to time, upon the
occurrence and during the continuance of any Event of Default, each Lender is
hereby authorized by the Borrower, with reasonably prompt subsequent notice to
the Borrower or to any other Person (any prior or contemporaneous notice being
hereby expressly waived by the Borrower) to set off and to appropriate and to
apply any and all:
(a) balances held by such Lender at any of its offices for the account of
the Borrower or any of its Subsidiaries (regardless of whether such balances are
then due to the Borrower or any of its Subsidiaries); and
(b) other Property at any time held or owing by such Lender to or for the
credit or for the account of the Borrower or any of its Subsidiaries; against
and on account of any and all Obligations which are not paid when due; except
that no Lender shall exercise such right without the prior written consent of
the Agent. Any Lender having a right to set off shall purchase for cash (and the
other Lenders shall sell) participations in each such other Lender's pro rata
share of the Obligations as would be necessary to cause such Lender to share the
benefit of such right of set-off with each other Lender in accordance with their
respective pro rata shares of the Obligations. The Borrower agrees, to the
fullest extent permitted by law, that (i) any Lender may exercise its right to
set off with respect to amounts in excess of its pro rata share of the
Obligations and may sell participations to other Lenders, and (ii) any Lender so
purchasing a participation in the Obligations held by other Lenders may exercise
all rights of setoff, bankers' lien, counterclaim or similar rights with respect
to such participation as fully as if such Lender were a direct holder of
Obligations in the amount of such participation. The Borrower hereby grants to
each Lender a security interest in all such deposits and other Property, whether
now existing or hereafter arising, held by each Lender for the purposes set
forth herein.
9.11 Notification of Addresses, Lending Offices, Etc. Each Lender shall
-----------------------------------------------
notify the Agent in writing of any changes in the address to which notices to
the Lender should be directed, of addresses of its Lending Office, of payment
instructions in respect of all payments to be made to it hereunder and of such
other administrative information as the Agent shall reasonably request.
9.12 Counterparts. This Agreement may be executed by one or more of the
------------
parties to this Agreement in any number of separate counterparts, each of which,
when so executed, shall be deemed an original, and all of said counterparts
taken together shall be deemed to constitute but one and the same instrument. A
set of the copies of this Agreement signed by all the parties shall be lodged
with each of the Borrower and the Agent.
9.13 Severability. The illegality or unenforceability of any provision of
------------
this Agreement or any instrument or agreement required hereunder shall not in
any way affect or impair the
64
<PAGE>
legality or enforceability of the remaining provisions of this Agreement or any
instrument or agreement required hereunder.
9.14 Captions. The captions and headings of this Agreement are for
--------
convenience of reference only and shall not affect the interpretation of this
Agreement.
9.15 Independence of Provisions. The parties acknowledge that this
--------------------------
Agreement and other Loan Documents may use several different limitations, tests
or measurements to regulate the same or similar matters, and that such
limitations, tests and measurements are cumulative and must each be performed,
except as expressly stated to the contrary in this Agreement.
9.16 Interpretation. This Agreement is the result of negotiations among
--------------
and has been reviewed by counsel to the Agent, the Borrower and other parties,
and is the product of all parties hereto. Accordingly, this Agreement and the
other Loan Documents shall not be construed against the Lenders or the Agent
merely because of the Agent's or Lenders' involvement in the preparation of such
documents and agreements.
9.17 No Third Parties Benefited. This Agreement is made and entered into
--------------------------
for the sole protection and legal benefit of the Borrower, the Lenders and the
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 Agreement or any of the other Loan
Documents. Neither the Agent nor any Lender shall have any obligation to any
Person not a party to this Agreement or other Loan Documents.
9.18 Governing Law and Jurisdiction.
------------------------------
(A) THIS AGREEMENT AND EACH NOTE SHALL BE GOVERNED BY, AND CONSTRUED
IN ACCORDANCE WITH, THE INTERNAL LAWS AND DECISIONS OF THE STATE OF ILLINOIS,
WITHOUT REGARD TO CONFLICT OF LAWS PRINCIPLES; PROVIDED THAT THE AGENT AND THE
LENDERS SHALL RETAIN ALL RIGHTS ARISING UNDER FEDERAL LAW.
(B) BORROWER HEREBY IRREVOCABLY SUBMITS TO THE NON-EXCLUSIVE
JURISDICTION OF ANY UNITED STATES FEDERAL OR ILLINOIS STATE COURT SITTING IN
CHICAGO IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO ANY LOAN
DOCUMENTS AND BORROWER HEREBY IRREVOCABLY AGREES THAT ALL CLAIMS IN RESPECT OF
SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN ANY SUCH COURT AND
IRREVOCABLY WAIVES ANY OBJECTION IT MAY NOW OR HEREAFTER HAVE AS TO THE VENUE OF
ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN SUCH A COURT OR THAT SUCH COURT
IS AN INCONVENIENT FORUM. NOTHING HEREIN SHALL LIMIT THE RIGHT OF AGENT OR ANY
LENDER TO BRING PROCEEDINGS AGAINST BORROWER IN THE COURTS OF ANY OTHER
JURISDICTION. ANY JUDICIAL PROCEEDING BY
65
<PAGE>
BORROWER AGAINST AGENT OR ANY LENDER OR ANY AFFILIATE THEREOF INVOLVING,
DIRECTLY OR INDIRECTLY, ANY MATTER IN ANY WAY ARISING OUT OF, RELATED TO, OR
CONNECTED WITH ANY LOAN DOCUMENT SHALL BE BROUGHT ONLY IN A COURT IN CHICAGO,
ILLINOIS.
(C) BORROWER DESIGNATES AND APPOINTS CT CORPORATION SYSTEM AND SUCH
OTHER PERSONS AS MAY HEREAFTER BE SELECTED BY BORROWER WHICH IRREVOCABLY AGREE
IN WRITING TO SO SERVE AS ITS AGENT TO RECEIVE ON ITS BEHALF SERVICE OF ALL
PROCESS IN ANY SUCH PROCEEDINGS IN ANY SUCH COURT, SUCH SERVICE BEING HEREBY
ACKNOWLEDGED BY BORROWER TO BE EFFECTIVE AND BINDING SERVICE IN EVERY RESPECT.
A COPY OF ANY SUCH PROCESS SO SERVED SHALL BE MAILED BY REGISTERED MAIL TO
BORROWER AT ITS ADDRESS PROVIDED IN SUBSECTION 9.2 EXCEPT THAT UNLESS OTHERWISE
PROVIDED BY APPLICABLE LAW, ANY FAILURE TO MAIL SUCH COPY SHALL NOT AFFECT THE
VALIDITY OF SERVICE OF PROCESS. IF ANY AGENT APPOINTED BY BORROWER REFUSES TO
ACCEPT SERVICE, BORROWER HEREBY AGREES THAT SERVICE UPON IT BY MAIL SHALL
CONSTITUTE SUFFICIENT NOTICE. NOTHING HEREIN SHALL AFFECT THE RIGHT TO SERVE
PROCESS IN ANY OTHER MANNER PERMITTED BY LAW.
9.19 Waiver of Jury Trial. THE BORROWER, THE LENDERS AND THE AGENT 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 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 PARTIES, WHETHER WITH RESPECT TO CONTRACT CLAIMS, TORT
CLAIMS, OR OTHERWISE. THE BORROWER, THE LENDERS AND THE AGENT 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 AGREEMENT OR THE OTHER LOAN
DOCUMENTS OR ANY PROVISION HEREOF OR THEREOF. THIS WAIVER SHALL APPLY TO ANY
SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT
AND THE OTHER LOAN DOCUMENTS.
9.20 Entire Agreement; Release. This Agreement, together with the other
-------------------------
Loan Documents, embodies the entire agreement and understanding among the
Borrower, the Lenders and the Agent, and supersedes all prior or contemporaneous
Agreements and understandings of such Persons, oral or written, relating to the
subject matter hereof and thereof, except for the fee letter referenced in
subsection 1.9(a), and any prior arrangements made with respect to the
66
<PAGE>
payment by the Borrower of (or any indemnification for) any fees, costs or
expenses payable to or incurred (or to be incurred) by or on behalf of the Agent
or the Lenders. Execution of this Agreement by the Borrower constitutes a full,
complete and irrevocable release of any and all claims which the Borrower may
have at law or in equity in respect of all prior discussions and understandings,
oral or written, relating to the subject matter of this Agreement and the other
Loan Documents. Neither Agent nor any Lender shall be liable to Borrower or any
other Person on any theory of liability for any special, indirect, consequential
or punitive damages.
ARTICLE X - TAXES, YIELD PROTECTION AND ILLEGALITY
--------------------------------------------------
10.1 Taxes. (a) Subject to subsection 10.1(g), any and all payments by
the Borrower to each Lender or the Agent under this Agreement shall be made free
and clear of, and without deduction or withholding for, any and all present or
future taxes, levies, imposts, deductions, charges or withholdings, and all
liabilities with respect thereto, excluding, in the case of each Lender and the
Agent, such taxes (including income taxes or franchise taxes) as are imposed on
or measured by each Lender's net income by the jurisdiction under the laws of
which such Lender or the Agent, as the case may be, is organized or maintains a
Lending Office or any political subdivision thereof (all such non-excluded
taxes, levies, imposts, deductions, charges, withholdings and liabilities being
hereinafter referred to as "Taxes").
-----
(b) In addition, the Borrower shall pay any present or future stamp or
documentary taxes or any other excise or property taxes, charges or similar
levies which arise from any payment made hereunder or from the execution,
delivery or registration of, or otherwise with respect to, this Agreement or any
other Loan Documents (hereinafter referred to as "Other Taxes").
-----------
(c) Subject to subsection 10.1(g), the Borrower shall indemnify and
hold harmless each Lender and the Agent for the full amount of Taxes or Other
Taxes (including any Taxes or Other Taxes imposed by any jurisdiction on amounts
payable under this Section 10.1) paid by the Lender or the Agent and any
liability (including penalties, interest, additions to tax and expenses) arising
therefrom or with respect thereto, whether or not such Taxes or Other Taxes were
correctly or legally asserted. Payment under this indemnification shall be made
within thirty (30) days from the date the Lender or the Agent makes written
demand therefor.
(d) If the Borrower shall be required by law to deduct or withhold any
Taxes or Other Taxes from or in respect of any sum payable hereunder to any
Lender or the Agent, then, subject to subsection 10.1(g):
(i) the sum payable shall be increased as necessary so that after
making all required deductions (including deductions applicable to
additional sums payable under this Section 10.1) such Lender or the Agent,
as the case may be, receives an amount equal to the sum it would have
received had no such deductions been made;
67
<PAGE>
(ii) the Borrower shall make such deductions; and
(iii) the Borrower shall pay the full amount deducted to the relevant
taxation authority or other authority in accordance with applicable law.
(e) Within thirty (30) days after the date of any payment by the
Borrower of Taxes or Other Taxes, the Borrower shall furnish to the Agent the
original or a certified copy of a receipt evidencing payment thereof, or other
evidence of payment satisfactory to the Agent.
(f) Each Lender that is not a citizen or resident of the United States
of America, a corporation, partnership or other entity created or organized in
or under the laws of the United States (or any jurisdiction thereof), or any
estate or trust that is subject to federal income taxation regardless of the
source of its income (a "Non-U.S. Lender") shall deliver to the Borrower and the
Agent two copies of each U.S. Internal Revenue Service Form 1001 or Form 4224,
or, in the case of a Non-U.S. Lender claiming exemption from U.S. federal
withholding tax under Section 871(h) or 881(c) of the Code with respect to
payments of "portfolio interest", a Form W-8, or any subsequent versions thereof
or successors thereto (and, if such Non-U.S. Lender delivers a Form W-8, a
certificate representing that such Non-U.S. Lender is not a "bank" for purposes
of Section 881(c) of the Code, is not a 10-percent shareholder (within the
meaning of Section 871(h)(3)(B) of the Code) of Borrower and is not a controlled
foreign corporation related to Borrower (within the meaning of Section 864(d)(4)
of the Code)), properly completed and duly executed by such Non-U.S. Lender
claiming complete exemption from, or a reduced rate of, U.S. federal withholding
tax on all payments by Borrower under this Agreement and the other Loan
Documents. Such forms shall be delivered by each Non-U.S. Lender on or before
the date it becomes a party to this Agreement. In addition, each Non-U.S.
Lender shall deliver such forms promptly upon the obsolescence or invalidity of
any form previously delivered by such Non-U.S. Lender. Each Non-U.S. Lender
shall promptly notify the Borrower at any time it determines that it is no
longer in a position to provide any previously delivered certificate to the
Borrower (or any other form of certification adopted by the U.S. taxing
authorities for such purpose). Notwithstanding any other provision of this
subsection, a Non-U.S. Lender shall not be required to deliver any form pursuant
to this subsection that such Non-U.S. Lender is not legally able to deliver.
(g) The Borrower will not be required to pay any additional amounts in
respect of United States Federal income tax pursuant to subsection 10.1(d) to
any Lender for the account of any Lending Office of such Lender:
(i) if the obligation to pay such additional amounts would not
have arisen but for a failure by such Lender to comply with its obligations
under subsection 10.1(f) in respect of such Lending Office;
(ii) if such Lender shall have delivered to the Borrower a Form
1001 and/or Form 4224 in respect of such Lending Office pursuant to
subsection 10.1(f), and such
68
<PAGE>
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 Borrower hereunder for the account of such Lending Office for any
reason other than a change in United States law, treaty or regulations or
in the official interpretation of such law 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 Form 1001 and/or Form 4224; or
(iii) if the Lender shall have delivered to the Borrower a Form W-8
in respect of such Lending Office pursuant to Subsection 10.1(f), 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 Borrowers hereunder for the account of such Lending Office for any
reason other than a change in the United States law or regulations or any
applicable tax treaty or regulations or in the official interpretation of
any 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 Form W-8.
(h) If, at any time, the Borrower requests any Lender to deliver any
forms or other documentation pursuant to subsection 10.1(f), then the Borrower
shall, on demand of such Lender through the Agent, reimburse such Lender for any
costs and expenses (including Attorney Costs) reasonably incurred by such Lender
in the preparation or delivery of such forms or other documentation.
(i) If the Borrower is required to pay additional amounts to any
Lender or the Agent pursuant to subsection 10.1(d), then such Lender shall use
its reasonable best efforts (consistent with legal and regulatory restrictions)
to change the jurisdiction of its Lending Office so as to eliminate any such
additional payment by the Borrower which may thereafter accrue if such change in
the judgment of such Lender is not otherwise disadvantageous to such Lender.
10.2 Illegality. (a) If after the date hereof any Lender shall determine
that the introduction of any Requirement of Law, or any change in any
Requirement of Law or in the interpretation or administration thereof, has made
it unlawful, or that any central bank or other Governmental Authority has
asserted that it is unlawful, for any Lender or its Lending Office to make LIBOR
Loans, then, on notice thereof by the Lender to the Borrower through the Agent,
the obligation of that Lender to make LIBOR Rate Loans shall be suspended until
the Lender shall have notified the Agent and the Borrower that the circumstances
giving rise to such determination no longer exists.
(b) Subject to clause (c) below, if a Lender shall determine that it
is unlawful to maintain any LIBOR Rate Loan, the Borrower shall prepay in full
all LIBOR Rate Loans of that Lender then outstanding, together with interest
accrued thereon, either on the last day of the Interest Period thereof if the
Lender may lawfully continue to maintain such LIBOR Rate Loans
69
<PAGE>
to such day, or immediately, if the Lender may not lawfully continue to maintain
such LIBOR Rate Loans, together with any amounts required to be paid in
connection therewith pursuant to Section 10.4.
(c) If the obligation of any Lender to make or maintain LIBOR Rate
Loans has been terminated, the Borrower may elect, by giving notice to the
Lender through the Agent that all Loans which would otherwise be made by any
such Lender as LIBOR Rate Loans shall be instead Base Rate Loans.
(d) Before giving any notice to the Agent pursuant to this Section
10.2, the affected Lender shall designate a different Lending Office with
respect to its LIBOR Rate Loans if such designation will avoid the need for
giving such notice or making such demand and will not, in the judgment of the
Lender, be illegal or otherwise disadvantageous to the Lender.
10.3 Increased Costs and Reduction of Return. (a) If any Lender shall
---------------------------------------
determine that, due to either (i) the introduction of or any change in or in the
interpretation of any law or regulation or (ii) the compliance with any
guideline or request from any central bank or other Governmental Authority
(whether or not having the force of law) made, in the case of clause (i) or (ii)
subsequent to the date hereof, there shall be any increase in the cost to such
Lender of agreeing to make or making, funding or maintaining any LIBOR Rate
Loans, then the Borrower shall be liable for, and shall from time to time,
within 30 days of demand therefor by such Lender (with a copy of such demand to
the Agent), pay to the Agent for the account of such Lender, additional amounts
as are sufficient to compensate such Lender for such increased costs.
(b) If any Lender shall have determined that:
(i) the introduction of any Capital Adequacy Regulation;
(ii) any change in any Capital Adequacy Regulation;
(iii) any change in the interpretation or administration of any
Capital Adequacy Regulation by any central bank or other Governmental
Authority charged with the interpretation or administration thereof; or
(iv) compliance by the Lender (or its Lending Office) or any
corporation controlling the Lender, with any Capital Adequacy Regulation;
affects the amount of capital required or expected to be maintained by the
Lender or any corporation controlling the Lender and (taking into consideration
such Lender's or such corporation's policies with respect to capital adequacy
and such Lender's desired return on capital) determines that the amount of such
capital is increased as a consequence of its Commitment(s), loans, credits or
obligations under this Agreement, then, within 30 days of demand of such Lender
(with a copy to the Agent), the Borrower shall upon demand pay to the Lender,
from time to time
70
<PAGE>
as specified by the Lender, additional amounts sufficient to compensate the
Lender for such increase.
10.4 Funding Losses. The Borrower agrees to reimburse each Lender and to
--------------
hold each Lender harmless from any loss or expense which the Lender may sustain
or incur as a consequence of:
(a) the failure of the Borrower to make any payment or mandatory
prepayment of principal of any LIBOR Rate Loan (including payments made after
any acceleration thereof);
(b) the failure of the Borrower to borrow, continue or convert a Loan
after the Borrower has given (or is deemed to have given) a Notice of Borrowing
or a Notice of Conversion/ Continuation;
(c) the failure of the Borrower to make any prepayment after the Borrower
has given a notice in accordance with Section 1.7;
(d) the prepayment (including pursuant to Section 1.8) of a LIBOR Rate
Loan on a day which is not the last day of the Interest Period with respect
thereto; or
(e) the conversion pursuant to Section 1.6 of any LIBOR Rate Loan to a
Base Rate Loan on a day that is not the last day of the applicable Interest
Period;
including any such loss or expense arising from the liquidation or reemployment
of funds obtained by it to maintain its LIBOR Rate Loans hereunder or from fees
payable to terminate the deposits from which such funds were obtained. Solely
for purposes of calculating amounts payable by the Borrower to the Lenders under
this Section 10.4 and under subsection 10.3(a): each LIBOR Rate Loan made by a
Lender (and each related reserve, special deposit or similar requirement) shall
be conclusively deemed to have been funded at the LIBOR used in determining the
interest rate for such LIBOR Rate Loan by a matching deposit or other borrowing
in the interbank eurodollar market for a comparable amount and for a comparable
period, whether or not such LIBOR Rate Loan is in fact so funded.
10.5 Inability to Determine Rates. If the Agent shall have determined in
----------------------------
good faith that for any reason adequate and reasonable means do not exist for
ascertaining the LIBOR for any requested Interest Period with respect to a
proposed LIBOR Rate Loan or that the LIBOR applicable pursuant to subsection
1.3(a) for any requested Interest Period with respect to a proposed LIBOR Rate
Loan does not adequately and fairly reflect the cost to the Lenders of funding
such Loan, the Agent will forthwith give notice of such determination to the
Borrower and each Lender. Thereafter, the obligation of the Lenders to make or
maintain LIBOR Rate Loans hereunder shall be suspended until the Agent revokes
such notice in writing. Upon receipt of such notice, the Borrower may revoke any
Notice of Borrowing or Notice of Conversion/Continuation then submitted by it.
If the Borrower does not revoke such notice, the Lenders shall make,
71
<PAGE>
convert or continue the Loans, as proposed by the Borrower, in the amount
specified in the applicable notice submitted by the Borrower, but such Loans
shall be made, converted or continued as Base Rate Loans.
10.6 Reserves on LIBOR Rate Loans. The Borrower shall pay to each Lender,
----------------------------
as long as such Lender shall be required under regulations of the Federal
Reserve Board to maintain reserves with respect to liabilities or assets
consisting of or including Eurocurrency funds or deposits (currently known as
"Eurocurrency liabilities"), additional costs on the unpaid principal amount of
each LIBOR Rate Loan equal to actual costs of such reserves allocated to such
Loan by the Lender (as determined by the Lender in good faith, which
determination shall be conclusive absent demonstrable error), payable on each
date on which interest is payable on such Loan provided the Borrower shall have
received at least fifteen (15) days' prior written notice (with a copy to the
Agent) of such additional interest from the Lender. If a Lender fails to give
notice fifteen (15) days prior to the relevant Interest Payment Date, such
additional interest shall be payable fifteen (15) days from receipt of such
notice.
10.7 Certificates of Lenders. Any Lender claiming reimbursement or
-----------------------
compensation pursuant to this Article X shall deliver to the Borrower (with a
copy to the Agent) a certificate setting forth in reasonable detail the amount
payable to the Lender hereunder and such certificate shall be conclusive and
binding on the Borrower in the absence of manifest error.
10.8 Survival. The agreements and obligations of the Borrower in this
--------
Article X shall survive the payment of all other Obligations.
10.9 Replacement of Lender in Respect of Increased Costs. Within
---------------------------------------------------
forty-five (45) days after receipt by the Borrower of written notice and demand
from any Lender (an "Affected Lender") for payment of additional costs as
provided in subsections 10.1, 10.3 and 10.6, the Borrower may, at its option,
notify the Agent and such Affected Lender of the Borrower's intention to obtain,
at the Borrower's expense, a replacement Lender ("Replacement Lender") for such
Affected Lender, which Replacement Lender shall be reasonably satisfactory to
the Agent. In the event the Borrower obtains a Replacement Lender within ninety
(90) days following notice of its intention to do so, the Affected Lender shall
sell and assign its Loans and Commitments to such Replacement Lender, provided
--------
that the Borrower has reimbursed such Affected Lender for its increased costs
for which it is entitled to reimbursement under this Agreement through the date
of such sale and assignment.
ARTICLE XI - DEFINITIONS
------------------------
11.1 Defined Terms. The following terms are defined in the Sections or
-------------
subsections referenced opposite such terms:
"Affected Lender" 10.9
72
<PAGE>
"Assignee" 9.8(a)
"Assignment and Acceptance" 9.8(a)(ii)
"Borrower" Preamble
"Borrowing Base" 1.1(b)
"Capital Expenditures" Exhibit 4.2(b)
"Commitment Fee" 1.9(b)
"Confidential Information" 9.9
"EBITDA" Exhibit 4.2(b)
"Event of Default" 7.1
"Excess Cash Flow" Exhibit 1.8(d)
"Fixed Charge Coverage Ratio" Exhibit 4.2(b)
"Form 1001" 10.1(f)
"Form 4224" 10.1(f)
"Indemnified Person" 9.5
"Indemnified Liabilities" 9.5
"Interest Coverage Ratio" Exhibit 4.2(b)
"Interest Settlement Date" 1.12(d)
"Lender" Preamble
"Lender Letter of Credit" 1.1(c)
"Letter of Credit Participation Agreement" 1.1(c)
"Letter of Credit Participation Fee" 1.9(b)
"Letter of Credit Participation Fee Ratio" 1.12(d)
"Leverage Ratio" Exhibit 4.2(b)
"Maximum Revolving Loan Balance" 1.1(b)
"Originating Lender" 9.8
"Other Taxes" 10.1(b)
"Participant" 9.8(d)
"Permitted Liens" 5.1
"Restricted Payments" 5.11
"Replacement Lender" 10.9
"Revolving Loan Commitment" 1.1(b)
"Revolving Loan" 1.1(b)
"Settlement Date" 1.12(b)
"Taxes" 10.1(a)
"Term Loan" 1.1(a)
"Term Loan Commitment" 1.1(a)
"Year 2000 Problem" 3.22
In addition to the terms defined elsewhere in this Agreement, the following
terms have the following meanings:
"Account" means, as at any date of determination, all "accounts" (as such
term is defined in the UCC) of the Borrower, including, without limitation, the
unpaid portion of the obligation
73
<PAGE>
of a customer of the Borrower in respect of Inventory purchased by and shipped
to such customer and/or the rendition of services by the Borrower, as stated on
the respective invoice of the Borrower, net of any credits, rebates or offsets
owed to such customer.
"Account Debtor" means the customer of the Borrower who is obligated on or
under an Account.
"Acquisition" means any transaction or series of related transactions for
the purpose of or resulting, directly or indirectly, in (a) the acquisition of
all or substantially all of the assets of a Person, or of any business or
division of a Person, (b) the acquisition, of in excess of fifty percent (50%)
of the capital stock, partnership interests or equity of any Person or otherwise
causing any Person to become a Subsidiary of the Borrower, or (c) a merger or
consolidation or any other combination with another Person.
"Affiliate" means, as to any Person, any other Person which, directly or
indirectly, is in control of, is controlled by, or is under common control with,
such Person. A Person shall be deemed to control another Person if the
controlling Person possesses, directly or indirectly, the power to direct or
cause the direction of the management and policies of the other Person, whether
through the ownership of voting securities, by contract or otherwise. Without
limitation, any director, executive officer or beneficial owner of five percent
(5%) or more of the equity of a Person shall for the purposes of this Agreement,
be deemed to control the other Person. Notwithstanding the foregoing, neither
the Agent nor any Lender shall be deemed an "Affiliate" of the Borrower or of
any Subsidiary of the Borrower.
"Agent" means Antares in its capacity as agent for the Lenders hereunder,
and any successor agent.
"Agent-Related Persons" means Antares and any successor agent arising under
Section 8.9, together with their respective Affiliates, and the officers,
directors, employees, agents and attorneys-in-fact of such Persons and
Affiliates.
"Aggregate Commitment" means the combined Commitments of the Lenders, which
shall initially be in the amount of $84,000,000, as such amount may be reduced
from time to time pursuant to this Agreement.
"Aggregate Revolving Loan Commitment" means the combined Revolving Loan
Commitments of the Lenders, which shall initially be in the amount of
$30,000,000, as such amount may be reduced from time to time pursuant to this
Agreement.
"Aggregate Term Loan Commitment" means the combined Term Loan A Commitments
and the combined Term Loan B Commitments of the Lenders, which shall initially
be in the amount of $54,000,000, as such amount may be reduced from time to time
pursuant to this Agreement.
74
<PAGE>
"Aggregate Term Loan A Commitment" means the combined Term Loan A
Commitments of the Lenders, which shall initially be in the amount of
$24,000,000, as such amount may be reduced from time to time pursuant to this
Agreement.
"Aggregate Term Loan B Commitment" means the combined Term Loan B
Commitments of the Lenders, which shall initially be in the amount of
$30,000,000, as such amount may be reduced from time to time pursuant to this
Agreement.
"Antares" means Antares Capital Corporation, a Delaware corporation, acting
in its capacity as agent for the Lenders hereunder.
"Applicable Margin" means (a) for the period from the Closing Date through
July 31, 2000, (i) the Revolving Loan Commitment and the Term Loan A with
respect to Base Rate Loans, 1.50%, and with respect to LIBOR Rate Loans, 2.75%,
and (ii) the Term Loan B with respect to the Base Rate Loans, 2.00%, and with
respect to LIBOR Rate Loans, 3.25% and (b) commencing August 1, 2000, with
respect to LIBOR Rate Loans and Base Rate Loans, respectively, the applicable
LIBOR margin or Base Rate margin in effect from time to time determined based on
the applicable Leverage Ratio then in effect pursuant to the appropriate column
under the table below:
Revolving Loan and Term Loan A
<TABLE>
<CAPTION>
LIBOR Base Rate
Leverage Ratio Margin Margin
- -------------- ------ ------
<S> <C> <C>
4.5 to 1.0 or
greater 2.75% 1.50%
4.0 to 1.0 or
greater, but less
than 4.5 to 1.0 2.50% 1.25%
less than 4.0 to 1.0 2.25% 1.00%
</TABLE>
Term Loan B
<TABLE>
<CAPTION>
LIBOR Base Rate
Leverage Ratio Margin Margin
- -------------- ------ ------
<S> <C> <C>
</TABLE>
75
<PAGE>
<TABLE>
<S> <C> <C>
4.5 to 1.0 or
greater 3.25% 2.00%
4.0 to 1.0 or
greater, but less
than 4.5 to 1.0 3.00% 1.75%
less than 4.0 to 1.0 3.00% 1.75%
</TABLE>
The Applicable Margin shall be adjusted from time to time upon delivery to the
Agent of the financial statements for June, September, December and March
required to be delivered pursuant to Section 4.1 hereof accompanied by a written
calculation of the Leverage Ratio certified on behalf of Borrower by a
Responsible Officer as of the end of the calendar quarter for which such
financial statements are delivered. The first adjustment shall occur August 1,
2000 based on Leverage Ratio for the twelve month period ending June 30, 2000.
If such calculation indicates that the Applicable Margin shall increase or
decrease, then on the first day of the month following the date of delivery of
such financial statements and written calculation the Applicable Margin shall be
adjusted in accordance therewith; provided, however, that if Borrower shall fail
-------- -------
to deliver any such financial statements for any such fiscal month by the date
required pursuant to Section 4.1, then, at Agent's election, effective as of the
first day of the month following the end of the fiscal month during which such
financial statements were to have been delivered, and continuing through the
first day of the month following the date (if ever) when such financial
statements and such written calculation are finally delivered, the Applicable
Margin shall be conclusively presumed to equal the highest Applicable Margin
specified in the pricing table set forth above.
"Attorney Costs" means and includes all reasonable fees and disbursements
of any law firm or other external counsel, the allocated cost of internal legal
services and all disbursements of internal counsel.
"B & L" means Bausch & Lomb Incorporated, a New York corporation.
"B & L License Agreement" means that certain license agreement by and
between B & L and Bushnell dated January 1, 1999, as the same may be amended,
restated, supplemented or otherwise modified from time to time as permitted
herein.
"Bankruptcy Code" means the Federal Bankruptcy Reform Act of 1978 (11
U.S.C. (S)101, et seq.), as amended and in effect from time to time and the
-------
regulations issued from time to time thereunder.
"Base Rate" means, for any day, a rate of interest equal to the rate of
interest which is identified as the "Prime Rate" and normally published in the
Money Rates section of The Wall
--------
76
<PAGE>
Street Journal (or, if such rate ceases to be so published, as quoted from such
- --------------
other generally available and recognizable source as the Agent may select).
"Base Rate Loan" means a Loan that bears interest based on the Base Rate.
"Borrowing" means a borrowing hereunder consisting of Loans made to the
Borrower on the same day by the Lenders pursuant to Article I.
"Borrowing Base Certificate" means a certificate of the Borrower, in
substantially the form of Exhibit 11.1(a) hereto, duly completed as of a date
---------------
acceptable to the Agent in its sole discretion.
"Bushnell" means Bushnell Corporation, a Delaware corporation.
"Bushnell Canada" means Bushnell Corporation of Canada, an Ontario
corporation.
"Business Day" means any day other than a Saturday, Sunday or other day on
which commercial banks in Chicago, Illinois or New York, New York are authorized
or required by law to close and, if the applicable Business Day relates to any
---
LIBOR Rate Loan, a day on which dealings are carried on in the London interbank
market.
"Capital Adequacy Regulation" means any guideline, request or directive of
any central bank or other Governmental Authority, or any other law, rule or
regulation, whether or not having the force of law, in each case, regarding
capital adequacy of any Lender or of any corporation controlling a Lender.
"Capital Lease" means any leasing or similar arrangement which, in
accordance with GAAP, is classified as a capital lease.
"Capital Lease Obligations" means all monetary obligations of the Borrower
or any of its Subsidiaries under any Capital Leases.
"Cash Equivalents" means: (a) securities issued or fully guaranteed or
insured by the United States Government or any agency thereof having maturities
of not more than twelve (12) months from the date of acquisition; (b)
certificates of deposit, time deposits, repurchase agreements, reverse
repurchase agreements, or bankers' acceptances, having in each case a tenor of
not more than twelve (12) months, issued by any Lender, or by any U.S.
commercial bank or any branch or agency of a non-U.S. bank licensed to conduct
business in the U.S. having combined capital and surplus of not less than
$100,000,000; (c) commercial paper of an issuer rated at least A-2 by Standard &
Poor's Corporation or P-2 by Moody's Investors Service Inc. and in either case
having a tenor of not more than 270 days; (d) investments in money market mutual
funds having assets in excess of $1,000,000,000.00 or more substantially all of
the assets are comprised of securities of the types described in clauses (a)
through (c) above.
77
<PAGE>
"Closing Date" means the date on which all conditions precedent set forth
in Section 2.1 are satisfied or waived by the Agent and all Lenders and the
initial Loan has been funded pursuant to the terms hereof.
"Code" means the Internal Revenue Code of 1986, and regulations promulgated
thereunder.
"Collateral" means all property and interests in property and proceeds
thereof now owned or hereafter acquired by the Borrower, WSR or any other Person
as debtor and their respective Subsidiaries in or upon which a Lien now or
hereafter exists in favor of any Lender or the Agent for the benefit of the
Lenders, whether under this Agreement or under any other documents executed by
any such Persons and delivered to the Agent.
"Collateral Documents" means, collectively, the Security Agreements, the
Mortgages, the Guaranties, the Pledge Agreements, the Negative Pledge Agreement
and all other security agreements, patent and trademark assignments, lease
assignments, guarantees and other similar agreements, and all amendments,
restatements, modifications or supplements thereof or thereto, by or between any
one or more of, the Borrower or its Subsidiaries and any Lender or the Agent for
the benefit of the Lenders now or hereafter delivered to the Lenders or the
Agent pursuant to or in connection with the transactions contemplated hereby,
and all financing statements (or comparable documents now or hereafter filed in
accordance with the UCC or comparable law) against, the Borrower or its
Subsidiaries as debtor in favor of any Lender or the Agent for the benefit of
the Lenders, as secured party.
"Commitment" means, for each Lender, the sum of its Revolving Loan
Commitment and Term Loan A Commitment and Term Loan B Commitment.
"Commitment Percentage" means, as to any Lender, the percentage equivalent
of such Lender's Revolving Loan Commitment, Term Loan A Commitment or Term Loan
B Commitment divided by the Aggregate Revolving Loan Commitment or Aggregate
Term Loan A Commitment or Aggregate Term Loan B Commitment, as applicable.
"Contingent Obligation" means, as to any Person, any direct or indirect
liability, contingent or otherwise, of that Person: (i) with respect to any
indebtedness, lease, dividend or other obligation of another Person if the
primary purpose or intent of the Person incurring such liability, or the primary
effect thereof, is to provide assurance to the obligee of such liability that
such liability will be paid or discharged, or that any agreements relating
thereto will be complied with, or that the holders of such liability will be
protected (in whole or in part) against loss with respect thereto; (ii) with
respect to any letter of credit issued for the account of that Person or as to
which that Person is otherwise liable for reimbursement of drawings; (iii) under
any Rate Contracts; (iv) to make take-or-pay or similar payments if required
regardless of nonperformance by any other party or parties to an agreement; or
(v) for the obligations of another through any agreement to purchase, repurchase
or otherwise acquire such obligation or any property
78
<PAGE>
constituting security therefor, to provide funds for the payment or discharge of
such obligation or to maintain the solvency, financial condition or any balance
sheet item or level of income of another Person. The amount of any Contingent
Obligation shall be equal to the amount of the obligation so guaranteed or
otherwise supported or, if not a fixed and determined amount, the maximum amount
so guaranteed or supported.
"Contractual Obligations" means, as to any Person, any provision of any
security issued by such Person or of any agreement, undertaking, contract,
indenture, mortgage, deed of trust or other instrument, document or agreement to
which such Person is a party or by which it or any of its property is bound.
"Controlled Group" means the Borrower and all Persons (whether or not
incorporated) under common control or treated as a single employer with the
Borrower pursuant to Section 414(b), (c), (m) or (o) of the Code.
"Conversion Date" means any date on which the Borrower converts a Base Rate
Loan to a LIBOR Rate Loan or a LIBOR Rate Loan to a Base Rate Loan.
"Default" means any event or circumstance which, with the giving of notice,
the lapse of time, or both, would (if not cured or otherwise remedied during
such time) constitute an Event of Default.
"Disposition" means (a) the sale, lease (as lessor), conveyance or other
disposition of Property, other than sales or other dispositions expressly
permitted under subsection 5.2(a) and (b) the sale or transfer by the Borrower
or any Subsidiary of the Borrower of any equity securities issued by any
Subsidiary of the Borrower and held by such transferor Person.
"Dollars", "dollars" and "$" each mean lawful money of the United States of
America.
"Eligible Assignee" means any of: (a) a commercial bank organized under the
laws of the United States, or any State thereof; (b) a commercial bank organized
under the laws of any other country; (c) a finance company, insurance company or
other financial institution or fund which is engaged in making, purchasing or
otherwise investing in commercial loans for its own account in the ordinary
course of its business; (d) a trust, limited or general partnership, limited
liability company, corporation or other limited purpose entity formed for the
purpose of effecting a securitization of, among other things, the Loans.
"Environmental Claims" means all claims, however asserted, by any
Governmental Authority or other Person alleging potential liability or
responsibility for violation of any Environmental Law, or for release or injury
to the environment or threat to public health, personal injury (including
sickness, disease or death), property damage, natural resources damage, or
otherwise alleging liability or responsibility for damages (punitive or
otherwise), cleanup, removal, remedial or response costs, restitution, civil or
criminal penalties, injunctive relief, or
79
<PAGE>
other type of relief, resulting from or based upon the presence, placement,
discharge, emission or release (including intentional and unintentional,
negligent and non-negligent, sudden or non-sudden, accidental or non-accidental,
placement, spills, leaks, discharges, emissions or releases) of any Hazardous
Material at, in, or from Property, whether or not owned by the Borrower.
"Environmental Laws" means all federal, state or local laws, statutes,
common law duties, rules, regulations, ordinances and codes, together with all
administrative orders, directed duties, requests, licenses, authorizations and
permits of, and agreements with, any Governmental Authorities, in each case
relating to environmental, health, safety and land use matters; including,
without limitation, the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, the Clean Air Act, the Federal Water Pollution Control
Act of 1972, the Solid Waste Disposal Act, the Federal Resource Conservation and
Recovery Act, the Toxic Substances Control Act, the Emergency Planning and
Community Right-to-Know Act.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and regulations promulgated thereunder.
"ERISA Affiliate" means any trade or business (whether or not incorporated)
under common control with the Borrower within the meaning of Section 414(b),
414(c) or 414(m) of the Code.
"ERISA Event" means (a) a Reportable Event with respect to a Qualified Plan
or a Multiemployer Plan; (b) a withdrawal by the Borrower or any ERISA Affiliate
from a Qualified Plan subject to Section 4063 of ERISA during a plan year in
which it was a substantial employer (as defined in Section 4001(a)(2) of ERISA);
(c) a complete or partial withdrawal by the Borrower or any ERISA Affiliate from
a Multiemployer Plan; (d) the filing of a notice of intent to terminate, the
treatment of a plan amendment as a termination under Section 4041 or 4041A of
ERISA or the commencement of proceedings by the PBGC to terminate a Qualified
Plan or Multiemployer Plan subject to Title IV of ERISA; (e) a failure by the
Borrower or any member of the Controlled Group to make required contributions to
a Qualified Plan or Multiemployer Plan; (f) an event or condition which might
reasonably be expected to constitute grounds under Section 4042 of ERISA for the
termination of, or the appointment of a trustee to administer, any Qualified
Plan or Multiemployer Plan; (g) the imposition of any liability under Title IV
of ERISA, other than PBGC premiums due but not delinquent under Section 4007 of
ERISA, upon the Borrower or any ERISA Affiliate; (h) an application for a
funding waiver or an extension of any amortization period pursuant to Section
412 of the Code with respect to any Plan; (i) a non-exempt prohibited
transaction occurs with respect to any Plan for which the Borrower or any
Subsidiary of the Borrower may be directly or indirectly liable; or (j) a
violation of the applicable requirements of Section 404 or 405 of ERISA or the
exclusive benefit rule under Section 401(a) of the Code by any fiduciary or
disqualified person with respect to any Plan for which the Borrower or any
member of the Controlled Group may be directly or indirectly liable.
80
<PAGE>
"Event of Loss" means, with respect to any Property, any of the following:
(a) any loss, destruction or damage of such Property; (b) any pending or
threatened institution of any proceedings for the condemnation or seizure of
such Property or for the exercise of any right of eminent domain; or (c) any
actual condemnation, seizure or taking, by exercise of the power of eminent
domain or otherwise, of such Property, or confiscation of such Property or the
requisition of the use of such Property.
"Exchange Act" means the Securities and Exchange Act of 1934, and
regulations promulgated thereunder.
"Federal Reserve Board" means the Board of Governors of the Federal Reserve
System, or any entity succeeding to any of its principal functions.
"Foreign Sales" means, without duplication, the aggregate of all sales by
Borrower or any of its Subsidiaries to an Account Debtor located outside the
United States of America or Canada and sales by Subsidiaries of Borrower which
are not organized under the laws of a jurisdiction located in the United States
or Canada.
"GAAP" means generally accepted accounting principles set forth from time
to time in the opinions and pronouncements of the Accounting Principles Board
and the American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board (or agencies with
similar functions of comparable stature and authority within the accounting
profession), which are applicable to the circumstances as of the date of
determination.
"Governmental Authority" means any nation or government, any state or other
political subdivision thereof, any central bank (or similar monetary or
regulatory authority) thereof, any entity exercising executive, legislative,
judicial, regulatory or administrative functions of or pertaining to government,
and any corporation or other entity owned or controlled, through stock or
capital ownership or otherwise, by any of the foregoing.
"Guaranties" means, collectively, (i) the Guaranty, dated as of even date
herewith, in form and substance reasonably acceptable to Agent and Lenders, made
by Voit and Voit Sports in favor of the Agent, for the benefit of Agent and
Lenders, (ii) the Guaranty, dated as of even date herewith, in form and
substance reasonably acceptable to Agent and Lenders, made by Bushnell and Old
WSR in favor of the Agent, for the benefit of Agent and Lenders and (iii) the
Guaranty dated as of even date herewith in form and substance reasonably
acceptable to Agent and Lenders, made by Bushnell Canada in favor of Agent, for
the benefit of Agent and Lenders.
"Hazardous Materials" means all those substances which are regulated by, or
which may form the basis of liability under, any Environmental Law.
"Indebtedness" of any Person means, without duplication: (a) all
indebtedness for borrowed money; (b) all obligations issued, undertaken or
assumed as the deferred purchase price of
81
<PAGE>
property or services (other than trade payables entered into in the Ordinary
Course of Business); (c) all reimbursement or payment obligations with respect
to letters of credit, surety bonds and other similar instruments; (d) all
obligations evidenced by notes, bonds, debentures or similar instruments,
including obligations so evidenced incurred in connection with the acquisition
of property, assets or businesses; (e) all indebtedness created or arising under
any conditional sale or other title retention agreement, or incurred as
financing, in either case with respect to Property acquired by the Person (even
though the rights and remedies of the seller or bank under such agreement in the
event of default are limited to repossession or sale of such property); (f) all
Capital Lease Obligations; (g) all indebtedness referred to in clauses (a)
through (f) above secured by (or for which the holder of such Indebtedness has
an existing right, contingent or otherwise, to be secured by) any Lien upon or
in Property (including accounts and contracts rights) owned by such Person, even
though such Person has not assumed or become liable for the payment of such
indebtedness; and (h) all Contingent Obligations described in clause (i) of the
definition thereof in respect of indebtedness or obligations of others of the
kinds referred to in clauses (a) through (g) above.
"Insolvency Proceeding" means (a) any case, action or proceeding before any
court or other Governmental Authority relating to bankruptcy, reorganization,
insolvency, liquidation, receivership, dissolution, winding-up or relief of
debtors, or (b) any general assignment for the benefit of creditors,
composition, marshalling of assets for creditors, or other, similar arrangement
in respect of its creditors generally or any substantial portion of its
creditors; in each case (a) and (b) undertaken under U.S. Federal, State or
foreign law, including the Bankruptcy Code.
"Interest Payment Date" means, (a) with respect to any LIBOR Rate Loan
(other than a LIBOR Rate Loan having an Interest Period of six (6) months) the
last day of each Interest Period applicable to such Loan, (b) with respect to
any LIBOR Rate Loan having an Interest Period of six (6) months, the last day of
each three (3) month interval, and (c) with respect to Base Rate Loans, the
first day of each calendar month.
"Interest Period" means, with respect to any LIBOR Rate Loan, the period
commencing on the Business Day the Loan is disbursed or continued or on the
Conversion Date on which the Loan is converted to the LIBOR Rate Loan and ending
on the date one, two, three or six months thereafter, as selected by the
Borrower in its Notice of Borrowing or Notice of Conversion/Continuation;
provided that:
- --------
(a) if any Interest Period pertaining to a LIBOR Rate Loan would
otherwise end on a day which is not a Business Day, that Interest Period
shall be extended to the next succeeding Business Day unless the result of
such extension would be to carry such Interest Period into another calendar
month, in which event such Interest Period shall end on the immediately
preceding Business Day;
(b) any Interest Period pertaining to a LIBOR Rate Loan that begins
on the last Business Day of a calendar month (or on a day for which there
is no numerically
82
<PAGE>
corresponding day in the calendar month at the end of such Interest Period)
shall end on the last Business Day of the calendar month at the end of such
Interest Period;
(c) no Interest Period for any Term Loan shall extend beyond the last
scheduled payment date therefor and no Interest Period for any Revolving
Loan shall extend beyond the Revolving Termination Date; and
(d) no Interest Period applicable to a Term Loan or portion thereof
shall extend beyond any date upon which is due any scheduled principal
payment in respect of the Term Loans unless the aggregate principal amount
of Term Loans represented by Base Rate Loans or by LIBOR Rate Loans having
Interest Periods that will expire on or before such date is equal to or in
excess of the amount of such principal payment.
"Inventory" means all of the "inventory" (as such term is defined in the
UCC) of the Borrower, including, but not limited to, all merchandise, raw
materials, parts, supplies, work-in-process and finished goods intended for
sale, together with all the containers, packing, packaging, shipping and similar
materials related thereto, and including such inventory as is temporarily out of
the Borrower's custody or possession, including inventory on the premises of
others and items in transit.
"Lending Office" means, with respect to any Lender, the office or offices
of the Lender specified as its "Lending Office" opposite its name on the
applicable signature page hereto, or such other office or offices of the Lender
as it may from time to time notify the Borrower and the Agent.
"Letter of Credit Participation Liability" means, as to each Lender Letter
of Credit and each Letter of Credit Participation Agreement, all reimbursement
obligations and all other liabilities of Borrower or any of its Subsidiaries to
Agent and the Lenders in connection with the Lender Letter of Credit with
respect to the transaction for which the Letter of Credit Participation
Agreement was issued, whether contingent or otherwise, including with respect to
any letter of credit: (a) the amount available to be drawn or which may become
available to be drawn; (b) without duplication, all amounts which have been paid
or made available by the issuing bank or by the Agent under such Lender Letters
of Credit or Letter of Credit Participation Agreement, in each instance, to the
extent not reimbursed; and (c) all unpaid interest, fees and expenses incurred
in connection therewith.
"LIBOR" means, for each Interest Period, the offered rate per annum for
deposits of Dollars for the applicable Interest Period that appears on Telerate
Page 3750 as of 11:00 A.M. (London, England time) two (2) Business Days prior to
the first day in such Interest Period. If no such offered rate exists, such
rate will be the rate of interest per annum, as determined by the Agent (rounded
upwards, if necessary, to the nearest 1/16 of 1%) at which deposits of Dollars
in immediately available funds are offered at 11:00 A.M. (London, England time)
two (2) Business Days prior to the first day in such Interest Period by major
financial institutions reasonably
83
<PAGE>
satisfactory to the Agent in the London interbank market for such Interest
Period for the applicable principal amount on such date of determination.
"LIBOR Rate Loan" means a Loan that bears interest based on LIBOR.
"Lien" means any mortgage, deed of trust, pledge, hypothecation,
assignment, charge or deposit arrangement, encumbrance, lien (statutory or
other) or preference, priority or other security interest or preferential
arrangement of any kind or nature whatsoever (including those created by,
arising under or evidenced by any conditional sale or other title retention
agreement, the interest of a lessor under a Capital Lease, any financing lease
having substantially the same economic effect as any of the foregoing, or the
filing of any financing statement naming the owner of the asset to which such
lien relates as debtor, under the UCC or any comparable law) and any contingent
or other agreement to provide any of the foregoing, but not including the
interest of a lessor under a lease which is not a Capital Lease.
"Loan" means an extension of credit by a Lender to the Borrower pursuant to
Article I hereof, and may be a Base Rate Loan or a LIBOR Rate Loan.
"Loan Documents" means this Agreement, the Notes, the Fee Letter, the
Collateral Documents and all documents delivered to the Agent in connection
therewith.
"Margin Stock" means "margin stock" as such term is defined in Regulation
T, U or X of the Federal Reserve Board.
"Material Adverse Effect" means (a) a material adverse change in, or a
material adverse effect upon, the operations, business, properties, or financial
condition of the Borrower or the Borrower and its Subsidiaries taken as a whole;
(b) a material impairment of the ability of the Borrower or any of its
Subsidiaries to perform in any material respect its obligations under any Loan
Document and avoid any Event of Default; or (c) a material adverse effect upon
(i) the legality, validity, binding effect or enforceability of any Loan
Document, or (ii) the perfection or priority of any Lien granted to the Lenders
or to the Agent for the benefit of the Lenders under any of the Collateral
Documents.
"Merger" means the merger of Borrower with and into WSR with Borrower as
the continuing or surviving corporation.
"Mortgage" means any deed of trust, mortgage or other document creating a
Lien on real property or any interest in real property.
"Multiemployer Plan" means a "multiemployer plan" (within the meaning of
Section 4001(a)(3) of ERISA) and to which Borrower or any member of the
Controlled Group makes, is making, or is obligated to make contributions or,
during the preceding three calendar years, has made, or been obligated to make,
contributions.
84
<PAGE>
"Negative Pledge Agreement" means the Negative Pledge Agreement, dated as
of even date herewith, in form and substance reasonably acceptable to Agent and
Lenders, made by the WPP Group Borrower in favor of the Agent, for the benefit
of Lenders.
"Net Issuance Proceeds" means, in respect of any issuance of debt or
equity, cash proceeds and non-cash proceeds received or receivable in connection
therewith, net of reasonable out-of-pocket costs and expenses paid or incurred
in connection therewith in favor of any Person not an Affiliate of the Borrower.
"Net Proceeds" means proceeds in cash, checks or other cash equivalent
financial instruments (including Cash Equivalents) as and when received by the
Person making a Disposition, net of: (a) the direct costs relating to such
Disposition excluding amounts payable to the Borrower or any Affiliate of the
Borrower, (b) sale, use or other transaction taxes paid or payable as a result
thereof, and (c) amounts required to be applied to repay principal, interest and
prepayment premiums and penalties on Indebtedness secured by a Lien on the asset
which is the subject of such Disposition. "Net Proceeds" shall also include
proceeds paid on account of any Event of Loss net of (i) all money actually
applied to repair or reconstruct the damaged property or property affected by
the condemnation or taking, (ii) all of the costs and expenses reasonably
incurred in connection with the collection of such proceeds, award or other
payments, and (iii) any amounts retained by or paid to parties having superior
rights to such proceeds, awards or other payments.
"Note" means any Revolving Note or Term Note and "Notes" means all such
Notes.
"Notice of Borrowing" means a notice given by the Borrower to the Agent
pursuant to Section 1.5, in substantially the form of Exhibit 11.1(b) hereto.
---------------
"Notice of Conversion/Continuation" means a notice given by the Borrower to
the Agent pursuant to Section 1.6, in substantially the form of Exhibit 11.1(c)
---------------
hereto.
"Obligations" means all Loans, and other Indebtedness, advances, debts,
liabilities, obligations, covenants and duties owing by the Borrower to any
Lender, the Agent, or any other Person required to be indemnified, that arises
under any Loan Document, whether or not for the payment of money, whether
arising by reason of an extension of credit, loan, guaranty, indemnification or
in any other manner, whether direct or indirect (including those acquired by
assignment), absolute or contingent, due or to become due, now existing or
hereafter arising and however acquired.
"Old WSR" means Old WSR, Inc., a Delaware corporation.
"Ordinary Course of Business" means, in respect of any transaction
involving the Borrower or any Subsidiary of the Borrower, the ordinary course of
such Person's business, as conducted
85
<PAGE>
by any such Person in accordance with past practice and undertaken by such
Person in good faith and not for purposes of evading any covenant or restriction
in any Loan Document.
"Organization Documents" means, (a) for any corporation, the certificate or
articles of incorporation, the bylaws, any certificate of determination or
instrument relating to the rights of preferred shareholders of such corporation,
any shareholder rights agreement, and all applicable resolutions of the board of
directors (or any committee thereof) of such corporation, (b) for any
partnership, the partnership agreement and, if applicable, certificate of
limited partnership or (c) for any limited liability company, the operating
agreement and articles or certificate of formation.
"PBGC" means the Pension Benefit Guaranty Corporation or any entity
succeeding to any of its principal functions under ERISA.
"Permitted Equity Securities Issuance" shall mean (i) the issuance of stock
of Borrower upon exercise of (a) the warrants issued to Subordinated Noteholders
in connection with the Subordinated Loan Documents and (b) the Seller Warrants,
(ii) the sale of equity securities of Borrower to employees, officers and
directors of Borrower (as permitted herein), (iii) the issuance of securities
issued in connection with corporate partnering transactions in the Ordinary
Course of Business and (iv) the sale of preferred stock of Borrower in
satisfaction of all or a portion of the "Future Preferred Commitment" under and
pursuant to the Purchase Agreement dated August __, 1999 among Borrower, Wind
Point, Antares and certain other stockholders of Borrower, as in effect on the
Closing Date.
"Person" means an individual, partnership, corporation, limited liability
company, business trust, joint stock company, trust, unincorporated association,
joint venture or Governmental Authority.
"Plan" means an employee benefit plan (as defined in Section 3(3) of ERISA)
which the Borrower or any member of the Controlled Group sponsors or maintains
or to which the Borrower or any member of the Controlled Group makes, is making
or is obligated to make contributions.
"Pledge Agreement" means, collectively, (i) that certain the Pledge
Agreement, dated as of even date herewith, in form and substance reasonably
acceptable to Agent and Lenders, made by Borrower in favor of the Agent, for the
benefit of the Lenders and (ii) that certain Pledge Agreement, dated as of even
date herewith, in form and substance reasonably acceptable to Agent and Lenders,
made by Subsidiaries of Borrower and Voit in favor of the Agent, for the benefit
of the Lenders.
"Pledged Collateral" has the meaning specified in the Pledge Agreement.
"Prior Indebtedness" means the indebtedness and obligations specified on
Schedule 11.1 hereto.
- -------------
86
<PAGE>
"Property" means any interest in any kind of property or asset, whether
real, personal or mixed, and whether tangible or intangible.
"Qualified Plan" means a pension plan (as defined in Section 3(2) of ERISA)
intended to be tax-qualified under Section 401(a) of the Code and which any
member of the Controlled Group sponsors, maintains, or to which it makes, is
making or is obligated to make contributions, or in the case of a multiple
employer plan (as described in Section 4064(a) of ERISA) has made contributions
at any time during the immediately preceding period covering at least five (5)
plan years, but excluding any Multiemployer Plan.
"Qualifying Initial Public Offering" means an initial public offering of
any securities of Borrower pursuant to an effective registration statement under
the Securities Act of 1933, as amended, in which the gross proceeds received by
Borrower are $35,000,000 or more.
"Rate Contracts" means swap agreements (as such term is defined in Section
101 of the Bankruptcy Code) and any other agreements or arrangements designed to
provide protection against fluctuations in interest or currency exchange rates.
"Recapitalization Agreement" means that certain Agreement and Plan of
Merger and Recapitalization dated as of June 1, 1999 by and among WPP, Borrower,
WSR, Excorp Holdings Limited and Pacific Investments (BVI), Limited.
"Related Agreements" means, collectively, the Recapitalization Agreement,
Subordinated Note Agreement, the Subordinated Notes, Seller Notes and the other
agreements, executed in connection with the recapitalization of Borrower and the
Merger.
"Related Transactions" means the transactions contemplated by the Related
Agreements and includes, without limitation, the recapitalization of Borrower,
the Merger and the funding of the Subordinated Indebtedness.
"Reportable Event" means, as to any Plan, (a) any of the events set forth
in Section 4043(b) of ERISA or the regulations thereunder, other than any such
event for which the 30-day notice requirement under ERISA has been waived in
regulations issued by the PBGC, (b) a withdrawal from a Plan described in
Section 4063 of ERISA, or (c) a cessation of operations described in Section
4062(e) of ERISA.
"Required Lenders" means at any time (a) Lenders then holding at least
sixty six and two-thirds percent (66-2/3%) of the sum of the Aggregate Revolving
Loan Commitment then in effect plus the aggregate unpaid principal balance of
the Term Loans then outstanding, or (b) if the Revolving Loan Commitments have
been terminated, Lenders then having at least sixty six and two-thirds percent
(66-2/3%) of the aggregate unpaid principal amount of Loans then outstanding.
87
<PAGE>
"Requirement of Law" means, as to any Person, any law (statutory or
common), ordinance, treaty, rule, regulation, order, policy, other legal
requirement or determination of an arbitrator or of a Governmental Authority, in
each case applicable to or binding upon the Person or any of its property or to
which the Person or any of its property is subject.
"Responsible Officer" means the chief executive officer or the president of
the Borrower, or any other officer having substantially the same authority and
responsibility; or, with respect to compliance with financial covenants or
delivery of financial information, the chief financial officer or the treasurer
of the Borrower, or any other officer having substantially the same authority
and responsibility.
"Revolving Note" means a promissory note of the Borrower payable to the
order of a Lender and otherwise substantially the form of Exhibit 11.1(d)
---------------
hereto, evidencing indebtedness of the Borrower under the Revolving Loan
Commitment of such Lender.
"Revolving Termination Date" means the earlier to occur of: (a) July 30,
2005; and (b) the date on which the Aggregate Revolving Loan Commitment shall
terminate in accordance with the provisions of this Agreement.
"SEC" means the Securities and Exchange Commission, or any entity
succeeding to any of its principal functions.
"Security Agreements" means, collectively, (i) the Security Agreement,
dated as of even date herewith, in form and substance reasonably satisfactory to
Agent and Lenders, made by Borrower in favor of the Agent for the benefit of
Lenders, (ii) the Security Agreement, dated as of even date herewith, in form
and substance reasonably acceptable to Agent and Lenders, made by the Voit and
Voit Sports in favor of the Agent for the benefit of Lenders, (iii) the Security
Agreement, dated as of even date herewith, in form and substance reasonably
acceptable to Agent and Lenders, made by Bushnell and Old WSR in favor of Agent,
for the benefit of Agent and Lenders and (iv) those two (2) Security Agreements,
dated as of even date herewith in form and substance reasonably acceptable to
Agent and Lenders, made by Bushnell Canada in favor of Agent, for the benefit of
Agent and Lenders.
"Seller Note" means the Non-Negotiable Subordinated Promissory Note issued
by Borrower to Excorp Holdings Limited, in the aggregate principal amount of
$5,000,000, as the same may be increased as the result of the accrual of
interest.
"Seller Warrants" means warrants issued to Sellers pursuant to the Seller
Notes.
"Solvent" means, as to any Person at any time, that (a) the fair value of
the Property of such Person is greater than the amount of such Person's
liabilities (including disputed, contingent and unliquidated liabilities) as
such value is established and liabilities evaluated for purposes of Section
101(31) of the Bankruptcy Code and, in the alternative, for purposes of the
Uniform
88
<PAGE>
Fraudulent Transfer Act; (b) such Person is able to realize upon its Property
and pay its debts and other liabilities (including disputed, contingent and
unliquidated liabilities) as they mature in the normal course of business; (c)
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 (d) such Person is not engaged in business or a transaction, and is
not about to engage in business or a transaction, for which such Person's
property would constitute unreasonably small capital.
"Subordinated Indebtedness" means the Indebtedness described on Schedule
5.5 and all other Indebtedness of Borrower or any of its Subsidiaries which is
subordinated in right of payment to the Obligations including without
limitation, Indebtedness evidenced by Subordinated Notes and Seller Notes.
"Subordinated Loan Documents" means the Subordinated Note Agreement,
Subordinated Notes, the Warrants and Subsidiary Guaranty Agreements issued under
and pursuant to the Subordinated Note Agreement.
"Subordinated Note Agreement" means Note Agreement dated as of even date
herewith between Borrower and Subordinated Noteholders.
"Subordinated Noteholders" means The Northwestern Mutual Life Insurance
Company, its successors and assigns and each other holder of Subordinated Notes
from time to time.
"Subordinated Notes" means, collectively, the 12% Senior Subordinated Notes
issued by Borrower to Subordinated Noteholders, in the original aggregate
principal amount of $22,800,000.
"Subsidiary" of a Person means any corporation, association, limited
liability company, partnership, joint venture or other business entity of which
more than fifty percent (50%) of the voting stock or other equity interests (in
the case of Persons other than corporations), is owned or controlled directly or
indirectly by the Person, or one or more of the Subsidiaries of the Person, or a
combination thereof.
"Term Note A" means a promissory note of the Borrower payable to the order
of a Lender, in substantially the form of Exhibit 11.1(e)(i) hereto, evidencing
------------------
the indebtedness of the Borrower to such Lender resulting from the Term Loan A
made to the Borrower by such Lender.
"Term Note B" means a promissory note of the Borrower payable to the order
of a Lender, in substantially the form of Exhibit 11.1(e)(ii) hereto, evidencing
-------------------
the indebtedness of the Borrower to such Lender resulting from the Term Loan B
made to the Borrower by such Lender.
"UCC" means the Uniform Commercial Code as in effect from time to time in
the State of Illinois.
89
<PAGE>
"Unfunded Pension Liabilities" means the excess of a Plan's benefit
liabilities under Section 4001(a)(16) of ERISA, over the current value of that
Plan's assets, determined in accordance with the assumptions used by the Plan's
actuaries for funding the Plan pursuant to section 412 for the applicable plan
year.
"United States" and "U.S." each means the United States of America.
"Voit" means Voit Corporation, a New York corporation.
"Voit Sports" means Voit Sports, Inc., a New York corporation.
"Wholly-Owned Subsidiary" means any corporation in which (other than
directors' qualifying shares required by law) 100% of the capital stock of each
class having ordinary voting power, and 100% of the capital stock of every other
class, in each case, at the time as of which any determination is being made, is
owned, beneficially and of record, by the Borrower, or by one or more of the
other Wholly-Owned Subsidiaries, or both.
"Withdrawal Liabilities" means, as of any determination date, the aggregate
amount of the liabilities, if any, pursuant to Section 4201 of ERISA if the
Controlled Group made a complete withdrawal from all Multiemployer Plans and any
increase in contributions pursuant to Section 4243 of ERISA.
"WPP" means Wind Point Partners III, L.P. and Wind Point Partners IV, L.P.,
each a Delaware limited partnership.
"WPP Group" means WPP and Wind Point III Executive Advisor Partners, L.P.
and Wind Point IV Executive Advisor Partners, L.P., each a Delaware limited
partnership.
"WSR" means WSR Acquisition Co., Inc., a Delaware corporation.
"WSR Stockholders Agreement" means that certain Stockholders Agreement by
and among Borrower, WPP Group, Excorp Holdings Limited, a corporation organized
under the laws of Hong Kong, Pacific Investment (BVI) Ltd., a British Islands
corporation, Joseph Messner, an individual, Managers (as defined therein) and
Other Stockholders (as defined therein).
11.2 Other Interpretive Provisions.
-----------------------------
(a) Defined Terms. Unless otherwise specified herein or therein, all terms
-------------
defined in this Agreement shall have the defined meanings when used in any
certificate or other document made or delivered pursuant hereto. The meaning of
defined terms shall be equally applicable to the singular and plural forms of
the defined terms. Terms (including uncapitalized terms) not otherwise defined
herein and that are defined in the UCC shall have the meanings therein
described.
90
<PAGE>
(b) The Agreement. The words "hereof", "herein", "hereunder" and words of
-------------
similar import when used in this Agreement shall refer to this Agreement as a
whole and not to any particular provision of this Agreement; and subsection,
section, schedule and exhibit references are to this Agreement unless otherwise
specified.
(c) Certain Common Terms. The term "documents" includes any and all
--------------------
instruments, documents, agreements, certificates, indentures, notices and other
writings, however evidenced. The term "including" is not limiting and means
"including without limitation."
(d) Performance; Time. Whenever any performance obligation hereunder
-----------------
(other than a payment obligation) shall be stated to be due or required to be
satisfied on a day other than a Business Day, such performance shall be made or
satisfied on the next succeeding Business Day. In the computation of periods of
time from a specified date to a later specified date, the word "from" means
"from and including"; the words "to" and "until" each mean "to but excluding",
and the word "through" means "to and including." If any provision of this
Agreement refers to any action taken or to be taken by any Person, or which such
Person is prohibited from taking, such provision shall be interpreted to
encompass any and all means, direct or indirect, of taking, or not taking, such
action.
(e) Contracts. Unless otherwise expressly provided herein, references to
---------
agreements and other contractual instruments, including this Agreement and the
other Loan Documents, shall be deemed to include all subsequent amendments,
thereto, restatements thereof and other modifications and supplements thereto
which are in effect from time to time, but only to the extent such amendments
and other modifications are not prohibited by the terms of any Loan Document.
(f) Laws. References to any statute or regulation are to be construed as
----
including all statutory and regulatory provisions consolidating, amending,
replacing, supplementing or interpreting the statute or regulation.
11.3 Accounting Principles. (a) Unless the context otherwise clearly
---------------------
requires, all accounting terms not expressly defined herein shall be construed,
and all financial computations required under this Agreement shall be made, in
accordance with GAAP, consistently applied.
(b) References herein to "fiscal year", "fiscal quarter" and "fiscal
month" refer to such fiscal periods of the Borrower.
91
<PAGE>
(c) If any change in GAAP results in a change in the calculation of the
financial covenants or interpretation of related provisions of this Agreement or
any other Loan Document, then the Borrower, the Agent and the Lenders agree to
amend such provisions of this Agreement so as to equitably reflect such changes
in GAAP with the desired result that the criteria for evaluating the Borrower's
financial condition shall be the same after such change in GAAP as if such
change had not been made, provided that, notwithstanding any other provision of
this Agreement, the Required Lenders' agreement to any amendment of such
provisions shall be sufficient to bind all Lenders.
[Balance of page intentionally left blank; signature page follows.]
92
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered by their duly authorized officers as of the day and
year first above written.
Address for Wire Transfers: WORLDWIDE SPORTS & RECREATION, INC.
_______________________ By:_____________________________________
_______________________ B. Joseph Messner
_______________________ President
_______________________
Borrower's FEIN: 74-2141117
Address for notices:
9200 Cody
Overland Park, Kansas 66214
Attn: Chief Executive Officer and Chief
Financial Officer
Facsimile: (913) 752-3580
Copies to:
Wind Point Partners
One Town Square
Suite 780
Southfield, Michigan 48076
Attention: James TenBroek and Salam Chaudhary
Facsimile: (248) 945-7220
Wind Point Partners
676 North Michigan Avenue
Suite 3300
Chicago, Illinois 60611
Attention: Richard R. Kracum
Facsimile: (312) 255-4820
<PAGE>
ANTARES CAPITAL CORPORATION,
as Agent and as a Lender
By:___________________________________
Title: __________________ Director
Address for notices:
311 South Wacker Drive
Suite 2725
Chicago, IL 60606
Attn: Portfolio Manager
Facsimile: (312) 697-3998
Telephone: (312) 697-3948
Address for payments:
Antares Capital Corporation
Account # 4070-6016
Citibank N.A., NY
ABA # 021000089
Reference: Worldwide Sports
Please advise Jim Luchansky at
(312) 697-3991 upon receipt
<PAGE>
Schedule 1.1(a)
Term Loan Commitments
Term Loan A Commitment $24,000,000
- ----------------------
Antares Capital Corporation
Term Loan B Commitment $30,000,000
- ----------------------
Antares Capital Corporation
<PAGE>
Schedule 1.1(b)
Revolving Loan Commitments
Period Amount
------ ------
Antares Capital Corporation April 1 - January 31 $30,000,000
February 1 - March 31 $13,000,000
<PAGE>
EXHIBIT (b)(2)
FIRST AMENDMENT TO CREDIT AGREEMENT AND WAIVER
----------------------------------------------
THIS FIRST AMENDMENT TO CREDIT AGREEMENT AND WAIVER (this "Amendment") is
entered into as of August 18, 1999 by and between WORLDWIDE SPORTS & RECREATION,
INC., a Delaware corporation (the "Borrower"), ANTARES CAPITAL CORPORATION, a
Delaware corporation, as Agent and as Lender, and each of the other Persons who
are signatories hereto (individually, a "Loan Party" and collectively, the "Loan
Parties").
W I T N E S S E T H:
WHEREAS, Borrower, Agent and Lender have entered into that certain Credit
Agreement dated as of August 5, 1999 (as the same may be amended, modified,
restated or otherwise supplemented from time to time, the "Credit Agreement");
and
WHEREAS, the parties to the Credit Agreement desire to amend the Credit
Agreement all on the terms and subject to the conditions set forth herein.
NOW, THEREFORE, in consideration of the mutual agreements, provisions and
covenants contained herein, the parties agree as follows:
1. Defined Terms. Capitalized terms used but not defined herein shall
-------------
have the meanings ascribed to them in the Credit Agreement.
2. Amendments. The Credit Agreement is hereby amended as follows:
----------
(a) Simultaneously with The First National Bank of Chicago ("First
Chicago") becoming a Lender under the Credit Agreement, Irrevocable Standby
Letter of Credit No. 00332065 dated September 5, 1996, of which $162,000 remains
available, Irrevocable Letter of Credit No. 00245691 dated January 12, 1998, of
which $687,326.10 remains available, and Irrevocable Standby Letter of Credit
dated August 16, 1999 of which $1,662,555 remains available, each issued by
First Chicago, shall be deemed Lender Letters of Credit under the Credit
Agreement. In addition, First Chicago shall be a permitted issuer of Lender
Letters of Credit but shall be under no obligation to so issue. For purposes of
subsection 1.1(c) of the Credit Agreement, amounts paid by First Chicago
pursuant to such Lender Letters of Credit shall be deemed amounts paid by the
Agent, and First Chicago shall enjoy the same rights to indemnity and
reimbursement with respect thereto as the Agent enjoys with respect to Lender
Letters of Credit issued by it.
<PAGE>
(b) Subsection 1.3(c) of the Credit Agreement is hereby amended by
deleting the word "exists" in the second line thereof and inserting the word
"exists" after the phrase "or 7.1(c)".
(c) Subsection 3.11(b) of the Credit Agreement is hereby amended by
deleting the word "here" and substituting the word "there" therefor.
(d) Subsection 4.3(a) of the Credit Agreement is deleted in its
entirety and the following is substituted therefor:
"(a) (i) the occurrence or existence of any Default or Event of Default or
(ii) any event or circumstance that foreseeably will become a Default or
Event of Default under any of Sections 5.1, 5.2, 5.3, 5.4, 5.5, 5.9, 5.11
or Article VI;"
(e) Section 4.10 of the Credit Agreement is hereby amended by adding
the phrase "and financing Permitted Acquisitions" at the end of such section.
(f) Section 5.3 of the Credit Agreement is hereby amended by adding
the phrase "and except Permitted Acquisitions may be consummated" at the end of
such section.
(g) Section 5.4 of the Credit Agreement is hereby amended by deleting
the period at the end of clause (g) thereof, substituting a semicolon therefore
and adding the following at the end of such section:
"(h) Borrower and its Subsidiaries may consummate Permitted Acquisitions
and may create Subsidiaries to consummate Permitted Acquisitions."
(h) Subsection 7.1(l) of the Credit Agreement is hereby amended by
deleting the phrase "in each instance, in (i), (ii), (iii) and (iv)" and
substituting "in each instance, in clauses (i), (ii), (iii) and (iv) above"
therefor.
(i) Subsection 7.1(m) of the Credit Agreement is hereby amended by
deleting the word "shall" appearing immediately after the word "Obligations".
(j) Section 8.10 of the Credit Agreement is hereby amended by deleting
clause (c) thereof in its entirety.
(k) The Credit Agreement is hereby amended by adding the following at
the end of Article VIII.
"8.11 Co-Agent. Notwithstanding any provision to the contrary contained
--------
elsewhere in this Agreement or in any other Loan Documents, the Co-Agent
shall not have any duties or responsibilities, nor shall the Co-Agent have
or be deemed
2
<PAGE>
to have any fiduciary relationship with any Lender, and no implied
covenants, functions, responsibilities, duties, obligations or liabilities
shall be read into this Agreement or any other Loan Document or otherwise
exist against the Co-Agent."
(l) Subsection 9.1(b) of the Credit Agreement is hereby amended by
deleting the phrase "1.8(e) or 1.8(g)" in the parenthetical at the end of such
subsection and substituting "or 1.8(e)" therefor.
(m) Section 11.1 of the Credit Agreement is hereby amended by adding
the following thereto in the correct alphabetical order:
""Permitted Acquisition" means an Acquisition of all of the capital stock,
partnership interests or membership interests of a Target, or any asset or
group of assets of a Target, which satisfies all of the following
conditions:
(i) The Target must be in the same or related line of business as
the Borrower, must have generated positive EBITDA for the immediately
preceding year (excluding extraordinary expenses, identifiable and
verifiable cost savings and excess management compensation, in each
instance, approved by Required Lenders) and the transaction must be
structured as an asset purchase by, or merger with, a Wholly-Owned
Subsidiary of Borrower organized in a jurisdiction located in the United
States (a "Domestic Subsidiary") or a purchase by Borrower or a Domestic
Subsidiary of all of the equity securities of the Target;
(ii) No Default or Event of Default shall have occurred and be
continuing or would arise as a result of such Acquisition;
(iii) (A) The aggregate purchase price (including the fair market
value of any non-cash component of such purchase price and any assumed
liabilities) to be paid by the Borrower or its Subsidiaries (all such items
being collectively referred to as the "Acquisition Cost") for any single
Acquisition and the aggregate Acquisition Cost for all Acquisitions within
any twelve (12) month period is less than $5,000,000, and (B) the aggregate
Acquisition Cost for all Acquisitions is less than $10,000,000;
(iv) Borrower shall have demonstrated to the reasonable satisfaction
of Required Lenders that Pro forma EBITDA of the Target for the twelve (12)
month period prior to such Acquisition is greater than $0;
(v) After the consummation of any such Acquisition, the Maximum
Revolving Loan Balance exceeds outstanding Revolving Loans by an amount not
less than $3,000,000;
3
<PAGE>
(vi) The business and assets (and, if applicable, all shares of
capital stock or other equity securities) so acquired in such Acquisition
shall be acquired by Borrower or its Wholly-Owned Subsidiary free and clear
of all Liens (other than Permitted Liens) and all Indebtedness and
liabilities unless otherwise permitted in this Agreement;
(vii) All environmental audits, pro forma financial statements,
appraisals, if any, accounting reviews and due diligence reports conducted
by Borrower, with respect to the business to be acquired shall have been
delivered to Agent promptly after they are made available to Borrower;
(viii) Borrower shall have delivered revised schedules to this
Agreement to the extent necessary to disclose facts pertaining to the
Target;
(ix) With respect to the Target acquired or financed with the
proceeds of a Loan, and prior to or simultaneously with the funding of such
Loan, the Agent shall have been granted, for the benefit of Agent and the
Lenders, a first priority lien on and security interest in such Target
thereof, subject only to Permitted Liens, and shall have received, without
limitation, (a) the items described in subsection 2.1(d)(ii) and Section
4.12, and (b) duly executed UCC financing statements or amendments to
existing financing statements with respect to such Target, in form and
substance reasonably satisfactory to the Agent and which, upon filing,
shall perfect the first priority security interest of the Agent, for the
benefit of Agent and the Lenders, in such property. In the event real
property is being acquired in connection with such Acquisition, prior to or
simultaneously with the funding of such Loan, the Agent shall have received
(x) a fully executed Mortgage, in form and substance reasonably
satisfactory to the Agent together with an ALTA lender's title insurance
policy issued by a title insurer reasonably satisfactory to the Agent, in
form and substance and in an amount reasonably satisfactory to the Agent
insuring that the Mortgage is a valid and enforceable first priority lien
on the respective property, free and clear of all defects, encumbrances and
Liens (other than the Permitted Liens), (y) then current surveys, certified
to the Agent and the Lenders by a licensed surveyor sufficient to allow the
issuer of the lender's title insurance policy to issue such policy without
a survey exception and (z) an environmental site assessment prepared by a
qualified firm reasonably acceptable to the Agent and the Lenders, in form
and substance satisfactory to the Agent and the Lenders;
(x) Agent shall have received a certificate of Borrower's chief
financial officer demonstrating to the reasonable satisfaction of Agent
that after giving effect to such Acquisition on a pro forma basis as if
such Acquisition had occurred on the first day of the twelve (12) month
period ending on the last day of Borrower's most
4
<PAGE>
recently completed calendar month, Borrower would have been in compliance
with each of the financial covenants contained in Article VI; and
(xi) (a) The Agent shall have received complete executed or
conformed copies of each material document, instrument and
agreement executed in connection with such Acquisition
(collectively, "Acquisition Documents");
(b) The Agent shall have received, for the benefit of the
Lenders, a collateral assignment of the seller's
representations, warranties and indemnities to the Borrower or
its Subsidiary under the Acquisition Documents;
(xii) Such Acquisition shall be permitted under the Subordinated Note
Agreement."
""Target" means any Person organized in a jurisdiction located within the
United States or business unit or asset group located in the United States
acquired or proposed to be acquired in a Permitted Acquisition."
(n) Simultaneously with General Electric Capital Corporation
becoming a Lender under the Credit Agreement, General Electric Capital
Corporation shall be deemed to be Co-Agent.
3. Conditions. The effectiveness of this Amendment is subject to the
----------
following conditions precedent:
(a) the execution and delivery of this Amendment by Borrower,
Agent, Lenders and the Loan Parties;
(b) receipt by Agent of Subordinated Noteholders' consent to the
execution, delivery and performance of this Amendment; and
(c) confirmation from First Chicago that the Credit Agreement dated
April 27, 1995 has been terminated.
4. Representations and Warranties. Borrower hereby represents and
------------------------------
warrants to Agent and each Lender as follows:
(a) Borrower and each of its Subsidiaries is a corporation or
limited liability company, duly organized, validly existing and
in good standing under the laws of the jurisdiction of its
incorporation or formation, as applicable;
5
<PAGE>
(b) Borrower and each of its Subsidiaries has the power and authority
to execute, deliver and perform its obligations under this
Amendment;
(c) the execution, delivery and performance by Borrower and each of
its Subsidiaries of this Amendment have been duly authorized by
all necessary action;
(d) this Amendment constitutes the legal, valid and binding
obligation of Borrower and each of its Subsidiaries, enforceable
against such Person in accordance with its terms, except as
enforceability may be limited by applicable bankruptcy,
insolvency, or similar laws affecting the enforcement of
creditor's rights generally or by equitable principles relating
to enforceability; and
(e) no Default or Event of Default exists.
5. No Waiver. Nothing contained herein shall be deemed to constitute a
---------
waiver of compliance with any term or condition contained in the Credit
Agreement or any of the other Loan Documents or constitute a course of conduct
or dealing among the parties. Except as expressly stated herein, Agent and
Lender reserve all rights, privileges and remedies under the Loan Documents.
Except as amended hereby, the Credit Agreement and other Loan Documents remain
unmodified and in full force and effect. All references in the Loan Documents
to the Credit Agreement shall be deemed to be references to the Credit Agreement
as amended hereby.
6. Counterparts. This Amendment may be executed by one or more of the
------------
parties to this Amendment and any number of separate counterparts, each of which
when so executed, shall be deemed an original and all said counterparts when
taken together shall be deemed to constitute but one and the same instrument.
7. Successors and Assigns. This Amendment shall be binding upon and
----------------------
inure to the benefit of Borrower and each Loan Party and their successors and
assigns and the Agent and the Lenders and their successors and assigns.
8. Further Assurance. Borrower hereby agrees from time to time, as and
-----------------
when requested by the Agent or Lender, to execute and deliver or cause to be
executed and delivered, all such documents, instruments and agreements and to
take or cause to be taken such further or other action as the Agent or Lender
may reasonably deem necessary or desirable in order to carry out the intent and
purposes of this Amendment, the Credit Agreement and the Loan Documents.
9. GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY AND SHALL BE
-------------
CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF
ILLINOIS, WITHOUT REGARD TO CONFLICTS OF LAW PRINCIPLES.
6
<PAGE>
10. Severability. Wherever possible, each provision of this Amendment
------------
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Amendment shall be prohibited by or
invalid under such law, such provision shall be ineffective to the extent of
such prohibition or invalidity without invalidating the remainder of such
provision or the remaining provisions of this Amendment.
11. Reaffirmation. Each of the Loan Parties as debtor, grantor, pledgor,
-------------
guarantor, assignor, or in other any other similar capacity in which such Loan
Party grants liens or security interests in its property or otherwise acts as
accommodation party or guarantor, as the case may be, hereby (i) ratifies and
reaffirms all of its payment and performance obligations, contingent or
otherwise, under each of the Loan Documents to which it is a party (after giving
effect hereto) and (ii) to the extent such Loan Party granted liens on or
security interests in any of its property pursuant to any such Loan Document as
security for or otherwise guaranteed the Borrower's Obligations under or with
respect to the Loan Documents, ratifies and reaffirms such guarantee and grant
of security interests and liens and confirms and agrees that such security
interests and liens hereafter secure all of the Obligations as amended hereby.
Each of the Loan Parties hereby consents to this Amendment and acknowledges that
each of the Loan Documents remains in full force and effect and is hereby
ratified and reaffirmed. The execution of this Amendment shall not operate as a
waiver of any right, power or remedy of the Agent or Lenders, constitute a
waiver of any provision of any of the Loan Documents or serve to effect a
novation of the Obligations.
7
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Amendment as of the date
set forth above.
BORROWER:
--------
WORLDWIDE SPORTS & RECREATION, INC., a
Delaware corporation
By:________________________________
Title:_____________________________
AGENT AND LENDER:
----------------
ANTARES CAPITAL CORPORATION,
as Agent and as Lender
By:________________________________
Title: ______ Director
LOAN PARTIES:
------------
BUSHNELL CORPORATION
By:________________________________
Title:_____________________________
BUSHNELL CORPORATION OF CANADA
By:________________________________
Title:_____________________________
VOIT SPORTS, INC.
By:________________________________
Title:_____________________________
VOIT CORPORATION
By:________________________________
Title:_____________________________
8
<PAGE>
OLD WSR, INC.
By:________________________________
Title:_____________________________
9
<PAGE>
Exhibit (b)(3)
Draft of August 5, 1999
================================================================================
Worldwide Sports & Recreation, Inc.
Note Agreement
Dated as of August 5, 1999
Re: $22,800,000 12% Senior Subordinated Notes
Due August 5, 2007,
Warrants to Purchase Common Stock
and
Purchase of Series A Preferred Stock and Common Stock
================================================================================
<PAGE>
Table of Contents
(Not a part of the Agreement)
<TABLE>
<CAPTION>
Page
<S> <C>
Section 1. Description of Notes and Commitment................................ 1
Section 1.1. Description of Notes............................... 1
Section 1.2. Warrants to Purchase Common Stock.................. 2
Section 1.3. Purchase of Preferred Stock and Common Stock....... 2
Section 1.4. Federal Tax Treatment.............................. 2
Section 1.5. Guaranties of Notes................................ 2
Section 1.6. Commitment and Closing Date........................ 2
Section 2. Prepayment of Notes................................................ 3
Section 2.1. Required Prepayments............................... 3
Section 2.2. Optional Prepayments............................... 3
Section 2.3. Notice of Optional Prepayments..................... 4
Section 2.4. Prepayment of Notes upon Change of Control......... 5
Section 2.5. Application of Prepayments......................... 6
Section 2.6. Direct Payment..................................... 6
Section 3. Representations.................................................... 7
Section 3.1. Representations of the Company and the Subsidiary
Guarantors......................................... 7
Section 3.2. Representations of the Purchaser................... 7
Section 4. Closing Conditions................................................. 8
Section 4.1. Closing Date Conditions............................ 8
Section 5. Company Covenants.................................................. 13
Section 5.1. Corporate Existence, Etc........................... 13
Section 5.2. Insurance.......................................... 13
Section 5.3. Taxes, Claims for Labor and Materials; Compliance
with Laws.......................................... 13
Section 5.4. Maintenance, Etc................................... 14
Section 5.5. Nature of Business................................. 14
Section 5.6. Plan of Merger..................................... 14
Section 5.8. Leverage Ratio..................................... 14
Section 5.9. Fixed Charge Coverage.............................. 15
Section 5.10. Interest Coverage Ratio............................ 16
Section 5.11. Minimum EBITDA..................................... 17
Section 5.12. Limitations on Liens............................... 18
Section 5.13. Disposition of Assets.............................. 20
Section 5.14. Mergers and Consolidations......................... 20
</TABLE>
-i-
<PAGE>
<TABLE>
<S> <C>
Section 5.15. Loans and Investments.............................. 21
Section 5.16. Limitations on Indebtedness........................ 21
Section 5.17. Contingent Obligations............................. 22
Section 5.18. Restricted Payments................................ 23
Section 5.19. Repurchase of Notes................................ 24
Section 5.20. Transactions with Affiliates....................... 24
Section 5.21. Termination of Pension Plans....................... 24
Section 5.22. Prohibition of Change in Fiscal Year............... 24
Section 5.23. Sale or Discount of Receivables.................... 24
Section 5.24. Partnerships and Joint Ventures.................... 25
Section 5.25. Issuance of Stock or Partnership Interests......... 25
Section 5.26. Hedging Contracts.................................. 25
Section 5.27. Additional Subsidiary Guarantors................... 25
Section 5.28. Amendment or Waivers of Certain Documents:
Restrictions Relating to Prepayment of the Notes... 25
Section 5.29. Reports and Rights of Inspection................... 27
Section 5.30. Agreement of Obligors during Standstill Period..... 31
Section 6. Subordination of Subordinated Indebtedness Liabilities............. 32
Section 7. Events of Default and Remedies Therefor............................ 37
Section 7.1. Events of Default.................................. 37
Section 7.2. Notice to Holders.................................. 38
Section 7.3. Acceleration of Maturities......................... 39
Section 7.4. Rescission of Acceleration......................... 39
Section 8. Amendments, Waivers and Consents................................... 40
Section 8.1. Consent Required................................... 40
Section 8.2. Solicitation of Holders............................ 40
Section 8.3. Effect of Amendment or Waiver...................... 40
Section 9. Interpretation of Agreement........................................ 40
Section 9.1. Definitions........................................ 40
Section 9.2. Accounting Principles.............................. 57
Section 9.3. Directly or Indirectly............................. 57
Section 10. Miscellaneous...................................................... 57
Section 10.1. Registered Notes................................... 57
Section 10.2. Exchange of Notes.................................. 58
Section 10.3. Loss, Theft, Etc. of Notes......................... 58
Section 10.4. Expenses, Stamp Tax Indemnity...................... 58
Section 10.5. Powers and Rights Not Waived; Remedies Cumulative.. 59
Section 10.6. Notices............................................ 59
Section 10.7. Successors and Assign.............................. 60
</TABLE>
-ii-
<PAGE>
<TABLE>
<S> <C>
Section 10.8. Survival of Covenants and Representations.......... 60
Section 10.9. Severability....................................... 60
Section 10.10. Governing Law...................................... 60
Section 10.11. Submission to Jurisdiction; Waiver of Jury Trial... 61
Section 10.12. General Indemnity; Special Environmental Indemnity
and Covenant Not to Sue............................ 61
Section 10.13. Interest........................................... 63
Section 10.14. Captions........................................... 63
Signature Page.................................................................. 64
</TABLE>
Attachments to Note Agreement:
Schedule I -- Name and Address of Purchaser and Amount of Commitment
Schedule II -- Indebtedness; Subsidiaries; and Disclosures as of the Closing
Date
Exhibit A -- Form of 12% Senior Subordinated Note Due August 5, 2007
Exhibit B -- Form of Warrants
Exhibit C -- Form of Subsidiary Guaranty Agreement
Exhibit D-1 -- Representations and Warranties of the Company
Exhibit D-2 -- Representations and Warranties of the Subsidiary Guarantors
Exhibit E -- Description of Special Counsel's Closing Opinion
Exhibit F -- Description of Closing Opinion of Counsel to the Company
Exhibit G -- Description of Closing Opinion of Special Canadian Counsel to
the Company
-iii-
<PAGE>
Worldwide Sports & Recreation, Inc.
9200 Cody
Overland Park, Kansas 66214
Note Agreement
Re: $22,800,000 12% Senior Subordinated Notes
Due August 5, 2007,
Warrants to Purchase Common Stock
and
Purchase of Series A Preferred Stock and Common Stock
Dated as of
August 5, 1999
To the Purchaser named in Schedule I
hereto which is a signatory of this
Agreement
Ladies and Gentlemen:
The undersigned, Worldwide Sports & Recreation, Inc., a Delaware
corporation, agrees with you as follows:
Section 1. Description of Notes and Commitment.
Section 1.1. Description of Notes. The Company will authorize the issue
and sale of $22,800,000 aggregate principal amount of its 12% Senior
Subordinated Notes (the "Notes") to be dated the date of issue, to bear interest
from such date at the rate of 12% per annum, payable quarterly on the fifth day
of February, May, August and November in each year (commencing November 5, 1999)
and at maturity and to bear interest on overdue principal (including any overdue
required or optional prepayment of principal) and premium, if any, and (to the
extent legally enforceable) on any overdue installment of interest at the
Overdue Rate after the date due, whether by acceleration or otherwise, until
paid, to be expressed to mature on August 5, 2007, and to be substantially in
the form attached hereto as Exhibit A. Interest on the Notes shall be computed
on the basis of a 360-day year of twelve 30-day months. The Notes are not
subject to prepayment or redemption at the option of the Company prior to their
expressed maturity date except on the terms and conditions and in the amounts
and with the premium, if any, set forth in (S)2 of this Agreement. You are
hereinafter sometimes referred to as the "Purchaser". The terms which are
capitalized herein shall have the meanings set forth in (S)9.1 unless the
context shall otherwise require.
<PAGE>
Section 1.2. Warrants to Purchase Common Stock. In consideration of, and
as an inducement to, your purchase of the Notes, the Company agrees to deliver
to you on the Closing Date (as defined below) warrants of the Company in the
form of Exhibit B attached hereto and made a part hereof to purchase 58,202
shares (subject to adjustment as provided in said warrants) of the Common Stock
of the Company for an exercise price of $0.01 per share (the "Warrants"). The
number of shares which may be acquired upon the exercise of the Warrants and the
price per share are subject to adjustment in the manner and on the terms and
conditions set forth in the Warrants.
Section 1.3. Purchase of Preferred Stock and Common Stock. In addition to
your Purchase of the Notes and Warrants as provided herein, and as required by
(S)4.1(l), on the Closing Date you shall purchase 22,060 shares of the Company's
Series A Preferred Stock at a price of $100.00 per share and 53,000 shares of
the Company's Common Stock at a price of $1.00 per share (the Series A Preferred
Stock of the Company and the Common Stock of the Company purchased by the
Purchaser on the Closing Date is hereinafter referred to as the "Strip Equity").
Section 1.4. Federal Tax Treatment. The regulations of the Internal
Revenue Service now in effect require a determination of the value of the
Warrants of the Company being delivered on the Closing Date. Accordingly, it is
therefore agreed by the Company and you that for Federal income tax purposes the
amount of the issue price allocated to the Warrants to be issued to you on the
date hereof is $52,500, which shall be the value ascribed to such Warrants by
the Company, you and any subsequent holder of the Notes or Warrants for all
purposes, including the preparation of tax returns and the preparation of the
Company's financial statements.
Section 1.5. Guaranties of Notes. The payment of the Notes and the
performance by the Company of its obligations under this Agreement shall be
absolutely and unconditionally guaranteed by the Subsidiary Guarantors pursuant
to one or more Subsidiary Guaranty Agreements each in the form attached hereto
as Exhibit C (the "Subsidiary Guaranty Agreements").
Section 1.6. Commitment and Closing Date. Subject to the terms and
conditions hereof and on the basis of the representations and warranties
hereinafter set forth, the Company agrees to issue and sell to you, and you
agree to purchase from the Company, (i) Notes in the principal amount set forth
opposite your name on Schedule I hereto and the Warrants at an aggregate
purchase price of 100% of the principal amount thereof and (ii) the Strip Equity
at a purchase price of $2,258,772, all on the Closing Date hereafter mentioned.
Delivery of the Notes, Warrants and Strip Equity will be made at the
offices of Katten, Muchin & Zavis, 525 West Monroe Street, Chicago, Illinois
60661, against payment therefor in Federal Reserve or other funds current and
immediately available at the principal office of The First National Bank of
Chicago as set forth in the funding instructions delivered pursuant to (S)4.1(p)
in the amount of the purchase price at 10:00 A.M., Chicago time, on August 5,
1999 or such later date (not later than August 6, 1999) as shall mutually be
agreed upon by the Company and the Purchaser (the "Closing Date"). The Notes
delivered to you on the Closing Date will be
-2-
<PAGE>
delivered to you in the form of a single registered Note in the form attached
hereto as Exhibit A for the full amount of your purchase (unless different
denominations are specified by you), registered in your name or in the name of
such nominee as may be specified in Schedule I attached hereto. The Warrants
delivered to you on the Closing Date will be delivered to you in the form of a
single Warrant in the form attached hereto as Exhibit B (unless otherwise
specified by you), registered in your name or in the name of such nominee as may
be specified in Schedule I attached hereto. The shares of Series A Preferred
Stock and Common Stock delivered to you on the Closing Date will be delivered to
you in the form of stock certificates evidencing such shares, registered in your
name or in the name of such nominee as may be specified in Schedule I attached
hereto.
Section 2. Prepayment of Notes.
Section 2.1. Required Prepayments. In addition to paying the entire
outstanding principal amount and the interest due on the Notes on the maturity
date thereof, the Company agrees that on August 5, 2006, it will prepay and
apply and there shall become due and payable on the principal Indebtedness
evidenced by the Notes an amount equal to the lesser of (a) $11,400,000 or (b)
the principal amount of the Notes then outstanding. The entire remaining
principal amount of the Notes shall become due and payable on August 5, 2007. No
premium shall be payable in connection with any required prepayment made
pursuant to this (S)2.1.
In the event that the Company shall prepay less than all of the Notes
pursuant to (S)2.2, the amounts of the prepayments required by this (S)2.1 shall
be reduced by an amount which is the same percentage of such required prepayment
as the percentage that the principal amount of Notes prepaid pursuant to (S)2.2
is of the aggregate principal amount of outstanding Notes immediately prior to
such prepayment.
Section 2.2. Optional Prepayments. (a) In addition to the payments
required by (S)2.1, the Company shall have the privilege, at any time and from
time to time, of prepaying the outstanding Notes, either in whole or in part
(but if in part then in a minimum principal amount of $1,000,000), by payment of
the principal amount of the Notes, or portion thereof to be prepaid, together
with accrued interest thereon to the date of such prepayment, and, subject to
(S)2.2(b), the Prepayment Compensation Amount.
(b) Notwithstanding the provisions of (S)2.2 and (S)2.4, no Prepayment
Compensation Amount shall be payable in connection with any prepayment of all,
but not less than all, of the Notes pursuant to (S)2.2 or (S)2.4 if, and only
if, both of the following conditions are satisfied:
(1) the prepayment of Notes pursuant to (S)2.2 or (S)2.4 is made
in connection with a Liquidity Event; and
(2) the Realizable IRR or Realized IRR, as applicable, as of the
date of such prepayment is equal to or greater than the Target IRR as of
such date.
(c) If, in connection with a Liquid Public Offering, any holder of
Warrants and/or Warrant Shares is subject to a lock-up or hold-back or other
restriction which prevents the sale of
-3-
<PAGE>
the Warrant Shares for a period of 180 days or less, then the Company shall pay
to the holders of the Notes the Prepayment Compensation Amount then due in
connection with the prepayment of the Notes pursuant to this (S)2.2. Thereafter,
on the date the lock-up or hold-back or other restriction expires, the Company
will calculate the Realizable IRR with respect to the Notes, Warrants and/or
Warrant Shares as of such date based upon the then-applicable market price for
which the Warrant Shares may then, in fact, be sold in the public market.
Written notice of such calculation shall be promptly delivered by the Company to
the holders of the Notes and Warrants and/or Warrant Shares. If such calculation
of the Realizable IRR demonstrates that no Prepayment Compensation Amount is
payable but was paid to the holders of the Notes in connection with the
prepayment of the Notes pursuant to the Initial Public Offering, then the
holders of the Notes shall, reasonably promptly after receiving and approving
such Realizable IRR calculation, pay to the Company an amount equal to such
Prepayment Compensation Amount previously paid to such holders but without
interest.
Section 2.3. Notice of Optional Prepayments. (a) The Company will give
written notice of any prepayment of the Notes pursuant to (S)2.2 to each holder
thereof not less than 30 days nor more than 60 days before the date fixed for
such optional prepayment specifying (1) such date fixed for prepayment, (2) the
principal amount of the holder's Notes to be prepaid on such date, (3) the
accrued interest applicable to the prepayment, (4) whether a Prepayment
Compensation Amount is payable or, if the Company claims that no Prepayment
Compensation Amount is then due in respect of such prepayment by virtue of the
provisions of (S)2.2(b), a statement to such effect, together with a reasonably
detailed computation of the Realizable IRR or Realized IRR, as applicable, by
the Company, calculated with respect to the specified prepayment date and (5) if
a computation of the Realizable IRR or Realized IRR is included in such notice,
a statement that, pursuant to (S)2.3(b), any holder of the Notes disagreeing
with such computation must provide written notice of such disagreement to the
Company within 15 days of such holder's receipt of the Company's notice. Notice
of optional prepayment having been so given, the aggregate principal amount of
the Notes specified in such notice, together with accrued interest thereon and
the Prepayment Compensation Amount, if any, payable with respect thereto shall
become due and payable on the prepayment date specified in said notice, provided
that if the Company gives written notice of a prepayment pursuant to (S)2.2 in
connection with an anticipated Liquidity Event or refinancing of the Notes, it
is understood and agreed that the obligation of the Company to prepay the Notes
pursuant to the requirements of this (S)2.3(a) is subject to the occurrence of
the Liquidity Event giving rise to such notice of optional prepayment. In the
event that such Liquidity Event does not occur on the date specified for
prepayment, the prepayment shall be deferred until and shall be made on the date
on which such Liquidity Event occurs. The Company shall keep the holders of the
Notes reasonably and timely informed of any such deferral of the date of
prepayment and the date on which such Liquidity Event is expected to occur.
(b) In the event that any holder of Notes shall disagree with the
calculation of the Realizable IRR or Realized IRR set forth by the Company in
the notice given pursuant to (S)2.2(c), (S)2.3(a), (S)2.4(a) or (S)2.4(b), such
holder, by written notice to the Company given within 15 days after receipt by
the holder of the notice given by the Company pursuant to (S)2.2(c), (S)2.3(a),
(S)2.4(a) or (S)2.4(b), may demand that the Company obtain a calculation of the
Realizable IRR by a Valuation Agent. In the event that any holder makes such a
demand, the calculation of
-4-
<PAGE>
the Realizable IRR or Realized IRR by the Valuation Agent shall be conclusive in
the absence of manifest error.
Section 2.4. Prepayment of Notes upon Change of Control. (a) In the event
that any Change of Control shall occur or the Company shall have knowledge of
any proposed Change of Control that is likely to occur, the Company will give
written notice (the "Company Notice") of such fact in the manner provided in
(S)10.6 hereof to the holders of the Notes. The Company Notice shall be
delivered promptly upon receipt of such knowledge by the Company and in any
event no later than three Business Days following the occurrence of any Change
of Control. The Company Notice shall (1) describe the facts and circumstances of
such Change of Control in reasonable detail, (2) make reference to this (S)2.4
and the right of the holders of the Notes to require prepayment of the Notes on
the terms and conditions provided for in this (S)2.4, (3) offer in writing to
prepay all, but not less than all, of the outstanding Notes, together with
accrued interest to the date of prepayment and the Prepayment Compensation
Amount, or, if the subject Change of Control is a Liquid Change of Control and
the Company claims that no Prepayment Compensation Amount is then due in respect
of such prepayment by virtue of the provisions of (S)2.2(b), a statement to such
effect, together with a reasonably detailed computation of the Realized IRR by
the Company, calculated with respect to the specified prepayment date, (4)
specify a date for such prepayment (the "Change of Control Prepayment Date"),
which Change of Control Prepayment Date shall be not more than 90 days nor less
than 30 days following the date of such Company Notice and (5) if a computation
of the Realized IRR is included in such notice, a statement that, pursuant to
(S)2.3(b), any holder of the Notes disagreeing with such computation must
provide written notice of such disagreement to the Company within 15 days of
such holder's receipt of the Company's notice. Each holder of the then
outstanding Notes shall have the right to accept such offer and require
prepayment of the Notes held by such holder in full by written notice to the
Company (a "Noteholder Notice") given not later than 20 days after receipt of
the Company Notice. The Company shall on the Change of Control Prepayment Date
prepay in full all of the Notes held by holders which have so accepted such
offer of prepayment, provided that the obligation of the Company to prepay the
Notes pursuant to the requirements of this (S)2.4(a) is subject to the
occurrence of the Change of Control giving rise to such notice of optional
prepayment. In the event that such Change of Control does not occur on the date
specified for prepayment, the prepayment shall be deferred until and shall be
made on the date on which such Change of Control occurs. The Company shall keep
the holders of the Notes reasonably and timely informed of any such deferral of
the date of prepayment and the date on which such Change of Control is expected
to occur. The prepayment price of the Notes payable upon the occurrence of any
Change of Control shall be an amount equal to 100% of the outstanding principal
amount of the Notes so to be prepaid and accrued interest thereon to the date of
such prepayment, and subject to (S)2.2(b), the Prepayment Compensation Amount.
(b)(1) Without limiting the foregoing, notwithstanding any failure on the
part of the Company to give the Company Notice herein required as a result of
the occurrence of a Change of Control, each holder of the Notes shall have the
right by delivery of written notice to the Company to require the Company to
prepay, and the Company will prepay, such holder's Notes in full, together with
accrued interest thereon to the date of prepayment, and, subject to (S)2.2(b),
the Prepayment Compensation Amount. Notice of any required prepayment pursuant
to this (S)2.4(b)(1) shall be delivered by any holder of the Notes which was
entitled to, but did not
-5-
<PAGE>
receive, such Company Notice to the Company within 30 days after such holder has
actual knowledge of both such Change of Control and the failure of the Company
to comply with the notice requirements of (S)2.4(a). On the date (the "Change of
Control Delayed Prepayment Date") designated in such holder's notice (which
shall be not more than 90 days nor less than 30 days following the date of such
holder's notice), the Company shall prepay in full all of the Notes held by such
holder, together with accrued interest thereon to the date of prepayment, and,
subject to (S)2.2(b), the Prepayment Compensation Amount. If the holder of any
Note gives any notice pursuant to this (S)2.4(b)(1), the Company shall give a
Company Notice (including all information and calculations required in (S)2.4(a)
hereof) within five Business Days of receipt of such notice and identify the
Change of Control Delayed Prepayment Date to all other holders of the Notes and
each of such other holders shall then and thereupon have the right to accept the
Company's offer to prepay the Notes held by such holder in full and require
prepayment of such Notes by delivery of a Noteholder Notice within 20 days
following receipt of such Company Notice; provided only that any date for
prepayment of such holder's Notes shall be the Change of Control Delayed
Prepayment Date. On the Change of Control Delayed Prepayment Date, the Company
shall prepay in full the Notes of each holder thereof which has accepted such
offer of prepayment at a prepayment price equal to 100% of the outstanding
principal amount of the Notes so to be prepaid and accrued interest thereon to
the date of such prepayment, and, subject to (S)2.2(b), the Prepayment
Compensation Amount.
(2) Compliance with the provisions of this (S)2.4(b) shall not be deemed
to constitute a waiver of, or consent to, any Default or Event of Default caused
by any violation of the provisions of (S)2.4(a).
(c) In the event any Change of Control shall also constitute an event of
default under the Senior Credit Agreement, any prepayment of the Notes pursuant
to (S)2.2 or (S)2.4 in connection with such Change of Control shall be subject
to the terms of (S)6 unless the Senior Lenders shall waive the event of default
arising in connection with such Change in Control.
Section 2.5. Application of Prepayments. All partial prepayments made
pursuant to (S)2.1 or (S)2.2 shall be applied on all outstanding Notes ratably
in accordance with the unpaid principal amounts thereof. All partial prepayments
made pursuant to (S)2.4 shall be applied only to the Notes of the holders who
have elected to participate in such prepayment.
Section 2.6. Direct Payment. Notwithstanding anything to the contrary
contained in this Agreement or the Notes, in the case of any Note owned by you
or your nominee or owned by any subsequent Institutional Holder which has given
written notice to the Company requesting that the provisions of this (S)2.6
shall apply, the Company will punctually pay when due the principal thereof,
interest thereon and premium, if any, due with respect to said principal,
without any presentment thereof, directly to you, to your nominee or to such
subsequent Institutional Holder at your address or your nominee's address set
forth in Schedule I hereto or such other address as you, your nominee or such
subsequent Institutional Holder may from time to time designate in writing to
the Company or, if a bank account with a United States bank is designated for
you or your nominee on Schedule I hereto or in any written notice to the Company
from you, from your nominee or from any such subsequent Institutional Holder,
the Company will make such payments in immediately available funds to such bank
account, no later than 11:00 a.m. Chicago,
-6-
<PAGE>
Illinois time on the date due, marked for attention as indicated, or in such
other manner or to such other account in any United States bank as you, your
nominee or any such subsequent Institutional Holder may from time to time direct
in writing. If for any reason whatsoever the Company does not make any such
payment by such 11:00 a.m. transmittal time, such payment shall be deemed to
have been made on the next following Business Day and such payment shall bear
interest at the Overdue Rate.
Section 3. Representations.
Section 3.1. Representations of the Company and the Subsidiary Guarantors.
(a) The Company represents and warrants that all representations and warranties
set forth in Exhibit D-1 are true and correct as of the date hereof and are
incorporated herein by reference with the same force and effect as though herein
set forth in full.
(b) The Subsidiary Guarantors represent and warrant that all
representations and warranties set forth in Exhibit D-2 are true and correct as
of the date hereof and are incorporated herein by reference with the same force
and effect as though herein set forth in full.
Section 3.2. Representations of the Purchaser. (a) You represent, and in
entering into this Agreement the Company understands, that you are acquiring the
Notes for the purpose of investment and not with a view to the distribution
thereof, and that you have no present intention of selling, negotiating or
otherwise disposing of the Notes; it being understood, however, that the
disposition of your property shall at all times be and remain within your
control and you are an accredited investor within the meaning of Rule 501 of
Regulation D promulgated under the Securities Act of 1933, as amended.
(b) You represent that at least one of the following statements is an
accurate representation as to each source of funds (a "Source") to be used by
you to pay the purchase price of the Notes to be purchased by you hereunder:
(1) the Source is an "insurance company general account" within the
meaning of Department of Labor Prohibited Transaction Exemption ("PTE") 95-
60 (issued July 12, 1995) and there is no employee benefit plan, treating
as a single plan, all plans maintained by the same employer or employee
organization, with respect to which the amount of the general account
reserves and liabilities for all contracts held by or on behalf of such
plan, exceed ten percent (10%) of the total reserves and liabilities of
such general account (exclusive of separate account liabilities) plus
surplus, as set forth in the NAIC Annual Statement filed with your State of
domicile; or
(2) the Source is either (i) an insurance company pooled separate
account, within the meaning of PTE 90-1 (issued January 29, 1990), or (ii)
a bank collective investment fund, within the meaning of the PTE 91-38
(issued July 12, 1991) and, except as you have disclosed to the Company in
writing pursuant to this paragraph (2), no employee benefit plan or group
of plans maintained by the same employer or employee organization
beneficially owns more than 10% of all assets allocated to such pooled
separate account or collective investment fund; or
-7-
<PAGE>
(3) the Source constitutes assets of an "investment fund" (within
the meaning of Part V of the QPAM Exemption) managed by a "qualified
professional asset manager" or "QPAM" (within the meaning of Part V of the
QPAM Exemption), no employee benefit plan's assets that are included in
such investment fund, when combined with the assets of all other employee
benefit plans established or maintained by the same employer or by an
affiliate (within the meaning of Section V(c)(1) of the QPAM Exemption) of
such employer or by the same employee organization and managed by such
QPAM, exceed 20% of the total client assets managed by such QPAM, the
conditions of Part l(c) and (g) of the QPAM Exemption are satisfied,
neither the QPAM nor a Person controlling or controlled by the QPAM
(applying the definition of "control" in Section V(e) of the QPAM
Exemption) owns a 5% or more interest in the Company and (i) the identity
of such QPAM and (ii) the names of all employee benefit plans whose assets
are included in such investment fund have been disclosed to the Company in
writing pursuant to this paragraph (3); or
(4) the Source is a governmental plan; or
(5) the Source is one or more employee benefit plans, or a separate
account or trust fund comprised of one or more employee benefit plans, each
of which has been identified to the Company in writing pursuant to this
paragraph (5); or
(6) the Source does not include assets of any employee benefit
plan, other than a plan exempt from the coverage of ERISA.
If you or any subsequent transferee of the Notes indicates that you or such
transferee are relying on any representation contained in paragraph (2), (3) or
(5) above, the Company shall deliver on the Closing Date and on the date of any
applicable transfer a certificate, which shall either state that (i) it is
neither a party in interest nor a "disqualified person" (as defined in Section
4975(e)(2) of the Code), with respect to any plan identified pursuant to
paragraphs (2) or (5) above, or (ii) with respect to any plan, identified
pursuant to paragraph (3) above, neither it nor any "affiliate" (as defined in
Section V(c) of the QPAM Exemption) has at such time, and during the immediately
preceding one year, exercised the authority to appoint or terminate said QPAM as
manager of any plan identified in writing pursuant to paragraph (3) above or to
negotiate the terms of said QPAM's management agreement on behalf of any such
identified plan. As used in this (S)3.2(b), the terms "employee benefit plan",
"governmental plan", "party in interest" and "separate account" shall have the
respective meanings assigned to such terms in Section 3 of ERISA.
Section 4. Closing Conditions.
Section 4.1. Closing Date Conditions. Your obligation to purchase the
Notes, the Warrants and the Strip Equity on the Closing Date shall be subject to
the performance by the Company of its agreements hereunder and under the
Warrants which by the terms hereof are to be performed at or prior to the time
of delivery of the Notes, the Warrants and the Strip Equity and to the following
further conditions precedent:
-8-
<PAGE>
(a) Closing Certificate of the Company. You shall have received a
certificate dated the Closing Date, signed by the President or a Vice
President of the Company, the truth and accuracy of which shall be a
condition to your obligation to purchase the Notes, the Warrants and the
Strip Equity proposed to be sold to you and to the effect that (1) the
representations and warranties of the Company set forth in Exhibit D-1
hereto are true and correct on and with respect to the Closing Date, (2)
the Company has performed all of its obligations hereunder which are to be
performed on or prior to the Closing Date, and (3) no Default or Event of
Default has occurred and is continuing.
(b) Closing Certificates of Subsidiary Guarantors. You shall have
received a certificate dated the Closing Date, signed by the President or a
Vice President of each Subsidiary Guarantor, the truth and accuracy of
which shall be a condition to your obligation to purchase the Notes, the
Warrants and the Strip Equity proposed to be sold to you and to the effect
that (i) the representations and warranties of such Subsidiary Guarantor
set forth in Exhibit D-2 hereto are true and correct on and with respect to
the Closing Date, (ii) such Subsidiary Guarantor has performed all of its
obligations hereunder and under its Subsidiary Guaranty Agreement which are
to be performed on or prior to the Closing Date, and (iii) no Default or
Event of Default has occurred and is continuing.
(c) Subsidiary Guaranty Agreement. Each of the Subsidiary
Guarantors shall have executed and delivered to you a Subsidiary Guaranty
Agreement.
(d) Legal Opinions. You shall have received from (a) Chapman and
Cutler, who are acting as your special counsel in this transaction, (b)
Sachnoff & Weaver, Ltd., counsel for the Company and (c) Miller Thomson,
special Canadian counsel for the Company, their respective opinions dated
the Closing Date, in form and substance satisfactory to you, and covering
the matters set forth in Exhibits E, F and G, respectively, hereto.
(e) Existence and Authority. On or prior to the Closing Date, you
shall have received, in form and substance reasonably satisfactory to you
and your special counsel, such documents and evidence with respect to the
Company and each Subsidiary Guarantor as you may reasonably request in
order to establish the existence and good standing of the Company and each
Subsidiary Guarantor and the authorization of the transactions contemplated
by this Agreement, the Warrants, the Stock Purchase Agreement, the
Registration Rights Agreement and the Subsidiary Guaranty Agreements.
(f) Charter and By-laws. The charter and by-laws of the Company and
each Subsidiary Guarantor shall in all respects be satisfactory in form and
substance to you and your special counsel.
(g) Related Transactions. On the Closing Date:
(1) the Senior Credit Agreement and the Senior Secured
Security Documents shall be in form and substance satisfactory to you
and your special
-9-
<PAGE>
counsel, shall have been duly executed and delivered by the parties
thereto and shall be in full force and effect and you shall have
received true, correct, and complete copies of each thereof;
(2) (i) the WSR Merger Documentation shall be in form and
substance satisfactory to you and your special counsel, shall have
been duly executed and delivered by the parties thereto, shall be in
full force and effect and you shall have received a true, correct and
complete copy thereof, (ii) the aggregate net merger consideration to
be paid by the Company under the WSR Merger Documentation shall not
exceed $134,000,000 plus (or minus) the Final Working Capital
Adjustment (as defined in and pursuant to the WSR Merger
Documentation), and (iii) the Company shall have consummated the WSR
Merger pursuant to the WSR Merger Documentation otherwise on terms and
conditions satisfactory to you and your special counsel;
(3) the Seller Junior Subordinated Notes shall be in form and
substance satisfactory to you and your special counsel, shall have
been duly executed and delivered by the Company in the aggregate
principal amount of $5,000,000, shall be in full force and effect and
you shall have received true, correct and complete copies thereof;
(4) the Company shall have entered into an employment
agreement with Joseph Messner, an employee of WSR, prior to the WSR
Merger, which employment agreement shall be for a duration of at least
three years from the Closing Date and shall otherwise be in form and
substance satisfactory to you and your special counsel;
(5) the Company shall have consummated term loans in an
aggregate principal amount equal to $54,000,000, and revolving loans
in an aggregate principal amount not to exceed $20,000,000 plus (or
minus) the Final Working Capital Adjustment (as defined in and
pursuant to the WSR Merger Documentation) and shall have the ability
to draw not less than $10,000,000 of revolving loan capacity, in each
such case, pursuant to the Senior Credit Agreement;
(6) the Indebtedness of the Company owing to The First
National Bank of Chicago and Pexco Holdings, Inc. shall have been paid
in full pursuant to the Company Payout Letters and any existing
secured Liens shall have been released and discharged in full and you
shall have received evidence thereof satisfactory to you and your
special counsel; and
(7) The Company shall have received contributions to capital
from Wind Point Partners of at least $25,648,000 in exchange for
Preferred Stock and Common Stock of the Company, and all documentation
evidencing or relating to such equity investments, including purchase
agreements and stockholder agreements, shall be in form and substance
satisfactory to you and your special counsel.
-10-
<PAGE>
(h) Application of Certain Proceeds; Statement of Sources and Uses
of Proceeds. Concurrently with the delivery of the Notes, the Warrants and
the Strip Equity to you on the Closing Date, the Company shall apply all of
the proceeds from the sale of the Notes and the Warrants, $54,000,000
aggregate principal amount in term loans, $20,000,000 plus (or minus) the
Final Working Capital Adjustment (as defined in and pursuant to the WSR
Merger Documentation) of the revolving loans drawn under the Senior Credit
Agreement and $36,050,000 of the proceeds from the sale of the Preferred
Stock and Common Stock of the Company pursuant to this Agreement and the
Stock Purchase Agreement, to the payment of (1) the merger consideration
pursuant to the WSR Merger Documentation, and (2) certain transactional
costs incurred in connection with such merger, with the remainder of such
proceeds to be used as general working capital by the Company, and you
shall have received evidence of such payment satisfactory in form and
substance to you and your special counsel. Without limiting the foregoing,
you shall receive from the Company on or prior to the Closing Date a
detailed statement setting forth all the sources and uses of funds from
wherever derived relating to the merger pursuant to the WSR Merger
Documentation satisfactory in form and substance to you and your special
counsel.
(i) Closing Date Financial Statements. On the Closing Date you shall
have received from the Company a pro forma balance sheet of the Company and
its Subsidiaries, in form and substance reasonably satisfactory to you,
which shall reflect the financial condition of the Company after giving
effect to the consummation of the transactions contemplated by the WSR
Merger Documentation, the Senior Credit Agreement, the issuance and sale of
the Notes, the Warrants, the Series A Preferred Stock of the Company and
the Common Stock of the Company and the use of the proceeds of the
foregoing transactions.
(j) Insurance. On or prior to the Closing Date, you shall have
received certificates dated the Closing Date executed by the independent
insurance broker of the Company evidencing that all insurance required
hereunder and under the Senior Credit Agreement and the Senior Security
Documents is in effect and that all premiums due thereon have been paid in
full.
(k) Environmental Reports. On or prior to the Closing Date, you
shall have received environmental reports from Environmental Resources
Management in form, scope, depth and substance satisfactory to you and your
special counsel (the "Environmental Reports"), which Environmental Reports
shall be dated as of June 16, 1999, and you shall be entitled to rely upon
such Environmental Reports as if the same were addressed to you in a form
satisfactory to you and your special counsel.
(l) Purchase of Series A Preferred Stock and Common Stock. On the
Closing Date, the Stock Purchase Agreement shall have been duly executed
and delivered by all parties thereto and the Company and the parties to the
Stock Purchase Agreement shall have consummated the purchase in the
aggregate of 352,000 shares of Series A Preferred Stock of the Company for
a price of $100.00 per share and 850,000 shares of Common Stock of the
Company for a price of $1.00 per share, and all documentation with respect
-11-
<PAGE>
to such Series A Preferred Stock and Common Stock, including without
limitation the Stock Purchase Agreement and the Stockholders Agreement,
shall have been duly executed and delivered by the parties thereto and
shall be in form and substance satisfactory to you and your special
counsel.
(m) Consent of Holders of Other Securities. Any consents or
approvals required to be obtained from any holder or holders of any
outstanding Security of the Company and any amendments of agreements
pursuant to which any Security may have been issued which shall be
necessary to permit the consummation of the transactions contemplated
hereby and by the WSR Merger Documentation shall have been obtained and all
such consents or amendments shall be satisfactory in form and substance to
you and your special counsel.
(n) Regulatory Agency Approvals. On or prior to the Closing Date,
you shall have received true and correct copies of all material licenses,
orders, permits and approvals, including without limitation, all zoning and
licenses, orders, permits and approvals, of all state and local
governmental licensing or regulatory agencies having jurisdiction over any
real property owned or leased by any of the Company required under
applicable laws, regulations and ordinances for the operation of such real
property.
(o) Private Placement Numbers. On or prior to the Closing Date,
special counsel to the Purchaser shall have duly made the appropriate
filings with Standard & Poor's CUSIP Service Bureau, as agent for the
National Association of Insurance Commissioners, in order to obtain private
placement numbers for the Notes, the Warrants, the Series A Preferred Stock
and the Common Stock.
(p) Funding Instructions. At least three Business Days prior to the
Closing Date, you shall have received written instructions executed by a
Responsible Officer of the Company directing the manner of the payment of
funds and setting forth (1) the name and address of the transferee bank,
(2) such transferee bank's ABA number, (3) the account name and number into
which the purchase price for the Notes is to be deposited, and (4) the name
and telephone number of the account representative responsible for
verifying receipt of such funds.
(q) Special Counsel Fees. Concurrently with the delivery of the
Notes, the Warrants and the Strip Equity to you on the Closing Date, the
charges and disbursements of Chapman and Cutler, your special counsel,
reflected in a statement for services delivered to the Company two Business
Days prior to the Closing Date shall have been paid by the Company.
(r) Legality of Investment. The Notes, the Warrants and the Strip
Equity to be purchased by you shall be legal investments for you under the
laws of each jurisdiction to which you may be subject (without resort to
any so-called "basket provisions" to such laws).
-12-
<PAGE>
(s) Satisfactory Proceedings. All proceedings taken in connection
with the transactions contemplated by this Agreement, the Warrants and the
Strip Equity, and all documents necessary to the consummation thereof,
shall be satisfactory in form and substance to you and your special
counsel, and you shall have received a copy (executed or certified as may
be appropriate) of all legal documents or proceedings taken in connection
with the consummation of said transactions.
(t) Waiver of Conditions. If on the Closing Date the Company fails
to tender to you the Notes, the Warrants and the Strip Equity to be issued
to you on such date or if the conditions specified in this (S)4.1 have not
been fulfilled, you may thereupon elect to be relieved of all further
obligations under this Agreement. Without limiting the foregoing, if the
conditions specified in this (S)4.1 have not been fulfilled, you may waive
compliance by the Company with any such condition to such extent as you may
in your sole discretion determine. Nothing in this (S)4.1(u) shall operate
to relieve the Company of any of its obligations hereunder or to waive any
of your rights against the Company.
Section 5. Company Covenants.
From and after the Closing Date and continuing so long as any amount
remains unpaid on any Note:
Section 5.1. Corporate Existence, Etc. The Company will preserve and keep
in full force and effect, and will cause each Subsidiary to preserve and keep in
full force and effect, its corporate existence and all licenses and permits
necessary to the proper conduct of its business, the absence of which could
reasonably be expected to have a Material Adverse Effect, provided that the
foregoing shall not prevent any transaction permitted by (S)5.13 or (S)5.14.
Section 5.2. Insurance. The Company will maintain, and will cause each
Subsidiary to maintain, insurance coverage by financially sound and reputable
insurers and in such forms and amounts and against such risks as are customary
for corporations of established reputation engaged in the same or a similar
business and owning and operating similar properties.
Section 5.3. Taxes, Claims for Labor and Materials; Compliance with Laws.
(a) The Company will promptly pay and discharge, and will cause each Subsidiary
promptly to pay and discharge, all lawful taxes, assessments and governmental
charges or levies imposed upon the Company or such Subsidiary, respectively, or
upon or in respect of all or any part of the property or business of the Company
or such Subsidiary, all trade accounts payable in accordance with usual and
customary business terms, and all claims for work, labor or materials, which if
unpaid might become a Lien upon any property of the Company or such Subsidiary;
provided the Company or such Subsidiary shall not be required to pay any such
tax, assessment, charge, levy, account payable or claim if (1) the validity,
applicability or amount thereof is being contested in good faith by appropriate
actions or proceedings which will prevent the forfeiture or sale of any property
of the Company or such Subsidiary or any material interference with the use
thereof by the Company or such Subsidiary, and (2) the Company or such
Subsidiary shall set aside on its books, reserves deemed by it to be adequate
with respect thereto.
-13-
<PAGE>
(b) The Company will promptly comply, and will cause each Subsidiary to
promptly comply, with all laws, ordinances or governmental rules and regulations
to which it is subject, including, without limitation, the Occupational Safety
and Health Act of 1970, as amended, ERISA, the Fair Housing Act, the American
With Disabilities Act of 1990, as amended, and all Environmental Laws, the
violation of which could have a Material Adverse Effect or would result in any
Lien not permitted under (S)5.12.
Section 5.4. Maintenance, Etc. The Company will maintain, preserve and
keep, and will cause each Subsidiary to maintain, preserve and keep, its
properties which are used or useful in the conduct of its business (whether
owned in fee or a leasehold interest) in good repair and working order and from
time to time will make all repairs, replacements, renewals and additions so that
at all times the efficiency thereof shall be maintained except where the failure
to do so could not reasonably be expected to have a Material Adverse Effect.
Section 5.5. Nature of Business. Neither the Company nor any Subsidiary
will engage in any business if, as a result, the general nature of the business,
taken on a consolidated basis, which would then be engaged in by the Company and
its Subsidiaries would be substantially changed from the general nature of the
business engaged in by the Company and its Subsidiaries on the date of this
Agreement.
Section 5.6. Plan of Merger. The Company shall cause the WSR Merger to
take place on the Closing Date.
Section 5.7. [Intentionally Omitted.]
Section 5.8. Leverage Ratio The Company shall not permit its Leverage
Ratio determined as of any date set forth below for the twelve months then ended
to be greater than the maximum ratio set forth in the table below opposite such
date:
<TABLE>
<CAPTION>
Date Maximum Leverage Ratio
---- ----------------------
<S> <C>
October 31, 1999 6.90 to 1.00
January 31, 2000 6.85 to 1.00
April 30, 2000 6.70 to 1.00
June 30, 2000 6.60 to 1.00
September 30, 2000 6.50 to 1.00
December 31, 2000 6.35 to 1.00
March 31, 2001 6.30 to 1.00
June 30, 2001 6.25 to 1.00
</TABLE>
-14-
<PAGE>
Date Maximum Leverage Ratio
---- ----------------------
September 30, 2001 5.75 to 1.00
December 31, 2001 5.75 to 1.00
March 31, 2002 5.75 to 1.00
June 30, 2002 5.75 to 1.00
September 30, 2002 5.25 to 1.00
December 31, 2002 5.25 to 1.00
March 31, 2003 5.25 to 1.00
June 30, 2003 5.25 to 1.00
September 30, 2003 4.75 to 1.00
December 31, 2003 4.75 to 1.00
March 31, 2004 4.75 to 1.00
June 30, 2004 4.75 to 1.00
September 30, 2004 4.00 to 1.00
Last day of each calendar quarter 4.00 to 1.00
thereafter
For purposes of this (S)5.8, the term "Leverage Ratio" shall mean, as of
the date of any measurement, the ratio of (a) Total Indebtedness to (b) EBITDA
for the twelve month period ending on the date of measurement.
Section 5.9. Fixed Charge Coverage. (a) The Company shall not permit its
Fixed Charge Coverage Ratio determined for any period set forth below to be less
than the minimum ratio set forth in the table below opposite such period:
Period Minimum Fixed Charge Coverage Ratio
------ -----------------------------------
August 1, 1999 through 0.95 to 1.00
October 31, 1999
August 1, 1999 through 0.95 to 1.00
January 31, 2000
August 1, 1999 through 0.95 to 1.00
April 30, 2000
August 1, 1999 through 0.95 to 1.00
-15-
<PAGE>
June 30, 2000
(b) The Company shall not permit its Fixed Charge Coverage Ratio
determined as of the last day of any calendar quarter set forth below for the
twelve months then ended to be less than the minimum ratio set forth in the
table below opposite such date:
Calendar Quarter Minimum Fixed Charge
----------------
Coverage Ratio
--------------
Calendar quarter ending September 30,
2000 0.95 to 1.00
Each calendar quarter commencing
with the quarter ending December 31,
2000 and each calendar quarter
thereafter 1.00 to 1.00
(c) For purposes of (S)5.9(a) and (S)5.9(b), the term "Fixed Charge
Coverage Ratio" shall mean, as of the date of any measurement, the ratio of (a)
Cash Flow for the period of calculation to (b) Fixed Charges for such period.
Section 5.10. Interest Coverage Ratio. (a) The Company shall not permit its
Interest Coverage Ratio determined for any period set forth below to be less
than the minimum ratio set forth in the table below opposite such period:
Period Ending Minimum Interest
-------------
Coverage Ratio
--------------
August 1, 1999 through 1.30 to 1.00
October 31, 1999
August 1, 1999 through 1.30 to 1.00
January 31, 2000
August 1, 1999 through 1.30 to 1.00
April 30, 2000
August 1, 1999 through 1.30 to 1.00
June 30, 2000
(b) The Company shall not permit its Interest Coverage Ratio determined as
of the last day of any calendar quarter set forth below for the twelve months
then ended to be less than the minimum ratio set forth in the table below
opposite such period:
-16-
<PAGE>
Calendar Quarter Ending Minimum Interest
----------------------- Coverage Ratio
--------------
September 30, 2000 1.45 to 1.00
December 31, 2000 1.45 to 1.00
March 31, 2001 1.45 to 1.00
June 30, 2001 1.45 to 1.00
September 30, 2001 1.50 to 1.00
December 31, 2001 1.50 to 1.00
March 31, 2002 1.60 to 1.00
June 30, 2002 1.60 to 1.00
September 30, 2002 1.75 to 1.00
December 31, 2002 1.75 to 1.00
March 31, 2003 1.75 to 1.00
June 30, 2003 1.75 to 1.00
September 30, 2003 1.75 to 1.00
December 31, 2003 and each calendar 2.00 to 1.00
quarter thereafter
(c) For purposes of (S)5.10(a) and (S)5.10(b), the term "Interest Coverage
Ratio" shall mean, as of the date of any measurement, the ratio of (a) EBITDA of
the Company and its Subsidiaries for the period of calculation to (b) Net
Interest Expense for such period.
Section 5.11. Minimum EBITDA. (a) The Company shall not permit
EBITDA for any period set forth below to be less than the amount set forth below
for such period:
Period Minimum EBITDA
------ --------------
August 1, 1999 through $ 5,200,000
October 31, 1999
August 1, 1999 through $ 8,300,000
January 31, 2000
August 1, 1999 through $ 9,400,000
April 30, 2000
August 1, 1999 through $10,900,000
June 30, 2000
-17-
<PAGE>
(b) The Company shall not permit EBITDA for the twelve month period ending
on the last day of any calendar quarter set forth below to be less than the
amount set forth below for such period:
Calendar Quarter Ending Minimum EBITDA
----------------------- --------------
September 30, 2000 $12,900,000
December 31, 2000 13,300,000
March 31, 2001 13,600,000
June 30, 2001 14,000,000
September 30, 2001 14,900,000
December 31, 2001 15,800,000
March 31, 2002 16,000,000
June 30, 2002 16,600,000
September 30, 2002 17,500,000
December 31, 2002 18,100,000
March 31, 2003 19,000,000
June 30, 2003 19,600,000
September 30, 2003 20,200,000
December 31, 2003 20,500,000
March 31, 2004 20,700,000
June 30, 2004 21,100,000
September 30, 2004 21,400,000
Each calendar quarter thereafter 22,200,000
Section 5.12. Limitations on Liens. The Company shall not, and shall not
suffer or permit any of its Subsidiaries to, directly or indirectly, make,
create, incur, assume or suffer to exist any Lien upon or with respect to any
part of its Property, whether now owned or hereafter acquired, other than the
following ("Permitted Liens"):
(a) any Lien existing on the Property of the Company or its
Subsidiaries on the Closing Date and set forth in Schedule II securing
Indebtedness outstanding on such date and permitted by (S)5.16(d),
including replacement Liens, provided that (i) the indebtedness secured by
such Lien immediately prior to such replacement is not increased and (ii)
such Lien is not extended to any other Property not currently subject to
such Lien;
-18-
<PAGE>
(b) any Lien created under the Senior Credit Agreement and the
Senior Security Documents;
(c) Liens for taxes, fees, assessments or other governmental charges
(i) which are not delinquent or remain payable without penalty, or (ii) the
non-payment thereof is permitted by (S)5.3, provided that, in respect of
this clause (ii), all such Liens secure claims in the aggregate at any time
outstanding for the Company and its Subsidiaries not exceeding $200,000;
(d) carriers', warehousemen's, mechanics', landlords', materialmen's,
repairmen's or other similar Liens arising in the Ordinary Course of
Business which are not delinquent for more than ninety (90) days or remain
payable without penalty or which are being contested in good faith and by
appropriate proceedings diligently prosecuted, which proceedings have the
effect of preventing the forfeiture or sale of the Property subject thereto
and for which adequate reserves in accordance with GAAP are being
maintained;
(e) Liens (other than any Lien imposed by ERISA) consisting of
pledges or deposits required in the Ordinary Course of Business in
connection with workers' compensation, unemployment insurance and other
social security legislation or to secure the performance of tenders,
statutory obligations, surety, stay, customs and appeals bonds, bids,
leases, governmental contract, trade contracts, performance and return of
money bonds and other similar obligations (exclusive of obligations for the
payment of borrowed money) or to secure liability to insurance carriers;
(f) Liens consisting of judgment or judicial attachment liens,
provided that the enforcement of such Liens is effectively stayed and all
such Liens secure claims in the aggregate at any time outstanding for the
Company and its Subsidiaries do not exceed $750,000;
(g) easements, rights-of-way, zoning and other restrictions, minor
defects or other irregularities in title, and other similar encumbrances
incurred in the Ordinary Course of Business which, in the aggregate, are
not substantial in amount, and which do not in any case materially detract
from the value of the Property subject thereto or interfere in any material
respect with the ordinary conduct of the businesses of the Company and its
Subsidiaries;
(h) Liens on any Property acquired or held by the Company or its
Subsidiaries in the Ordinary Course of Business, securing Indebtedness
incurred or assumed for the purpose of financing (or refinancing) all or
any part of the cost of acquiring such Property and permitted under
(S)5.16(d); provided that (i) any such Lien attaches to such Property
concurrently with or within twenty (20) days after the acquisition thereof,
(ii) such Lien attaches solely to the Property so acquired in such
transaction, and (iii) the principal amount of the debt secured thereby
does not exceed 100% of the cost of such Property;
(i) Liens securing Capital Lease Obligations permitted under
(S)5.16(d);
-19-
<PAGE>
(j) any interest or title of a lessor or sublessor under any lease
permitted by this Agreement;
(k) Liens arising from precautionary UCC financing statements filed
under any lease permitted by this Agreement; and
(l) Liens arising solely by virtue of any statutory or common law
provision relating to banker's liens, rights of set-off or similar rights
and remedies as to deposit accounts or other funds maintained with a
creditor depository institution.
Section 5.13. Disposition of Assets. The Company shall not, and shall
not suffer or permit any of its Subsidiaries to, directly or indirectly, sell,
assign, lease, convey, transfer or otherwise dispose of (whether in one or a
series of transactions) any Property (including accounts and notes receivable,
with or without recourse) or enter into any agreement to do any of the
foregoing, except:
(a) dispositions of inventory, or used, worn-out or surplus
equipment, all in the Ordinary Course of Business;
(b) dispositions not otherwise permitted hereunder which are made
for fair market value the Net Proceeds of which are applied in accordance
with the Senior Credit Agreement substantially on the terms existing in the
Senior Credit Agreement on the Closing Date; provided, that (i) at the time
of any disposition, no Event of Default shall exist or shall result from
such disposition, (ii) the aggregate value of all assets so sold by the
Company and its Subsidiaries, together, shall not exceed in any fiscal year
$1,500,000 and (iii) after giving effect to such disposition, the Company
is in compliance on a pro forma basis with the covenants set forth in
(S)(S)5.7 through 5.11, inclusive, recomputed for the most recent month for
which financial statements have been delivered; and
(c) mergers, consolidations and dispositions permitted by (S)5.14.
Section 5.14. Mergers and Consolidations. The Company shall not, and
shall not suffer or permit any of its Subsidiaries to, merge, consolidate with
or into, or convey, transfer, lease or otherwise dispose of (whether in one
transaction or in a series of transactions) all or substantially all of its
assets (whether now owned or hereafter acquired) to or in favor of any Person,
except:
(a) upon not less than five (5) Business Days prior written notice
to the holders of the Notes, any Subsidiary of the Company may merge with,
or dissolve or liquidate into, a Wholly-Owned Subsidiary of the Company,
provided that such Wholly-Owned Subsidiary shall be the continuing or
surviving corporation; and
(b) the Company or any Subsidiary may merge or consolidate with
another Person in connection with the acquisition of property or assets
permitted within the limitations of (S)5.15(h), provided that pursuant to
any such merger or consolidation, the Company or a Wholly-Owned Subsidiary
shall be the continuing or surviving corporation.
-20-
<PAGE>
Section 5.15. Loans and Investments. The Company shall not and shall not
suffer or permit any of its Subsidiaries to (i) purchase or acquire, or make any
commitment therefor, any capital stock, equity interest, or any obligations or
other securities of, or any interest in, any Person, including the establishment
or creation of a Subsidiary, or (ii) make or commit to make any Acquisitions, or
any other acquisition of all or substantially all of the assets of another
Person, or of any business or division of any Person, including without
limitation, by way of merger, consolidation or other combination or (iii) make
or commit to make any advance, loan, extension of credit or capital contribution
to or any other investment in, any Person including any Affiliate of the Company
(the items described in clauses (i), (ii) and (iii) are referred to as
"Investments"), except for:
(a) Investments in cash and Cash Equivalents;
(b) extensions of credit by the Company to any of its Wholly-Owned
Subsidiaries, provided the obligations of each obligor shall be evidenced
by notes;
(c) loans and advances to employees in the Ordinary Course of
Business not to exceed $250,000 in the aggregate at any time outstanding;
(d) reasonable travel, relocation and similar advance to officers
and employees of the Company made in the Ordinary Course of Business;
(e) loans and advances to customers, distributors and sales
representatives of the Company in the Ordinary Course of Business, not to
exceed $250,000 at any one time outstanding;
(f) loans, advances and extensions of credit existing on the date
hereof and listed in Schedule II attached hereto and made a part hereof;
(g) non-cash loans and advances to employees of the Company used to
acquire stock of the Company; and
(h) additional Investments consisting of the acquisition of
products, product lines or assets useful and to be used in the business of
the Company and its Subsidiaries, provided that the Indebtedness incurred
in connection with such acquisitions shall, in all events, be incurred and
outstanding within the limitations of this Agreement.
Section 5.16. Limitations on Indebtedness. The Company shall not, and
shall not suffer or permit any of its Subsidiaries to, create, incur, assume,
suffer to exist, or otherwise become or remain directly or indirectly liable
with respect to, any Indebtedness, except:
(a) Indebtedness evidenced by the Notes;
(b) Indebtedness incurred pursuant to the Senior Credit Agreement;
-21-
<PAGE>
(c) Indebtedness consisting of Contingent Obligations described in
clause (i) of the definition thereof and permitted pursuant to (S)5.17;
(d) Indebtedness existing on the Closing Date and set forth in
Schedule II including extensions and refinancings thereof which do not
-----------
increase the principal amount of such Indebtedness as of the date of such
extension or refinancing;
(e) Indebtedness not to exceed $2,500,000 in the aggregate at any
time outstanding, consisting of Capital Lease Obligations or secured by
Liens permitted by (S)5.12(h);
(f) unsecured intercompany Indebtedness permitted pursuant to
(S)5.15(b);
(g) other unsecured Indebtedness not exceeding in the aggregate at
any time outstanding $500,000; and
(h) Indebtedness not to exceed the principal amount of $5,000,000,
as the same may be increased as the result of the accrual of interest,
evidenced by the Seller Junior Subordinated Notes.
Section 5.17. Contingent Obligations. The Company shall not, and shall not
suffer or permit any of its Subsidiaries to, create, incur, assume or suffer to
exist any Contingent Obligations except in respect of Indebtedness under this
Agreement, the Notes and the Subsidiary Guaranty Agreements, and except:
(a) endorsements for collection or deposit in the Ordinary Course of
Business;
(b) Hedging Contracts entered into in the Ordinary Course of
Business with prior written consent of the Required Holders (which consent
shall not be unreasonably withheld) or pursuant to (S)5.26;
(c) Contingent Obligations of the Company and its Subsidiaries
existing as of the Closing Date and listed in Schedule II, including
-----------
extension and renewals thereof which do not increase the amount of such
Contingent Obligations as of the date of such extension or renewal;
(d) Contingent Obligations incurred in the Ordinary Course of
Business with respect to surety and appeal bonds, performance bonds and
other similar obligations;
(e) Contingent Obligations arising under indemnity agreements to
title insurers to cause such title insurers to issue to the Agent or the
Senior Lenders title insurance policies; and
(f) Contingent Obligations arising with respect to customary
indemnification obligations in favor of (i) sellers in connection with
Acquisitions permitted hereunder and (ii) purchasers in connection with
dispositions permitted under (S)5.13(b); and
-22-
<PAGE>
(g) Contingent Obligations in favor of the Agent or the Senior
Lenders in connection with Indebtedness incurred under the Senior Credit
Agreement.
Section 5.18. Restricted Payments. The Company shall not, and shall not
suffer or permit any of its Subsidiaries to, (i) declare or make any dividend
payment or other distribution of assets, properties, cash, rights, obligations
or securities on account of any shares of any class of its capital stock,
partnership interests, membership interests or other equity securities, (ii)
purchase, redeem or otherwise acquire for value any shares of its capital stock,
partnership interests, membership interests or other equity securities or any
warrants, rights or options to acquire such shares, interests or securities now
or hereafter outstanding or (iii) make any payment or prepayment of principal
of, premium, if any, interest, redemption, exchange, purchase, retirement,
defeasance, sinking fund or similar payment with respect to, Junior Subordinated
Indebtedness (the items described in clauses (i), (ii) and (iii) are referred to
as "Restricted Payments"); except that any Wholly-Owned Subsidiary of the
Company may declare and pay dividends to the Company or any Wholly-Owned
Subsidiary of the Company, and except that the Company may:
(a) declare and make dividend payments or other distributions
payable solely in its common stock; and
(b) purchase or redeem the Warrants;
(c) redeem from management stockholders shares of the Company common
stock or warrants or options to acquire any such shares provided all of the
following conditions are satisfied:
(i) no Default or Event of Default has occurred and is
continuing or would arise as a result of such redemption;
(ii) after giving effect to such redemption, the Company is in
compliance on a pro forma basis with the covenants set forth in
(S)(S)5.7 through 5.11, recomputed for the most recent quarter for
which financial statements have been delivered;
(iii) the aggregate redemptions permitted (x) in any fiscal year
of the Company shall not exceed $500,000 and (y) during the term of
this Agreement shall not exceed $2,000,000; and
(iv) after giving effect to such redemption, the maximum
revolving loan balance available under the Senior Credit Agreement
exceeds the aggregate outstanding principal balance of revolving loans
under the Senior Credit Agreement by not less than $3,000,000;
(d) make regularly scheduled payments of interest with respect to
Junior Subordinated Indebtedness evidenced by the Seller Junior
Subordinated Notes, provided
-23-
<PAGE>
no Default or Event of Default has occurred and is continuing or would
arise as a result of such payment; and
(e) redeem stock in accordance with Sections 1.1 and/or 1.2 of the
Stockholders Agreement, provided the aggregate redemptions permitted during
the term of this Agreement pursuant to Sections 1.1 and 1.2 of the
Stockholders Agreement shall not exceed $500,000.
Section 5.19. Repurchase of Notes. Except as provided in (S)2.2 and
(S)2.4, neither the Company nor any of its Subsidiaries or any Affiliate may
repurchase or prepay or make any offer to repurchase or prepay any Notes.
Section 5.20. Transactions with Affiliates. The Company will not, and will
not permit any of its Subsidiaries to, enter into or be a party to any
transaction or arrangement with any Affiliate (including, without limitation,
the purchase from, sale to or exchange of property with, or the rendering of any
service by or for, any Affiliate), except in the ordinary course of and pursuant
to the reasonable requirements of the Company's or such Subsidiary's business
and upon fair and reasonable terms no less favorable to the Company or such
Subsidiary than would obtain in a comparable arm's-length transaction with a
Person other than an Affiliate; provided, that (a) so long as no Default or
Event of Default under (S)7.1(a) or (S)7.1(d) shall have occurred and be
continuing, the Company shall be permitted to pay (i) Wind Point Investors
L.L.C. and/or Wind Point Investors IV L.P. and/or their Affiliates fees
aggregating $1,000,000 to be paid in connection with the consummation of the
transactions contemplated by the WSR Merger Documentation, the Senior Credit
Agreement and this Agreement and (ii) annual financial and management consulting
fees aggregating $360,000, all pursuant to and in accordance with the Consulting
Agreement between the Company and Wind Point Investors, L.L.C. dated August 5,
1999, as in effect on the Closing Date and (b) the Company shall be permitted to
pay directors' fees and reimbursement of actual out-of-pocket expenses incurred
by directors in connection with attending board of director meetings not to
exceed in the aggregate, with respect to all such items, $100,000 in any fiscal
year of the Company.
Section 5.21. Termination of Pension Plans. The Company will not,
and will not permit any of its Subsidiaries to, withdraw from any Multiemployer
Plan or permit any employee benefit plan maintained by it to be terminated if
such withdrawal or termination could result in material withdrawal liability (as
described in Part 1 of Subtitle E of Title IV of ERISA) or the imposition of a
Lien on any property of the Company or any Subsidiary pursuant to Section 4068
of ERISA.
Section 5.22. Prohibition of Change in Fiscal Year. The Company will
not, and will not permit any of its Subsidiaries to, change its Fiscal Year.
Section 5.23. Sale or Discount of Receivables. The Company will not,
and will not permit any of its Subsidiaries to, discount or sell with recourse,
or sell for less than the greater of the face value or market value thereof, any
of its notes receivable or accounts receivable.
-24-
<PAGE>
Section 5.24. Partnerships and Joint Ventures. The Company will not,
and will not permit any of its Subsidiaries to, act or participate as a general
or limited partner in any partnership or as a joint venturer in any joint
venture; provided that, the foregoing shall not restrict the ability of the
Company or any Subsidiary from entering into or establishing business
arrangements with third parties in connection with the manufacturing or other
production of goods, so long as such arrangements do not involve the sharing of
liabilities or the delegation of contracting power by the Company or any
Subsidiary with or to any such third party.
Section 5.25. Issuance of Stock or Partnership Interests. The Company will
not, and will not permit any of its Subsidiaries to, issue or distribute any
capital stock, partnership interests or other Securities for consideration or
otherwise; provided, however, that (a) a Wholly-owned Subsidiary may issue
equity Securities to the Company or to another Wholly-owned Subsidiary and (b)
the Company may issue shares of its Series A Preferred Stock in connection with
the Future Preferred Commitments provided for under the Stock Purchase
Agreement.
Section 5.26. Hedging Contracts. The Company will not, and will not permit
any of its Subsidiaries to, enter into any Hedging Contract with any Person
unless at the time of entering into such Hedging Contract the senior unsecured
long-term debt of such Person is rated "A" or better by Standard & Poor's Rating
Group, a division of McGraw-Hill, Inc., a New York corporation, or "A" by
Moody's Investors Service, Inc.
Section 5.27. Additional Subsidiary Guarantors. If at any time from and
after the Closing Date any Subsidiary shall guarantee the obligations of the
Company or any other Subsidiary under the Senior Credit Agreement or any Senior
Security Document, then in such event, the Company shall cause such Subsidiary
to promptly enter into a Guaranty of the Notes and, in connection therewith,
shall deliver to each of the holders of the Notes (a) an executed joinder
agreement to a Subsidiary Guaranty Agreement, (b) all such certificates,
resolutions, legal opinions and other related items in form and substance
satisfactory to the holders of the Notes and (c) all such amendments to this
Agreement as may reasonably be deemed necessary by the holders of the Notes in
order to reflect the existence of such additional Guaranty. The holders of the
Notes agree to release the obligations of any Subsidiary under any Subsidiary
Guaranty Agreement to which it is a party upon the request of the Company if and
to the extent the corresponding guaranty given pursuant to the Senior Credit
Agreement is released and discharged, provided that no Default or Event of
Default has occurred and is continuing, and provided, further, that in the event
any Subsidiary shall again become obligated under or with respect to any
previously discharged guaranty pursuant to the terms and provisions of such
guaranty or the Senior Credit Agreement, then the obligations of such Subsidiary
under such Subsidiary Guaranty Agreement shall ipso facto again benefit the
holders of the Notes.
Section 5.28. Amendment or Waivers of Certain Documents: Restrictions
Relating to Prepayment of the Notes. (a) The Company will not enter into any
oral or written amendment, supplement, alteration, waiver or other modification
of any of the terms or provisions of the Senior Credit Agreement or the Senior
Security Documents if the effect or result of any such amendment, supplement,
alteration, waiver or other modification is (1) to advance the date of any
required prepayment or repayment of any Senior Indebtedness Liabilities, (2) to
increase the interest rate payable in connection with the Senior Indebtedness
Liabilities by an amount greater
-25-
<PAGE>
than 2.0% per annum over the rate payable on the Closing Date (other than the
imposition of a default rate of interest), (3) to increase the amount of
permitted Senior Indebtedness Liabilities above the sum of $84,000,000 plus
$12,600,000, (4) to extend the term of the Senior Credit Agreement beyond August
5, 2006, or (5) to materially and adversely affect the interests of the holders
of the Notes or of the Company, except that if any event of default shall exist
under the Senior Credit Agreement, the terms of any amendment or modification
(but not any refinancing) are permitted hereby to materially and adversely
affect the interests of the Company if such amendment or modification is given
in consideration of a waiver or forbearance in respect of such event of default.
It is understood and agreed that any action permitted in this (S)5.28 shall not
be deemed or construed to mean (and not asserted to the contrary by the Agent,
the Senior Lenders or any replacement or replacements of any thereof) that the
terms of this (S)5.28 constitute a consent to any postponement or other
modification of the Company's obligation to make scheduled payments of principal
and interest, including the Company's obligation to repay the Notes on the
maturity date thereof, except as may be expressly provided in the circumstances
set forth Section 6 hereof.
Without limiting the foregoing, the Company will not enter into an
extension, renewal, or refunding of the Senior Credit Agreement and the Senior
Security Documents which would not otherwise be within and permitted by the
limitations of this (S)5.28(a).
(b) The Company will not enter into any oral or written amendment,
supplement, alteration, waiver or other modification of any of the terms or
provisions of the Seller Junior Subordinated Notes if the effect thereof is to:
(i) increase the interest rate on the Seller Junior Subordinated Notes, (ii)
shorten or accelerate the dates upon which payments of principal or interest are
due on such Seller Junior Subordinated Notes, (iii) change any event of default
or add or make more restrictive any agreement of the Company with respect to
such Seller Junior Subordinated Notes, (iv) change the subordination provisions
thereof, or (v) change or amend any other term if such change or amendment would
materially increase the obligations of the Company or confer additional material
rights on the holder of such Seller Junior Subordinated Notes in a manner
adverse to the Company, any of its Subsidiaries or the holders of the Notes.
(c) The Company will not enter into any material amendment or other change
to the Certificate of Incorporation or By-laws of the Company or to the terms
and provisions of any agreement or other instrument constituting or relating to
the capital stock of the Company in a manner adverse to, or which would
reasonably be expected to be adverse to, the holders of the Notes or Warrants or
which would, or would reasonably be expected to, adversely affect the Company's
or any Subsidiary's ability to perform their respective obligations under the
Note Documents.
(d) The Company will not, directly or indirectly, enter into any
restriction or limitation on its ability to prepay or repay the Notes other than
restrictions set forth in the Senior Credit Agreement as in effect on the
Closing Date, or restrictions no more onerous than those set forth in the Senior
Credit Agreement on the Closing Date contained in any credit or loan agreement
executed in connection with a permitted refinancing of such Senior Credit
Agreement.
-26-
<PAGE>
(e) The Company will not enter into any agreement containing any provision
which would be violated or breached by the performance of its obligations
hereunder, under the Notes, the Warrants, the Series A Preferred Stock, the
Stockholders Agreement, the Registration Rights Agreement or under any other
instrument or document delivered or to be delivered by it hereunder or in
connection herewith or which would violate or breach any provision hereof or
thereof.
Section 5.29. Reports and Rights of Inspection. The Company will keep, and
will cause each Subsidiary to keep, proper books of record and account in which
full and correct entries will be made of all dealings or transactions of, or in
relation to, the business and affairs of the Company or such Subsidiary, in
accordance with GAAP consistently applied (except for changes disclosed in the
financial statements furnished to you pursuant to this (S)5.29 and concurred in
by the independent public accountants referred to in (S)5.29(b)), and will
furnish to you so long as you are the holder of any Note and to each other
Institutional Holder of the then outstanding Notes (in duplicate if so specified
below or otherwise requested):
(a) Monthly Statements. As soon as available, but not later than
thirty (30) days after the end of each fiscal month of each year, a copy of
the unaudited consolidated and consolidating balance sheets of the Company
and each of its Subsidiaries, and the related consolidated and
consolidating statements of income, shareholders' equity and cash flows as
of the end of such month and for the portion of the fiscal year then ended,
all certified on behalf of Company by an appropriate Responsible Officer as
being complete and correct and fairly presenting, in accordance with GAAP,
the financial position and the results of operations of the Company and the
Subsidiaries, subject to normal year-end adjustments and absence of
footnote disclosure;
(b) Annual Statements. As soon as available, but not later than one
hundred and five (105) days after the end of each Fiscal Year, a copy of
the audited consolidated balance sheet of the Company as at the end of such
year and the related consolidated statements of income or operations,
shareholders' equity and cash flows for such Fiscal Year, setting forth in
each case in comparative form the figures for the previous Fiscal Year, and
accompanied by the opinion of any "Big Five" or other nationally-recognized
independent public accounting firm reasonably acceptable to the Required
Holders which report shall state that such consolidated financial
statements present fairly in all material respects the financial position
for the periods indicated in conformity with GAAP applied on a basis
consistent with prior years. Such opinion shall not be qualified or
limited because of a restricted or limited examination by such accountant
of any material portion of the Company's or any Subsidiary's records;
(c) Audit Reports. Promptly upon receipt thereof, copies of any
reports submitted by the Company's certified public accountants in
connection with each annual, interim or special audit or review of any type
of the financial statements or internal control systems of the Company made
by such accountants, including any comment letters submitted by such
accountants to management of the Company in connection with their services;
-27-
<PAGE>
(d) SEC and Other Reports. Promptly after the same are sent, copies
of all financial statements and reports which the Company sends to its
shareholders generally; and promptly after the same are filed, copies of
all financial statements and regular, periodic or special reports which the
Company may make to, or file with, the Securities and Exchange Commission
or any successor or similar Governmental Authority and copies of any orders
in any proceedings to which the Company or any of its Subsidiaries is a
party, issued by any governmental agency, foreign, Federal or state, having
jurisdiction over the Company or any of its Subsidiaries;
(e) ERISA Reports. Promptly upon the occurrence thereof, written
notice of any of the following if the same would reasonably be expected to
have a Material Adverse Effect, together with a copy of any notice with
respect to such event that may be required to be filed with a Governmental
Authority and any notice delivered by a Governmental Authority to the
Company or any member or its Controlled Group with respect to such event:
(1) an ERISA Event;
(2) the adoption of any new Qualified Plan that is subject to
Title IV of ERISA or Section 412 of the Code by any member of the
Controlled Group;
(3) the adoption of any amendment to a Qualified Plan that is
subject to Title IV of ERISA or Section 412 of the Code, if such
amendment results in a material increase in benefits or unfunded
liabilities; or
(4) the commencement of contributions by any member of the
Controlled Group to any Qualified Plan that is subject to Title IV of
ERISA or Section 412 of the Code;
(f) Officer's Certificates. Within the periods provided in paragraphs
(a) and (b) above, a certificate of the chief financial officer of the
Company stating that such officer has reviewed the provisions of this
Agreement and setting forth: (1) the information and computations (in
sufficient detail) required in order to establish whether the Company was
in compliance with the requirements of (S)(S)5.6 through 5.18 at the end of
the period covered by the financial statements then being furnished, and
(2) whether there existed as of the date of such financial statements and
whether, to the best of such officer's knowledge, there exists on the date
of the certificate or existed at any time during the period covered by such
financial statements any Default or Event of Default and, if any such
condition or event exists on the date of the certificate, specifying the
nature and period of existence thereof and the action the Company is taking
and proposes to take with respect thereto;
(g) Accountant's Certificates. Within the period provided in
paragraph (b) above, a certificate of the accountants who render an opinion
with respect to such financial statements, stating that they have reviewed
this Agreement and stating further whether, in making their audit, such
accountants have become aware of any Default or
-28-
<PAGE>
Event of Default under any of the terms or provisions of this Agreement
insofar as any such terms or provisions pertain to or involve accounting
matters or determinations, and if any such condition or event then exists,
specifying the nature and period of existence thereof;
(h) Management Reports. Together with each delivery of financial
statements pursuant to paragraphs (a) and (b) above: (1) to the extent
prepared by Company or its management, a management report, in reasonable
detail, signed by the chief financial officer of the Company, describing
the operations and financial condition of the Company and its Subsidiaries
for the month and the portion of the Fiscal Year then ended (or for the
fiscal year then ended in the case of annual financial statements), and (2)
a report setting forth in comparative form the corresponding figures for
the corresponding periods of the previous Fiscal Year and the corresponding
figures from the most recent projections for the current Fiscal Year
delivered pursuant to paragraph (i) and discussing the reasons for any
significant variations;
(i) Projections. As soon as available and in any event no later than
thirty (30) days subsequent to each Fiscal Year of the Company, projections
of the Company's (and its Subsidiaries') consolidated and consolidating
financial performance for the forthcoming Fiscal Year on a month by month
basis;
(j) Senior Credit Agreement Amendments. Subject to (S)5.28(a), as
soon as possible and in event within 10 days of entering into a material
change, modification, amendment, revision, waiver or consent to the Senior
Credit Agreement or the Senior Security Documents, the Company shall
provide written notice (together with copies of all executed instruments
relating thereto) to the holders of the Notes of any such change,
modification, amendment, revision, waiver or consent to the Senior Credit
Agreement or the Senior Security Documents, as the case may be, along with
such other information as may be necessary to explain the reason for such
alteration, consent or waiver;
(k) Senior Credit Agreement Deliveries. Simultaneously with the
Company's delivery of reports, statements and other information required to
be delivered pursuant to the Senior Credit Agreement, the Company shall
deliver to the holders of the Notes copies of such reports, statements and
other information, without duplication with that which has been delivered
to the Senior Lenders in accordance with the terms thereof;
(l) Disclosure Schedules. Annually, concurrently with the Company's
delivery of the projections under paragraph (i) above, the Company shall
supplement in writing and deliver to the holders of the Notes revisions of
and supplements to the Schedules hereto related to Exhibit D hereof to the
extent necessary to disclose new or changed facts or circumstances after
the Closing Date; provided that delivery or receipt of such subsequent
disclosure shall not constitute a waiver by the holders of the Notes or a
cure of any Default or Event of Default resulting in connection with the
matters disclosed;
-29-
<PAGE>
(m) Notices. Promptly upon the occurrence thereof, written notice of
any of the following:
(1) the occurrence or existence of any Default or Event of
Default, or any event or circumstance that foreseeably will become a
Default or Event of Default under (S)5.7 through (S)5.18;
(2) any breach or non-performance of, or any default under, any
Contractual Obligation of the Company or any of its Subsidiaries, or
any violation of, or non-compliance with, any Requirement of Law (in
each case, after the expiration of all applicable notice, grace and
cure periods), which would reasonably be expected to result, either
individually or in the aggregate, in a Material Adverse Effect,
including a description of such breach, non-performance, default,
violation or non-compliance and the steps, if any, the Company or such
Subsidiary has taken, is taking or proposes to take in respect
thereof;
(3) any dispute, litigation, investigation, proceeding or
suspension which may exist at any time between the Company or any of
its Subsidiaries and any Governmental Authority which would reasonably
be expected to result, either individually or in the aggregate, in a
Material Adverse Effect;
(4) the commencement of, or any material development in, any
litigation or proceeding affecting the Company or any Subsidiary (i)
in which the amount of damages claimed is $500,000 (or its equivalent
in another currency or currencies) or more, (ii) in which injunctive
or similar relief is sought and which, if adversely determined, would
reasonably be expected to have a Material Adverse Effect, or (iii) in
which the relief sought is an injunction or other stay of the
performance of this Agreement, the Notes or the Warrant;
(5) any of the following if the same would reasonably be
expected to have a Material Adverse Effect: (i) any enforcement,
cleanup, removal or other governmental or regulatory actions
instituted, completed or threatened against the Company or any of its
Subsidiaries or any of their respective properties pursuant to any
applicable Environmental Laws, (ii) any other Environmental Claims,
and (iii) any environmental or similar condition on any real property
adjoining the property of the Company or any Subsidiary that would
reasonably be anticipated to cause Company's or any of its
Subsidiaries' property or any part thereof to be subject to any
material restrictions on the ownership, occupancy, transferability or
use of such property under any Environmental Laws;
(6) any Material Adverse Effect subsequent to the date of the
most recent audited financial statements of the Company delivered to
the holders of the Notes pursuant to this Agreement;
(7) any material change in accounting policies or financial
reporting practices by the Company or any of its Subsidiaries;
-30-
<PAGE>
(8) any labor controversy resulting in or threatening to result
in any strike, work stoppage, boycott, shutdown or other labor
disruption against or involving the Company or any of its Subsidiaries
if the same could reasonably be expected to have a Material Adverse
Effect; and
(9) the creation, establishment or acquisition of any
Subsidiary; and
(n) Requested Information. Promptly, such additional business,
financial, corporate affairs and other information as the holders of the
Notes may from time to time reasonably request.
The Company will also permit you, so long as you are the holder of any Note, and
each Institutional Holder of the then outstanding Notes (or such Persons as
either you or such Institutional Holder may designate), to visit and inspect,
under the Company's guidance, any of the properties of the Company or any
Subsidiary, to examine all of their books of account, records, reports and other
papers, to make copies and extracts therefrom and to discuss their respective
affairs, finances and accounts with their respective officers, employees, and
independent public accountants (and by this provision the Company authorizes
said accountants to discuss with you the finances and affairs of the Company and
its Subsidiaries), all at such reasonable times and as often as may be
reasonably requested. Any visitation shall be at the sole expense of you or such
Institutional Holder and shall not be undertaken more than once in each calendar
year, unless a Default or Event of Default shall have occurred and be continuing
or the holder of any Note or of any other evidence of Indebtedness of the
Company or any Subsidiary gives any written notice or takes any other action
with respect to a claimed default, in which case, the frequency of such
visitation and inspections shall not be limited and any such visitation or
inspection shall be at the sole expense of the Company.
Without limiting the foregoing, the Company agrees that The Northwestern
Mutual Life Insurance Company and each other Institutional Holder of not less
than 30% of the aggregate principal amount of the then outstanding Notes, shall
have the right to receive all notices of, and to attend (either in person or by
telephonic conference), at the expense of such holders of the Notes, all
meetings of the Company's Board of Directors and any committees thereof and each
such Person shall be entitled to receive copies of all minutes of such meetings,
together with copies of any items distributed to the members of the Board of
Directors, whether or not such Person attends any such meeting.
Section 5.30. Agreement during Standstill Period. The Company agrees that,
so long as any Standstill Period shall be in effect, the Company will not, and
will not permit any Subsidiary to, sell, transfer or otherwise dispose of any
assets, or enter into or be a party to any transaction or agreement relating to
the sale, transfer or other disposition of any assets, other than dispositions
of assets made in compliance with the terms of Section 5.2(a) of the Senior
Credit Agreement as in effect on the Closing Date.
-31-
<PAGE>
Section 6. Subordination of Subordinated Indebtedness Liabilities.
The Subordinated Indebtedness Liabilities shall be subordinate and junior
in right of payment, to the extent and in the manner hereinafter set forth, to
the prior payment in full in cash (or in a manner satisfactory to the holders of
Senior Indebtedness Liabilities, in their sole discretion) of all Senior
Indebtedness Liabilities, whether now outstanding or hereafter incurred:
(a) In the event of any insolvency or bankruptcy proceedings, and any
receivership, liquidation, reorganization, arrangement or other similar
proceedings in connection therewith, relative to the Company, any of its
Subsidiaries or to its or their creditors, as such, or to its property, and
in the event of any proceedings for voluntary liquidation, dissolution or
other winding-up of the Company or any of its Subsidiaries, whether or not
involving insolvency or bankruptcy, then the holders of Senior Indebtedness
Liabilities shall be entitled to receive from the Company and its
Subsidiaries payment in full of all Senior Indebtedness Liabilities owed
thereby in cash or other property acceptable to the holders of the Senior
Indebtedness Liabilities in their sole discretion (or to have such payment
duly provided for in a manner satisfactory to the holders of said Senior
Indebtedness Liabilities in their sole discretion) before the holders of
the Subordinated Indebtedness Liabilities are entitled to receive any
payment from the Company or its Subsidiaries in respect of the Subordinated
Indebtedness Liabilities owed thereby, and to that end the holders of
Senior Indebtedness Liabilities shall be entitled to receive for
application in payment thereof any payment or distribution of any kind or
character, whether in cash or property or Securities, which may be payable
or deliverable in any such proceedings in respect of the Subordinated
Indebtedness Liabilities, excepting only Securities which are in all
respects subordinate and junior in right of payment to the payment in full
in cash (or in a manner satisfactory to the holders of Senior Indebtedness
Liabilities, in their sole discretion) of all Senior Indebtedness
Liabilities upon terms substantially similar to those contained in this
Agreement.
(b) Upon the happening of any Senior Indebtedness Payment Default,
the Company shall not be permitted to make and the holders of the
Subordinated Indebtedness Liabilities shall not be entitled to receive, any
payment on account thereof during the period beginning on the date such
Senior Indebtedness Payment Default shall occur and ending upon the
earliest of (1) the date such Senior Indebtedness Payment Default has been
waived in writing by the holders of the related Senior Indebtedness
Liabilities, (2) the date on which notice that such Senior Indebtedness
Payment Default shall have ceased to exist is given by any holder of the
related Senior Indebtedness Liabilities to the Company and the holders of
the Subordinated Indebtedness Liabilities, and (3) the date on which such
Senior Indebtedness Payment Default has been cured or shall have ceased to
exist. Upon the expiration of any period during which payments to the
holders of Subordinated Indebtedness Liabilities were withheld pursuant to
this paragraph (b), but subject to the provisions of paragraph (c) below,
the Company shall promptly make all payments to the holders of Subordinated
Indebtedness Liabilities so withheld.
-32-
<PAGE>
(c) Upon the happening of any Senior Indebtedness Material Covenant
Event of Default and the giving of written notice thereof by the Required
Lenders or an authorized agent of such Required Lenders to the holders of
the Subordinated Indebtedness Liabilities and to the Company in the manner
provided in (S)10.6 hereof (the date on which both such conditions have
been satisfied being herein referred to as a "Covenant Default Blockage
Commencement Date"), then the Company shall not be permitted to make and
the holders of the Subordinated Indebtedness Liabilities shall not be
entitled to receive any payment on account thereof during the period
beginning on the Covenant Default Blockage Commencement Date and ending
upon the earliest of (1) the date such Senior Indebtedness Material
Covenant Event of Default has been waived in writing by the Required
Lenders or by an authorized agent for the Required Lenders, (2) the date on
which notice that such Senior Indebtedness Material Covenant Event of
Default shall have ceased to exist is given by the Required Lenders or an
authorized agent of such Required Lenders to the Company and the holders of
the Subordinated Indebtedness Liabilities, and (3) the date on which such
Senior Indebtedness Material Covenant Event of Default has been cured;
provided, however, that (i) no more than two blockage periods under this
paragraph (c) may occur during any period of 365 consecutive days, (ii)
blockage periods under this paragraph (c) shall not be in effect in the
aggregate for more than 179 days during any period of 365 consecutive days,
and (iii) no facts or circumstances constituting a Senior Indebtedness
Material Covenant Event of Default existing on any Covenant Default
Blockage Commencement Date may be used as a basis for any subsequent
blockage period unless cured. Upon the expiration of any period during
which payments to the holders of Subordinated Indebtedness Liabilities were
withheld pursuant to this paragraph (c), but subject to the provisions of
paragraph (b) above, the Company shall promptly make all payments to the
holders of Subordinated Indebtedness Liabilities so withheld. It is
understood and agreed that if a blockage period under this paragraph (c) is
commenced in connection with a Senior Indebtedness Material Covenant Event
of Default resulting from the failure of the Company to deliver financial
statements, and upon the delivery of such financial statements, the
existence of a Senior Indebtedness Material Covenant Event of Default is
confirmed under Article VI of the Senior Credit Agreement, then the
blockage period commenced in connection with the failure to deliver
financial statements, coupled with a blockage period commenced promptly
following the confirmation of the Senior Indebtedness Material Covenant
Event of Default reflected in the such financial statements, shall
constitute a single blockage period for purposes of this paragraph (c).
(d) In reliance on and so long as the Company is in compliance with
the provisions of (S)5.30 hereof, no holder of Subordinated Indebtedness
Liabilities shall commence judicial enforcement of any of the rights and
remedies under this Agreement, the Notes or any other document or
instrument pertaining thereto, including, without limitation, the
initiation of any insolvency, bankruptcy, liquidation, readjustment,
reorganization or other similar proceedings relative to the Company or its
property or any Subsidiary, unless prior thereto a period of 90 days shall
have expired, which period shall have commenced on the earlier of (1) the
date on which such holder of Subordinated Indebtedness Liabilities shall
have provided the holders of Senior Indebtedness Liabilities (or, if the
holders of Senior Indebtedness Liabilities have an authorized agent, then
to
-33-
<PAGE>
such authorized agent) with written notice of the Event of Default giving
rise to any such remedy, suit or proceeding and (2) the date on which an
Event of Default arising under (S)7.1(a) or (b) shall have occurred;
provided, however, that the restrictions contained in this paragraph (d)
shall not apply with respect to the Company (i) to the extent necessary to
prevent the expiration of any applicable statute of limitations or similar
law, or (ii) after the earliest to occur of (x) the commencement of any
insolvency, bankruptcy, receivership, liquidation or reorganization
proceedings or arrangements relative to the Company or any Subsidiary
(other than any such proceeding or arrangement initiated by any holder of
Subordinated Indebtedness Liabilities), (y) the acceleration of all or any
portion of the Senior Indebtedness Liabilities or (z) the initiation by any
holder of Senior Indebtedness Liabilities of any suit, action or proceeding
in the nature of a foreclosure to enforce any rights, powers or remedies of
the holders of the Senior Indebtedness Liabilities with respect thereto.
(e) In the event that any holder of Subordinated Indebtedness
Liabilities shall obtain any cash or other assets of the Company, whether
by voluntary action of the Company, as a result of any administrative,
legal or equitable action, or otherwise, in violation of the provisions of
this Agreement, such holder of Subordinated Indebtedness Liabilities shall
pay, deliver and assign to, the holders of the Senior Indebtedness
Liabilities such cash or assets for application to the Senior Indebtedness
Liabilities within thirty Business Days of (1) in the case of any payment
received by the holders of Subordinated Indebtedness Liabilities when a
Senior Indebtedness Payment Default exists, if such holder of Subordinated
Indebtedness Liabilities is notified in writing of such fact by the holders
of the Senior Indebtedness Liabilities within 45 days of receipt of such
cash or other assets by such holder, and (2) in the case of any other
payment received in violation of this Agreement, if such holder of
Subordinated Indebtedness Liabilities is notified in writing of such fact
within 45 days of receipt by the holders of Senior Indebtedness Liabilities
of knowledge of the receipt by the holders of Subordinated Indebtedness
Liabilities of such cash or other assets.
(f) The Company will give prompt written notice to the holders of
Subordinated Indebtedness Liabilities of any default under any Senior
Indebtedness Liabilities and, in the event of any default, shall provide to
the holders of the Subordinated Indebtedness Liabilities the names and
addresses of the holders of the Senior Indebtedness Liabilities, and the
name and address of any agent acting on their behalf.
(g) The Company and the holders of Subordinated Indebtedness
Liabilities will not amend, supplement, alter, waive or otherwise modify
any of the terms or provisions of this Agreement, the Warrants or the Notes
without the prior written consent of the Senior Lenders if the effect or
result of any such amendment, supplement, alteration, waiver or other
modification is (1) to advance the date of any required prepayment or
repayment of any Subordinated Indebtedness Liabilities or any interest
payment related thereto, (2) to increase the interest rate or default rate
payable in connection with the Subordinated Indebtedness Liabilities, (3)
to increase the maximum principal amount of Subordinated Indebtedness
Liabilities (other than in connection with
-34-
<PAGE>
the capitalization of interest) or to add a put with respect to the Warrant
or Warrant Shares, (4) to make more restrictive any Event of Default or any
covenants contained therein or to add any Event of Default or covenant to
this Agreement as in effect on the Closing Date except changes which are
more restrictive to the same degree that corresponding changes are made to
the Senior Credit Agreement in accordance with (S)5.28(a) hereof, (5) to
amend any term or provision of Section 6 (or any definition used in Section
6) or (6) to change or amend any other term of this Agreement if such
change or amendment would result in a Default or an Event of Default under
the Senior Credit Agreement, increase the obligations of the Company or any
Subsidiary Guarantor or confer additional material rights on the holders of
Subordinated Indebtedness Liabilities in a manner materially adverse to the
Company, any such Subsidiary Guarantor or the holders of Senior
Indebtedness Liabilities.
No right of any present or future holder of any Senior Indebtedness
Liabilities of the Company to enforce subordination as herein provided shall at
any time or in any way be prejudiced or impaired by any failure to act on the
part of the holders of any Senior Indebtedness Liabilities or the Company, or by
any noncompliance by the Company with the terms, provisions and covenants of
this Agreement, regardless of any knowledge thereof that any such holder of
Senior Indebtedness Liabilities may have or be otherwise charged with.
The provisions hereof are solely for the purpose of defining the relative
rights of the holders of Senior Indebtedness Liabilities, on the one hand, and
the holders of the Subordinated Indebtedness Liabilities, on the other hand, and
nothing herein shall impair, as between the Company and the holders of the
Subordinated Indebtedness Liabilities, the obligation of the Company, which is
unconditional and absolute, to pay to the holders of the Subordinated
Indebtedness Liabilities the entire amount thereof in accordance with the terms
of the Notes and this Agreement, nor shall anything herein prevent the holder of
any Subordinated Indebtedness Liabilities from exercising all remedies otherwise
permitted by applicable law or under this Agreement or the Notes upon default
under this Agreement or the Notes, subject to the rights, if any, of holders of
Senior Indebtedness Liabilities as herein provided. In furtherance and not in
limitation of the foregoing provision, no provision of this Agreement shall
prevent or be deemed or construed to prevent any holder of Subordinated
Indebtedness Liabilities from accelerating the maturity thereof in accordance
with the provisions of (S)7.3 hereof.
Upon payment in full of the Senior Indebtedness Liabilities in cash or
other property acceptable to the holders of the Senior Indebtedness Liabilities
in their sole discretion, and in the event cash or other property otherwise
payable to the holders of Subordinated Indebtedness Liabilities shall have in
fact been applied pursuant to this Agreement to the Senior Indebtedness
Liabilities, then the holders of the Subordinated Indebtedness Liabilities shall
be subrogated to the rights of the holders of the Senior Indebtedness
Liabilities to receive payments or distributions of assets of the Company made
on or in respect of Senior Indebtedness Liabilities until all amounts
constituting Subordinated Indebtedness Liabilities and all other amounts payable
to the holders of the Subordinated Indebtedness Liabilities shall be paid in
full, and, for the purposes of such subrogation, no payments to the holders of
Senior Indebtedness Liabilities of any cash, property, stock or obligations to
which the holders of the Subordinated Indebtedness Liabilities would be entitled
shall, as between the Company, its creditors (other than the holders
-35-
<PAGE>
of Senior Indebtedness Liabilities) and the holders of the Subordinated
Indebtedness Liabilities, be deemed to be a payment by the Company to or on
account of Senior Indebtedness Liabilities.
In the event of any of the proceedings referred to in subparagraph (a)
above, if any holder of Subordinated Indebtedness Liabilities has not filed any
claim, proof of claim or other instrument of similar character necessary to
enforce the obligations of the Company in respect of the Subordinated
Indebtedness Liabilities held by such holder within 30 days before the
expiration of the time to file the same, then and in such event, but only in
such event, any holder of the Senior Indebtedness Liabilities may notify such
holder in the manner provided in (S)10.6 of such fact and that such holder of
the Senior Indebtedness Liabilities may, if such claim, proof of claim or other
instrument of similar character is not so filed by such holder of Subordinated
Indebtedness Liabilities at least 15 days before the expiration of the time to
file the same, as an attorney-in-fact for such holder of Subordinated
Indebtedness Liabilities, file any claim, proof of claim or such other
instrument of similar character on behalf of such holder of Subordinated
Indebtedness Liabilities. At any time within 10 days prior to the expiration of
the time to file such claim, proof of claim or other instrument, if such holder
of Subordinated Indebtedness Liabilities has not so filed the same, the holder
of the Senior Indebtedness Liabilities which has complied with the notice
provisions in the immediately preceding sentence may, then, as attorney-in-fact
for such holder of Subordinated Indebtedness Liabilities and at its sole
expense, file such claim, proof of claim or other instrument and such holder of
Subordinated Indebtedness Liabilities, by such holder's acceptance of such
holder's Notes, appoints such holder of the Senior Indebtedness Liabilities as
an attorney-in-fact for such holder of Subordinated Indebtedness Liabilities, to
so file any claim, proof of claim or such other instrument of similar character.
Notwithstanding the foregoing, the holder of Subordinated Indebtedness
Liabilities shall nevertheless retain all rights to enforce such claim, proof of
claim or other instrument in its capacity as the holder of such Subordinated
Indebtedness Liabilities.
By its acceptance of any Note, each holder of the Subordinated Debt
Liabilities evidenced thereby acknowledges and agrees that:
(i) the holders of Senior Indebtedness Liabilities have relied on
the terms and provisions of this Section 6 in executing and delivering the
Senior Credit Agreement and in making the extensions of credit contemplated
thereby and shall continue to rely on such terms and provisions in making
extensions of credit from time to time pursuant to the Senior Credit
Agreement, and the provisions of this Section 6 are for the benefit of and
may be enforced by the holders of the Senior Indebtedness Liabilities;
(ii) the holders of Subordinated Indebtedness Liabilities will not
amend the provisions of this (S)6 (or any definition used in this (S)6)
without the prior written consent of the Required Lenders; and
(iii) the holders of the Subordinated Indebtedness Liabilities will
not challenge the validity or enforceability of the subordination
provisions contained in this (S)6.
-36-
<PAGE>
Section 7. Events of Default and Remedies Therefor
Section 7.1. Events of Default. Any one or more of the following shall
constitute an "Event of Default" as such term is used herein:
(a) Default shall occur in the payment of interest on any Note when
the same shall have become due and such default shall continue for more
than five days; or
(b) Default shall occur in the making of any required prepayment on
any of the Notes as provided in (S)2.1; or
(c) Default shall occur in the making of any payment of the principal
of any Note or premium, if any, thereon at the expressed or any accelerated
maturity date or at any date fixed for prepayment; or
(d) Default shall occur in the observance or performance of any
covenant or agreement contained in (S)5.7 through (S)5.18; or
(e) Default shall occur in the observance or performance of any other
provision of this Agreement which is not remedied within 30 days after the
earlier of (1) the day on which a Responsible Officer of the Company first
obtains knowledge of such default, or (2) the day on which written notice
thereof is given to the Company by the holder of any Note; or
(f) Default or the happening of any event shall occur in the
observance or performance of any covenant or agreement under the Senior
Credit Agreement or any Senior Security Document and such default or event
shall have resulted in the acceleration of the maturity of the Indebtedness
of the Company outstanding thereunder; or
(g) Default shall be made in the payment when due (whether by lapse
of time, by declaration, by call for redemption or otherwise) of the
principal of or interest on any Indebtedness for borrowed money (other than
the Notes and other than Senior Indebtedness due and owing under the Senior
Credit Agreement, provision for which is made in clause (f) of this (S)7.1)
of the Company or any Subsidiary aggregating in excess of $1,000,000 and
such default shall continue beyond the period of grace, if any, allowed
with respect thereto; or
(h) Default or the happening of any event shall occur under any
indenture, agreement or other instrument under which any Indebtedness for
borrowed money (other than the Notes and other than Senior Indebtedness due
and owing under the Senior Credit Agreement, provision for which is made in
clause (f) of this (S)7.1) of the Company or any Subsidiary aggregating in
excess of $1,000,000 may be issued and such default or event shall continue
for a period of time sufficient to permit the acceleration of the maturity
of any Indebtedness for borrowed money of the Company or any Subsidiary
outstanding thereunder; or
-37-
<PAGE>
(i) Any representation or warranty made by the Company herein, or
made by the Company or any Subsidiary Guarantor in any statement or
certificate furnished by the Company or any Subsidiary Guarantor in
connection with the consummation of the issuance and delivery of the Notes,
the Warrants or the Subsidiary Guaranty Agreements or furnished by the
Company or any Subsidiary Guarantor pursuant hereto, is untrue in any
material respect as of the date of the issuance or making thereof; or
(j) Any Subsidiary Guaranty Agreement shall cease to be in full force
and effect for any reason, including without limitation a determination by
any governmental body or court that such agreement is invalid, void or
unenforceable, or any Subsidiary Guarantor shall contest or deny in writing
the validity or enforceability of any of its obligations under its
Subsidiary Guaranty Agreement; or
(k) (i) Final judgment or judgments, non-interlocutory orders,
decrees or arbitration awards for the payment of money aggregating in
excess of $500,000 (after excluding from such amount that portion thereof,
if any, covered by insurance for which the insurer has not denied its
liabilities in respect thereof) is or are outstanding against the Company
or any Subsidiary or against any property or assets of either and any one
of the same has remained unpaid, unvacated, unbonded or unstayed by appeal
or otherwise for a period of 30 days from the date of its entry, or (ii)
any non-monetary judgment, order or decree shall be rendered against the
Company or any of its Subsidiaries, or the Company or any of its
Subsidiaries shall lose export privileges, in any such instance which does
or would reasonably be expected to have a Material Adverse Effect, and
there shall be any period of 10 consecutive days during which a stay of
enforcement of such judgment, order or decree, by reason of a pending
appeal or otherwise, shall not be in effect; or
(l) A custodian, liquidator, trustee or receiver is appointed for the
Company or any Subsidiary or for the major part of the property of either
and is not discharged within 60 days after such appointment; or
(m) The Company or any Subsidiary becomes insolvent or bankrupt, is
generally not paying its debts as they become due or makes an assignment
for the benefit of creditors, or the Company or any Subsidiary applies for
or consents to the appointment of a custodian, liquidator, trustee or
receiver for the Company or such Subsidiary or for the major part of the
property of either; or
(n) Bankruptcy, reorganization, arrangement or insolvency
proceedings, or other proceedings for relief under any bankruptcy or
similar law or laws for the relief of debtors, are instituted by or against
the Company or any Subsidiary and, if instituted against the Company or any
Subsidiary, are consented to or are not dismissed within 60 days after such
institution.
Section 7.2. Notice to Holders. When any Event of Default described in the
foregoing (S)7.1 has occurred, or if the holder of any Note or of any other
evidence of Indebtedness for borrowed money of the Company gives any notice or
takes any other action with respect to a
-38-
<PAGE>
claimed default, the Company agrees to give notice within three Business Days of
such event to all holders of the Notes and the Warrants then outstanding.
Section 7.3. Acceleration of Maturities. When any Event of Default
described in paragraph (a), (b) or (c) of (S)7.1 has happened and is continuing,
any holder of any Note may, by notice in writing sent to the Company in the
manner provided in (S)10.6, declare the entire principal and all interest
accrued on such Note to be, and such Note shall thereupon become forthwith due
and payable, without any presentment, demand, protest or other notice of any
kind, all of which are hereby expressly waived. When any Event of Default
described in paragraphs (a) through (k), inclusive, of said (S)7.1 has happened
and is continuing, the holder or holders of 51% or more of the principal amount
of the Notes at the time outstanding may, by notice in writing to the Company in
the manner provided in (S)10.6, declare the entire principal and all interest
accrued on all Notes to be, and all Notes shall thereupon become, forthwith due
and payable, without any presentment, demand, protest or other notice of any
kind, all of which are hereby expressly waived. When any Event of Default
described in paragraph (l), (m) or (n) of (S)7.1 has occurred, then all
outstanding Notes shall immediately become due and payable without presentment,
demand or notice of any kind. Upon the Notes becoming due and payable as a
result of any Event of Default as aforesaid, the Company will forthwith pay to
the holders of the Notes the entire principal and interest accrued on the Notes
and, to the extent not prohibited by applicable law, an amount as liquidated
damages for the loss of the bargain evidenced hereby (and not as a penalty)
equal to 5% of the principal amount of the outstanding Notes. No course of
dealing on the part of the holder or holders of any Notes nor any delay or
failure on the part of any holder of Notes to exercise any right shall operate
as a waiver of such right or otherwise prejudice such holder's rights, powers
and remedies. The Company further agrees, to the extent permitted by law, to pay
to the holder or holders of the Notes all costs and expenses incurred by them in
the collection of any Notes upon any default hereunder or thereon, including
reasonable compensation to such holder's or holders' attorneys for all services
rendered in connection therewith.
Section 7.4. Rescission of Acceleration. The provisions of (S)7.3 are
subject to the condition that if the principal of and accrued interest on all or
any outstanding Notes have been declared immediately due and payable by reason
of the occurrence of any Event of Default described in paragraphs (a) through
(k), inclusive, of (S)7.1, the holders of 51% in aggregate principal amount of
the Notes then outstanding may, by written instrument filed with the Company,
rescind and annul such declaration and the consequences thereof, provided that
at the time such declaration is annulled and rescinded:
(a) no judgment or decree has been entered for the payment of
any monies due pursuant to the Notes or this Agreement;
(b) all arrears of interest upon all the Notes and all other
sums payable under the Notes and under this Agreement (except any
principal, interest or premium on the Notes which has become due and
payable solely by reason of such declaration under (S)7.3) shall have been
duly paid; and
-39-
<PAGE>
(c) each and every other Default and Event of Default shall have
been made good, cured or waived pursuant to (S)7.1;
and provided further, that no such rescission and annulment shall extend to or
affect any subsequent Default or Event of Default or impair any right consequent
thereto.
Section 8. Amendments, Waivers and Consents.
Section 8.1. Consent Required. Any term, covenant, agreement or condition
of this Agreement may, with the consent of the Company, be amended or compliance
therewith may be waived (either generally or in a particular instance and either
retroactively or prospectively), if the Company shall have obtained the consent
in writing of the holders of at least 51% in aggregate principal amount of
outstanding Notes; provided that without the written consent of the holders of
all of the Notes then outstanding, no such amendment or waiver shall be
effective (a) which will change the time or amount of any payment (including any
payment required by (S)2.1) of the principal of or the interest on any Note or
change the principal amount thereof or change the rate of interest thereon, or
(b) which will change any of the provisions with respect to optional
prepayments, or (c) which will change the percentage of holders of the Notes
required to consent to any such amendment or waiver of any of the provisions of
this (S)8 or (S)7.
Section 8.2. Solicitation of Holders. So long as there are any Notes
outstanding, the Company will not solicit, request or negotiate for or with
respect to any proposed waiver or amendment of any of the provisions of this
Agreement or the Notes unless each holder of Notes (irrespective of the amount
of Notes then owned by it) shall be informed thereof by the Company and shall be
afforded the opportunity of considering the same and shall be supplied by the
Company with sufficient information to enable it to make an informed decision
with respect thereto. The Company will not, directly or indirectly, pay or cause
to be paid any remuneration, whether by way of supplemental or additional
interest, fee or otherwise, to any holder of Notes as consideration for or as an
inducement to entering into by any holder of Notes or Warrants of any waiver or
amendment of any of the terms and provisions of this Agreement, the Notes or the
Warrants unless such remuneration is concurrently offered, on the same terms,
ratably to the holders of all Notes and Warrants then outstanding. Promptly and
in any event within 30 days of the date of execution and delivery of any such
waiver or amendment, the Company shall provide a true, correct and complete copy
thereof to each of the holders of the Notes and the Warrants.
Section 8.3. Effect of Amendment or Waiver. Any such amendment or waiver
shall apply equally to all of the holders of the Notes and shall be binding upon
them, upon each future holder of any Note and upon the Company, whether or not
such Note shall have been marked to indicate such amendment or waiver. No such
amendment or waiver shall extend to or affect any obligation not expressly
amended or waived or impair any right consequent thereon.
-40-
<PAGE>
Section 9. Interpretation of Agreement; Definitions.
Section 9.1. Definitions. Unless the context otherwise requires, the terms
hereinafter set forth when used herein shall have the following meanings and the
following definitions shall be equally applicable to both the singular and
plural forms of any of the terms herein defined:
"Acquiring Person" shall mean a "person" or "group of persons" within the
meaning of Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as
amended.
"Acquisition" shall mean any transaction or series of related transactions
for the purpose of or resulting, directly or indirectly, in (a) the acquisition
of all or substantially all of the assets of a Person, or of any business or
division of a Person, (b) the acquisition, of in excess of fifty percent (50%)
of the capital stock, partnership interests or equity of any Person or otherwise
causing any Person to become a Subsidiary of the Company, or (c) a merger or
consolidation or any other combination with another Person.
"Affiliate" shall mean any Person (other than a Subsidiary) (a) which
directly or indirectly through one or more intermediaries controls, or is
controlled by, or is under common control with, the Company, (b) which
beneficially owns or holds 5% or more of any class of the Voting Stock of the
Company or (c) 5% or more of the Voting Stock (or in the case of a Person which
is not a corporation, 5% or more of the equity interest) of which is
beneficially owned or held by the Company or a Subsidiary. The term "control"
means the possession, directly or indirectly, of the power to direct or cause
the direction of the management and policies of a Person, whether through the
ownership of Voting Stock, by contract or otherwise.
"Agent" shall mean the Agent of the Senior Lenders under the Senior Credit
Agreement and the Senior Security Documents.
"Agreement" shall mean this Note Agreement.
"Business Day" shall mean any day other than a Saturday, Sunday or other
day on which banks in New York, New York or Chicago, Illinois are required by
law to close or are customarily closed.
"Capital Expenditures" shall mean, for any period, the sum of all
expenditures made, directly or indirectly, by the Company and its Subsidiaries
during such period that have been or should be capitalized in accordance with
GAAP.
"Capital Lease" shall mean any leasing or similar arrangement which, in
accordance with GAAP, is classified as a capital lease.
"Capital Lease Obligations" shall mean all monetary obligations of the
Company or any of its Subsidiaries under any Capital Leases.
"Cash Equivalents" shall mean: (a) securities issued or fully guaranteed or
insured by the United States Government or any agency thereof having maturities
of not more than six (6)
-41-
<PAGE>
months from the date of acquisition; (b) certificates of deposit, time deposits,
repurchase agreements, reverse repurchase agreements, or bankers' acceptances,
having in each case a tenor of not more than six (6) months, issued by any
Senior Lender, or by any U.S. commercial bank or any branch or agency of a non-
U.S. bank licensed to conduct business in the U.S. having combined capital and
surplus of not less than $250,000,000; (c) commercial paper of an issuer rated
at least A-1 by Standard & Poor's Corporation or P-1 by Moody's Investors
Service Inc. and in either case having a tenor of not more than three (3)
months; (d) investments in money market mutual funds having assets in excess of
$1,000,000,000.00 or more substantially all of the assets of which are comprised
of securities of the types described in clauses (a) through (c) above.
"Cash Flow" shall mean, with respect to any period, (a) EBITDA of the
Company and its Subsidiaries for such period less (b) that portion of the
Capital Expenditures made by the Company and its Subsidiaries during such period
which are financed under Capital Leases or other Indebtedness incurred or
assumed by the Company or any Subsidiary (excluding Indebtedness consisting of
draws under the Company's revolving loan facility).
"Change of Control" shall mean the earliest date on which (a) prior to the
Initial Public Offering, Wind Point Partners ceases to maintain in the aggregate
a direct or indirect beneficial equity interest in the Company at least equal to
40% of the aggregate equity interests of the Company, or (b) subsequent to the
Initial Public Offering, Wind Point Partners ceases to maintain in the aggregate
a direct or indirect beneficial equity interest in the Company at least equal to
33% of the aggregate equity interests of the Company, (c) prior to the Initial
Public Offering, Wind Point Partners (i) fails to own beneficially, directly or
indirectly, capital stock representing voting control of the Company or (ii)
ceases to have the right, either through the ownership of voting securities or
by contract, to designate or approve a majority (or such greater percentage as
shall constitute control) of the members of the board of directors of the
Company, or (d) Wind Point Partners cease to have a cash equity investment in
the Company of at least $22,750,000, in each instance, in (a), (b), (c) and (d)
free and clear of all Liens, rights, options, warrants or other similar
agreements or understandings, other than Liens in favor of the Agent for the
benefit of the Agent and the Senior Lenders.
"Change of Control Delayed Prepayment Date" shall have the meaning assigned
thereto in (S)2.4(b)(1).
"Change of Control Prepayment Date" shall have the meaning assigned thereto
in (S)2.4(a).
"Closing Date" shall have the meaning specified in (S)1.6.
"Code" shall mean the Internal Revenue Code of 1986, as amended, and the
regulations from time to time promulgated thereunder.
"Common Stock" shall mean and include any class of capital stock of any
corporation now or hereafter authorized, the right of which to share in
distributions of either earnings or assets of such corporation is without limit
as to any amount or percentage.
-42-
<PAGE>
"Company" shall mean Worldwide Sports & Recreation, Inc., a Delaware
corporation, and any Person who succeeds to all, or substantially all, of the
assets and business of Worldwide Sports & Recreation, Inc.
"Company Notice" shall have the meaning assigned thereto in (S)2.4(a).
"Company Payout Letters" shall mean those certain letters dated the Closing
Date from The First National Bank of Chicago and Pexco Holdings, Inc., addressed
to the Company and the Purchaser setting forth in reasonable detail a
description of the unpaid principal amount of and accrued interest and all other
amounts, if any, due and owing to such Persons and otherwise in form and
substance satisfactory to the Purchaser and their special counsel.
"Consolidated Net Income" shall mean, for any period, net income (or loss)
for the applicable period of measurement of the Company and its Subsidiaries on
a consolidated basis determined in accordance with GAAP, but excluding: (a) the
income (or loss) of any Person which is not a Subsidiary of the Company, except
to the extent of the amount of dividends or other distributions actually paid to
the Company or any of its Subsidiaries in cash by such Person during such period
and the payment of dividends or similar distributions by that Subsidiary is not
at the time prohibited by operation of the terms of its charter or of any
agreement, instrument, judgment, decree, order, statute, rule or governmental
regulation applicable to that Subsidiary; (b) the income (or loss) of any Person
accrued prior to the date it becomes a Subsidiary of the Company or is merged
into or consolidated with the Company or any of its Subsidiaries or that
Person's assets are acquired by the Company or any of its Subsidiaries; (c) the
proceeds of any life insurance policy; (d) gains (but not losses) from the sale,
exchange, transfer or other disposition of Property or assets not in the
Ordinary Course of Business of the Company and its Subsidiaries, and relaxed tax
effects in accordance with GAAP; and (e) any other extraordinary or non-
recurring gains (but not losses) of the Company or its Subsidiaries, and related
tax effects in accordance with GAAP.
"Contingent Obligation" shall mean, as to any Person, any direct or
indirect liability, contingent or otherwise, of that Person: (i) with respect to
any indebtedness, lease, dividend or other obligation of another Person if the
primary purpose or intent of the Person incurring such liability, or the primary
effect thereof, is to provide assurance to the obligee of such liability that
such liability will be paid or discharged, or that any agreements relating
thereto will be complied with, or that the holders of such liability will be
protected (in whole or in part) against loss with respect thereto; (ii) with
respect to any letter of credit issued for the account of that Person or as to
which that Person is otherwise liable for reimbursement of drawings; (iii) under
any Hedging Contracts; (iv) to make take-or-pay or similar payments if required
regardless of nonperformance by any other party or parties to an agreement; or
(v) for the obligations of another through any agreement to purchase, repurchase
or otherwise acquire such obligation or any property constituting security
therefor, to provide funds for the payment or discharge of such obligation or to
maintain the solvency, financial condition or any balance sheet item or level of
income of another Person. The amount of any Contingent Obligation shall be equal
to the amount of the obligation so guaranteed or otherwise supported or, if not
a fixed and determined amount, the maximum amount so guaranteed or supported.
-43-
<PAGE>
"Contractual Obligations" shall mean, as to any Person, any provision of
any security issued by such Person or of any agreement, undertaking, contract,
indenture, mortgage, deed of trust or other instrument, document or agreement to
which such Person is a party or by which it or any of its property is bound.
"Controlled Group" shall mean the Company and all Persons (whether or not
incorporated) under common control or treated as a single employer with the
Company pursuant to Section 414(b), (c), (m) or (o) of the Code.
"Covenant Default Blockage Commencement Date" shall have the meaning
assigned thereto in (S)6(c).
"Default" shall mean any event or condition the occurrence of which would,
with the lapse of time or the giving of notice, or both, constitute an Event of
Default.
"EBITDA" shall mean, for any period, the sum of (a) Consolidated Net Income
of the Company and its Subsidiaries during such period plus (b) all amounts
deducted from Consolidated Net Income during such period for depreciation and
amortization, plus (c) Net Interest Expense deducted from Consolidated Net
Income for such period, plus (d) all provisions for accrued taxes on or measured
by income made by the Company and its Subsidiaries during such period, to the
extent deducted in the determination of Consolidated Net Income, plus (e) any
extraordinary losses or losses from discontinued operations for such period, to
the extent such losses reduce Consolidated Net Income for such period, plus (f)
all permitted management fees to Wind Point Investors, L.L.C. and/or Wind Point
Investors IV, L.P. during such period, to the extent deducted in the
determination of Consolidated Net Income, plus (g) legal fees paid in connection
with the Export Investigation and Related Claims (as defined in the WSR Merger
Documentation) during such period, to the extent deducted in the determination
of Consolidated Net Income, plus (h) a one time add-back not to exceed $900,000
in the aggregate for severance costs incurred in calendar year 1999, plus (i)
non-recurring out-of-pocket third party expenses incurred in connection with the
WSR Merger and related transactions, including consulting fees, investment
banking fees, accountants fees and legal fees paid during such period, to the
extent deducted in the determination of Consolidated Net Income, and minus (j)
all reimbursements received by the Company, including by way of set-off, through
indemnification or by insurance, of legal fees incurred by the Company in
connection with the Export Investigation and Related Claims, to the extent such
legal fees were included in the calculation of EBITDA for the then current year
or any prior period.
For purposes of (S)5.8, EBITDA for any month set forth below included
within any trailing twelve month period ending on or before June 30, 2000, shall
be deemed to equal the amount set forth below for such month:
<TABLE>
<CAPTION>
Month EBITDA
<S> <C>
June, 1999 $1,487,000
May, 1999 852,000
</TABLE>
-44-
<PAGE>
<TABLE>
<CAPTION>
Month EBITDA
<S> <C>
April, 1999 1,475,000
March, 1999 475,000
February, 1999 (167,000)
January, 1999 (113,000)
December, 1998 1,609,000
November, 1998 1,583,000
October, 1998 3,203,000
September, 1998 2,956,000
August, 1998 2,577,000
</TABLE>
"Environmental Claims" shall mean all claims, however asserted, by any
Governmental Authority or other Person alleging potential liability or
responsibility for violation of any Environmental Law, or for release or injury
to the environment or threat to public health, personal injury (including
sickness, disease or death), property damage, natural resources damage, or
otherwise alleging liability or responsibility for damages (punitive or
otherwise), cleanup, removal, remedial or response costs, restitution, civil or
criminal penalties, injunctive relief, or other type of relief, resulting from
or based upon the presence, placement, discharge, emission or release (including
intentional and unintentional, negligent and non-negligent, sudden or non-
sudden, accidental or non-accidental, placement, spills, leaks, discharges,
emissions or releases) of any Hazardous Substance at, in, or from property,
whether or not owned by the Company.
"Environmental Law" shall mean any international, federal, state or local
statute, law, regulation, order, consent decree, judgment, permit, license,
code, covenant, deed restriction, common law, treaty, convention, ordinance or
other requirement relating to public health, safety or the environment,
including, without limitation, those relating to releases, discharges or
emissions to air, water, land or groundwater, to the withdrawal or use of
groundwater, to the use and handling of polychlorinated biphenyls or asbestos,
to the disposal, treatment, storage or management of hazardous or solid waste,
or Hazardous Substances or crude oil, or any fraction thereof, or to exposure to
toxic or hazardous materials, to the handling, transportation, discharge or
release of gaseous or liquid Hazardous Substances and any regulation, order,
notice or demand issued pursuant to such law, statute or ordinance, in each case
applicable to the property of the Company and its Subsidiaries or the operation,
construction or modification of any thereof, including without limitation, the
following: the Comprehensive Environmental Response, Compensation and Liability
Act of 1980, as amended by the Superfund Amendments and Reauthorization Act of
1986, the Solid Waste Disposal Act, as amended by the Resource Conservation and
Recovery Act of 1976 and the Hazardous and Solid Waste Amendments of 1984, the
Hazardous Materials Transportation Act, as amended, the Federal Water Pollution
Control Act, as amended by the Clean Water Act of 1976, the Safe Drinking Water
Control Act,
-45-
<PAGE>
the Clean Air Act of 1966, as amended, the Toxic Substances Control Act of 1976,
the Emergency Planning and Community Right-to-Know Act of 1986, the National
Environmental Policy Act of 1975, the Oil Pollution Act of 1990 and any similar
or implementing state law, and any state statute and any further amendments to
these laws providing for financial responsibility for cleanup or other actions
with respect to the release or threatened release of Hazardous Substances or
crude oil, or any fraction thereof, and all rules, regulations, guidance
documents and publications promulgated thereunder.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended, and any successor statute of similar import, together with the
regulations thereunder, in each case as in effect from time to time. References
to sections of ERISA shall be construed to also refer to any successor sections.
"ERISA Affiliate" shall mean any corporation, trade or business that is,
along with the Company, a member of a controlled group of corporations or a
controlled group of trades or businesses, as described in Section 414(b) and
414(c), respectively, of the Code or Section 4001 of ERISA.
"ERISA Event" shall mean (a) a Reportable Event with respect to a Qualified
Plan or a Multiemployer Plan; (b) a withdrawal by the Company or any ERISA
Affiliate from a Qualified Plan subject to Section 4063 of ERISA during a plan
year in which it was a substantial employer (as defined in Section 4001(a)(2) of
ERISA); (c) a complete or partial withdrawal by the Company or any ERISA
Affiliate from a Multiemployer Plan; (d) the filing of a notice of intent to
terminate, the treatment of a plan amendment as a termination under Section 4041
or 4041A of ERISA or the commencement of proceedings by the PBGC to terminate a
Qualified Plan or Multiemployer Plan subject to Title IV of ERISA; (e) a failure
by the Company or any member of the Controlled Group to make required
contributions to a Qualified Plan or Multiemployer Plan; (f) an event or
condition which might reasonably be expected to constitute grounds under Section
4042 of ERISA for the termination of, or the appointment of a trustee to
administer, any Qualified Plan or Multiemployer Plan; (g) the imposition of any
liability under Title IV of ERISA, other than PBGC premiums due but not
delinquent under Section 4007 of ERISA, upon the Company or any ERISA Affiliate;
(h) an application for a funding waiver or an extension of any amortization
period pursuant to Section 412 of the Code with respect to any Plan; (i) a non-
exempt prohibited transaction occurs with respect to any Plan for which the
Company or any Subsidiary of the Company may be directly or indirectly liable;
or (j) a violation of the applicable requirements of Section 404 or 405 of ERISA
or the exclusive benefit rule under Section 401(a) of the Code by any fiduciary
or disqualified person with respect to any Plan for which the Company or any
member of the Controlled Group may be directly or indirectly liable.
"Event of Default" shall have the meaning set forth in (S)7.1.
"Fixed Charges" shall mean, with respect to any period, the sum of (a) Net
Interest Expense for such period, (b) scheduled principal payments of
Indebtedness of the Company and its Subsidiaries for such period, (c) taxes paid
in cash by the Company and its Subsidiaries during such period, (d) dividends
paid in cash by the Company and its Subsidiaries during such period in respect
of capital stock of any class of the Company or any Subsidiary, (e) management
-46-
<PAGE>
fees paid in cash during such period, and (f) other Restricted Payments paid in
cash during such period.
"Fiscal Year" shall mean a fiscal year of the Company and its Subsidiaries
ending on December 31 of each calendar year.
"GAAP" shall mean generally accepted accounting principles at the time.
"Governmental Authority" shall mean any nation or government, any state or
other political subdivision thereof, any central bank (or similar monetary or
regulatory authority) thereof, any entity exercising executive, legislative,
judicial, regulatory or administrative functions of or pertaining to government,
and any corporation or other entity owned or controlled, through stock or
capital ownership or otherwise, by any of the foregoing.
"Guaranties" by any Person shall mean all obligations (other than
endorsements in the ordinary course of business of negotiable instruments for
deposit or collection) of such Person guaranteeing, or in effect guaranteeing,
any Indebtedness, dividend or other obligation of any other Person (the "primary
obligor") in any manner, whether directly or indirectly, including, without
limitation, all obligations incurred through an agreement, contingent or
otherwise, by such Person: (a) to purchase such Indebtedness or obligation or
any property or assets constituting security therefor, (b) to advance or supply
funds (1) for the purchase or payment of such Indebtedness or obligation, or (2)
to maintain working capital or any balance sheet or income statement condition
or otherwise to advance or make available funds for the purchase or payment of
such Indebtedness or obligation, (c) to lease property or to purchase Securities
or other property or services primarily for the purpose of assuring the owner of
such Indebtedness or obligation of the ability of the primary obligor to make
payment of the Indebtedness or obligation, or (d) otherwise to assure the owner
of the Indebtedness or obligation of the primary obligor against loss in respect
thereof. For the purposes of all computations made under this Agreement, a
Guaranty in respect of any Indebtedness for borrowed money shall be deemed to be
Indebtedness equal to the principal amount of such Indebtedness for borrowed
money which has been guaranteed, and a Guaranty in respect of any other
obligation or liability or any dividend shall be deemed to be Indebtedness equal
to the maximum aggregate amount of such obligation, liability or dividend.
"Hazardous Substance" shall mean any hazardous or toxic material, substance
or waste, pollutant or contaminant which is regulated under any statute, law,
ordinance, rule or regulation of any local, state, regional or federal authority
having jurisdiction over the property of the Company and its Subsidiaries or its
use, including but not limited to any material, substance or waste which is: (a)
defined as a hazardous substance under Section 311 of the Federal Water
Pollution Control Act (33 U.S.C. (S)1317), as amended; (b) regulated as a
hazardous waste under Section 1004 or Section 3001 of the Federal Solid Waste
Disposal Act, as amended by the Resource Conservation and Recovery Act (42
U.S.C. (S)6901 et seq.), as amended; (c) defined as a hazardous substance under
Section 101 of the Comprehensive Environmental Response, Compensation and
Liability Act (42 U.S.C. (S)9601 et seq.), as amended; or (d) defined or
regulated as a hazardous substance or hazardous waste under any rules or
regulations promulgated under any of the foregoing statutes.
-47-
<PAGE>
"Hedging Contracts" shall mean interest rate swap, exchange or cap
agreements or other similar agreements, the principal purpose of which is to
provide the Company or any of its Subsidiaries, as the case may be, with
protection against the fluctuation of interest rates.
"Indebtedness" of any Person shall mean, without duplication: (a) all
indebtedness for borrowed money; (b) all obligations issued, undertaken or
assumed as the deferred purchase price of property or services (other than trade
payables entered into in the Ordinary Course of Business); (c) all reimbursement
or payment obligations with respect to letters of credit, surety bonds and other
similar instruments; (d) all obligations evidenced by notes, bonds, debentures
or similar instruments, including obligations so evidenced incurred in
connection with the acquisition of property, assets or businesses; (e) all
indebtedness created or arising under any conditional sale or other title
retention agreement, or incurred as financing, in either case with respect to
Property acquired by the Person (even though the rights and remedies of the
seller or bank under such agreement in the event of default are limited to
repossession or sale of such property); (f) all Capital Lease Obligations; (g)
all indebtedness referred to in clauses (a) through (f) above secured by (or for
which the holder of such Indebtedness has an existing right, contingent or
otherwise, to be secured by) any Lien upon or in Property (including accounts
and contracts rights) owned by such Person, even though such Person has not
assumed or become liable for the payment of such indebtedness; and (h) all
Contingent Obligations described in clause (i) of the definition thereof in
respect of indebtedness or obligations of others of the kinds referred to in
clauses (a) through (g) above.
"Initial Public Offering" shall mean the first issuance of shares of Common
Stock by the Company in which the Company receives no less than $35,000,000 of
gross proceeds pursuant to a public distribution in which the Common Stock of
the Company shall be listed and traded on a national or regional exchange or on
the NASDAQ National Market System.
"Institutional Holder" shall mean any of the following Persons: (a) any
bank, savings and loan association, savings institution, trust company or
national banking association, acting for its own account or in a fiduciary
capacity, (b) any charitable foundation, (c) any insurance company, (d) any
fraternal benefit society, (e) any pension, retirement or profit-sharing trust
or fund within the meaning of Title I of ERISA or for which any bank, trust
company, national banking association or investment adviser registered under the
Investment Advisers Act of 1940, as amended, is acting as trustee or agent, (f)
any investment company or business development company, as defined in the
Investment Company Act of 1940, as amended, (g) any small business investment
company licensed under the Small Business Investment Act of 1958, as amended,
(h) any broker or dealer registered under the Securities Exchange Act of 1934,
as amended, or any investment adviser registered under the Investment Advisers
Act of 1940, as amended, (i) any government, any public employees' pension or
retirement system, or any other government agency supervising the investment of
public funds, (j) any other entity all of the equity owners of which are
Institutional Holders or (k) any other Person which may be within the definition
of "qualified institutional buyer" as such term is used in Rule 144A, as from
time to time in effect, promulgated under the Securities Act of 1933, as
amended.
"Investments" shall have the meaning specified in (S)5.15.
-48-
<PAGE>
"Junior Subordinated Indebtedness" means the Seller Junior Subordinated
Note and all other Indebtedness of the Company or any of its Subsidiaries which
is subordinated in right of payment to the Notes.
"Lien" shall mean any interest in property securing an obligation owed to,
or a claim by, a Person other than the owner of the property, whether such
interest is based on the common law, statute or contract, and including but not
limited to the security interest lien arising from a mortgage, encumbrance,
pledge, conditional sale or trust receipt or a lease, consignment or bailment
for security purposes. The term "Lien" shall include reservations, exceptions,
encroachments, easements, rights-of-way, covenants, conditions, restrictions,
leases and other title exceptions and encumbrances (including, with respect to
stock, stockholder agreements, voting trust agreements, buy-back agreements and
all similar arrangements) affecting property. For the purposes of this
Agreement, the Company or a Subsidiary shall be deemed to be the owner of any
property which it has acquired or holds subject to a conditional sale agreement,
Capital Lease or other arrangement pursuant to which title to the property has
been retained by or vested in some other Person for security purposes and such
retention or vesting shall constitute a Lien.
"Liquid Change of Control" shall mean a Change of Control in connection
with which all Notes, Warrants and Warrant Shares are in fact prepaid and/or
purchased from the holders thereof.
"Liquid Public Offering" shall mean an Initial Public Offering pursuant to
which the Warrants are permitted to be converted into Warrant Shares and with
respect to which either (a) no restriction or limitation (such as a lock-up or
hold-back or other similar requirement of the Company or the underwriter) is
imposed or other restriction exists which prevents the holders of the Warrants
and/or Warrant Shares from selling any of the Warrant Shares into the public
market or (b) a lock-up or hold-back or other restriction is imposed or exists
for a period of 180 days or less on the holders of the Warrants and/or Warrant
Shares with respect to sales of the Warrant Shares and, in connection therewith,
the Company complies with the requirements of (S)2.2(c). Any Initial Public
Offering pursuant to which a lock-up or hold-back or other restriction is
imposed or exists for a period of more than 180 days on the holders of the
Warrants and/or Warrant Shares with respect to sales of the Warrant Shares shall
not be an event constituting a "Liquid Public Offering."
"Liquidity Event" shall mean either (a) a Liquid Public Offering or (b) a
Liquid Change of Control.
"Material Adverse Effect" shall mean (a) a material adverse change in, or a
material adverse effect upon, the operations, business, properties or financial
condition of the Company or the Company and its Subsidiaries taken as a whole;
(b) a material impairment of the ability of the Company or any of its
Subsidiaries to perform in any material respect its obligations under any Note
Document and avoid any Event of Default; or (c) a material adverse effect upon
the legality, validity, binding effect or enforceability of any Note Document.
-49-
<PAGE>
"Minority Interests" shall mean any shares of stock of any class of a
Subsidiary (other than directors' qualifying shares as required by law) that are
not owned by the Company and/or one or more of its Subsidiaries. Minority
Interests shall be valued by valuing Minority Interests constituting preferred
stock at the voluntary or involuntary liquidating value of such preferred stock,
whichever is greater, and by valuing Minority Interests constituting common
stock at the book value of capital and surplus applicable thereto adjusted, if
necessary, to reflect any changes from the book value of such common stock
required by the foregoing method of valuing Minority Interests in preferred
stock.
"Multiemployer Plan" shall have the same meaning as in ERISA.
"Net Interest Expense" shall mean, with respect to any period, (a) gross
interest expense in respect of Indebtedness of the Company and its Subsidiaries
required to be paid in cash during such period (including unused line fees, all
commissions, discounts, fees and other charges in connection with standby
letters of credit and similar instruments) determined on a consolidated basis,
less (b) interest income earned by the Company and its Subsidiaries during such
period.
"NML" shall mean The Northwestern Mutual Life Insurance Company.
"Noteholder Notice" shall have the meaning assigned thereto in (S)2.4(a).
"Note Documents" shall mean this Agreement, the Notes, the Warrants, the
Subsidiary Guaranty Agreements, the Stockholders Agreement, the Registration
Rights Agreement and all documents delivered to the holders of the Notes in
connection therewith.
"Notes" shall have the meaning assigned thereto in (S)1.1.
"Ordinary Course of Business" shall mean, in respect of any transaction
involving the Company or any Subsidiary of the Company, the ordinary course of
such Person's business, as conducted by any such Person in accordance with past
practice and undertaken by such Person in good faith and not for purposes of
evading any covenant or restriction in any Note Document.
"Overdue Rate" shall mean the lesser of (a) the maximum interest rate
permitted by law and (b) the greater of (1) 14% per annum and (2) the rate which
Morgan Guaranty Trust Company of New York, New York, announces from time to time
as its prime lending rate as in effect from time to time, plus 2%.
"PBGC" shall mean the Pension Benefit Guaranty Corporation and any entity
succeeding to any or all of its functions under ERISA.
"Permitted Liens" shall have the meaning specified in (S)5.12.
"Person" shall mean an individual, partnership, limited liability company,
corporation, trust or unincorporated organization, and a government or agency or
political subdivision thereof.
-50-
<PAGE>
"Plan" shall mean a "pension plan," as such term is defined in ERISA,
established or maintained by the Company or any ERISA Affiliate or as to which
the Company or any ERISA Affiliate contributed or is a member or otherwise may
have any liability.
"Preferred Stock" shall mean in respect of any corporation, shares of the
capital stock of such corporation which are entitled to preference or priority
over any other shares of the capital stock of such corporation in respect of
payment of dividends or distribution of assets upon liquidation.
"Prepayment Compensation Amount" shall mean, with respect to the principal
amount of Notes to which a Prepayment Compensation Amount is required to be
paid, an amount equal to the then applicable percentage set out below of the
principal amount of the Notes or portion thereof then being prepaid:
<TABLE>
<CAPTION>
If Prepayment Is Due
During the 12-Month Period Percentage of
Ending August 5 Principal Amount
<S> <C>
2000 5.0%
2001 4.0%
2002 3.0%
2003 2.0%
2004 1.0%
2005 and thereafter None.
</TABLE>
"Property" shall mean any interest in any kind of property or asset,
whether real, personal or mixed, and whether tangible or intangible.
"Purchaser" shall have the meaning set forth in (S)1.1.
"Qualified Plan" shall mean a pension plan (as defined in Section 3(2) of
ERISA) intended to be tax-qualified under Section 401(a) of the Code and which
any member of the Controlled Group sponsors, maintains, or to which it makes, is
making or is obligated to make contributions, or in the case of a multiple
employer plan (as described in Section 4064(a) of ERISA) has made contributions
at any time during the immediately preceding period covering at least five (5)
plan years, but excluding any Multiemployer Plan.
"Realizable IRR" shall mean, at any time in connection with a Liquid Public
Offering in which the holders of the Warrants and/or Warrant Shares elect not to
sell such Warrants or Warrant Shares in connection therewith, that internal rate
of return in respect of the Notes, the Warrants and the Warrant Shares at such
time, calculated in accordance with generally accepted financial practice, such
calculation to be made based on the following assumptions:
(i) the entire outstanding principal of all the Notes is paid in
full at par, together with accrued interest thereon, on the date fixed for
prepayment pursuant to (S)2.3(a);
-51-
<PAGE>
(ii) the holders of the Notes and the Warrant Shares at such time
purchased their Notes or Warrant Shares, or both, on the Closing Date;
(iii) all Warrants (whether or not previously exercised) are
exercised immediately prior to the occurrence of the Initial Public
Offering, and that the holders thereof paid the exercise price therefor;
and
(iv) all Warrant Shares (whether or not previously sold) are sold
immediately upon the occurrence of the Initial Public Offering for cash at
the price (net of discounts and commissions) which would have been actually
received by the Holders of the Warrant Shares in connection with the
Initial Public Offering, and the proceeds of such sale are received by the
holders of the Notes and included in the determination of such internal
rate of return.
"Realized IRR" shall mean, at any time in connection with either (x) a
Liquid Change of Control or (y) a Liquid Public Offering in which the holders of
the Warrants and/or Warrant Shares do, in fact, sell such Warrants and Warrant
Shares in connection therewith, that actual internal rate of return realized in
respect of the Notes, the Warrants and the Warrant Shares, calculated in
accordance with generally accepted financial practice, such calculation to be
made based on the following assumptions:
(i) the actual payment of all the Notes (whether or not the holders
of all such Notes actually accept the offered prepayment in respect of such
Liquid Change of Control) at par, together with accrued interest thereon,
on the date fixed for prepayment pursuant to (S)2.3(a), (S)2.4(a) or
(S)2.4(b);
(ii) the holders of the Notes and Warrant Shares at such time
purchased their Notes or Warrant Shares, or both, on the Closing Date;
(iii) the Warrants actually exercised prior to the date fixed for
prepayment were exercised, and payment of the purchase price therefor made,
on the actual date(s) of exercise thereof;
(iv) any Warrant Shares actually sold prior to the date fixed for
prepayment were sold on the actual date of sale thereof, that the return in
respect of such Warrant Shares was equal to the price actually received by
the holders of Warrant Shares in connection with such sales (net of
discounts and commissions), and that the return was received on the date(s)
actually received by the holders of the Warrant Shares; and
(v) all Warrant Shares not actually previously sold are sold on the
date fixed for prepayment at the actual price in connection with such sale
(net of discounts and commissions), and the purchase price is received by
the holders of the Warrant Shares on such date.
-52-
<PAGE>
The calculation of Realizable IRR shall take into account the amount and timing
of partial prepayments (and the payment of any related Prepayment Compensation
Amounts made in connection with any partial prepayment) made prior to any such
calculation.
"Reportable Event" shall have the same meaning as in ERISA.
"Required Holders" shall mean the holders of 51% of the principal amount of
the Notes outstanding at the time of determination.
"Required Lenders" shall have the meaning set forth in the Senior Credit
Agreement from time to time.
"Requirement of Law" shall mean, as to any Person, any law (statutory or
common), ordinance, treaty, rule, regulation, order, policy, other legal
requirement or determination of an arbitrator or of a Governmental Authority, in
each case applicable to or binding upon the Person or any of its property or to
which the Person or any of its property is subject.
"Responsible Officer" shall mean the chief executive officer or the
president of the Company, or any other officer having substantially the same
authority and responsibility; or, with respect to compliance with financial
covenants or delivery of financial information, the chief financial officer or
the treasurer of the Company, or any other officer having substantially the same
authority and responsibility.
"Restricted Payments" shall have the meaning specified in (S)5.18.
"Security" shall have the same meaning as in Section 2(1) of the Securities
Act of 1933, as amended.
"Seller Junior Subordinated Note" shall mean that certain 9% Subordinated
Promissory Note of the Company dated the Closing Date, issued to Excorp Holdings
Limited in the aggregate principal amount of $5,000,000, as such amount shall be
increased due to accrued interest.
"Senior Credit Agreement" shall mean that certain Credit Agreement dated as
of August 5, 1999 by and among the Company, Antares Capital Corporation, as a
lender and as Agent for all lenders, and the other financial institutions party
thereto from time to time, as in effect on the Closing Date, or as amended,
supplemented, refinanced or replaced from time to time in accordance with the
terms of this Agreement, including, without limitation, the terms of (S)5.28.
"Senior Indebtedness Liabilities" shall mean (a) the principal amount of
all Indebtedness of the Company existing under the Senior Credit Agreement, (b)
commitment fees, letter of credit participation fees, premium or break costs, if
any, due and owing in respect of said Indebtedness, (c) interest due and owing
in respect of said Indebtedness (including, without limitation, any such
interest accruing subsequent to the filing by or against the Company of any
proceeding brought under the Bankruptcy Act of 1978, as amended, but only to the
extent that
-53-
<PAGE>
such interest is allowed as a claim pursuant to the provisions of said Act), (d)
all other claims for reimbursements, expenses and out-of-pocket expenses
incurred as a result of the protection of collateral or the enforcement of the
Senior Credit Agreement and the Senior Security Documents in an amount up to but
not exceeding $750,000 at any time outstanding (and not previously reimbursed by
operation of Section 6 hereof) and (e) all amounts payable under any guaranties,
howsoever arising, by the Company or any of its Subsidiaries of amounts
described in clauses (a) through (d), above; provided, however, that the
aggregate amount of the principal included in Senior Indebtedness Liabilities
shall not at any time exceed an amount equal to the Maximum Senior Principal
Amount minus the cumulative aggregate amount of all permanent reductions in the
maximum commitment amount in respect of any revolving credit, working capital,
letter of credit, term loan or similar credit facility under which Senior
Indebtedness Liabilities shall be outstanding. As used herein, the term "Maximum
Senior Principal Amount" shall mean $96,600,000.
"Senior Indebtedness Material Covenant Event of Default" shall mean any
default by the Company under (a) Section 7.1(a), (b) Section 4.1(b) for the
months of October 1999, January 2000, April 2000 and the last month of each
calendar quarter thereafter, (c) Section 4.2(b) or (d) Article VI, in each case,
of the Senior Credit Agreement, as from time to time amended or supplemented as
and to the extent permitted under this Agreement, other than a Senior
Indebtedness Payment Default.
"Senior Indebtedness Payment Default" shall mean any default by the Company
to make any payment or mandatory prepayment of principal or interest with
respect to any Senior Indebtedness Liabilities.
"Senior Lenders" shall mean each financial institution which from time to
time is a lender under the Senior Credit Agreement.
"Senior Security Documents" shall mean (a) all agreements, instruments or
documents pursuant to which any real or personal property and/or interests in
property owned by the Company are or shall be subjected to Liens securing Senior
Indebtedness Liabilities, and (b) all Guaranties of Subsidiaries given in favor
of the Senior Lenders, all as provided in the Senior Credit Agreement.
"Stock Purchase Agreement" shall mean that certain Purchase Agreement dated
as of August 5, 1999 among the Company, Wind Point Partners and certain other
purchasers pursuant to which the Company shall sell to such purchasers the
Company's Series A Preferred Stock and Common Stock.
"Stockholders Agreement" shall mean that certain Stockholders Agreement
dated as of August 5, 1999 among the Company, Wind Point Partners, Excorp
Holdings Limited, B. Joseph Messner, The Northwestern Mutual Life Insurance
Company and Antares Capital Corporation.
"Strip Equity" shall have the meaning assigned therein in (S)1.3.
-54-
<PAGE>
"Subordinated Indebtedness Liabilities" shall mean (a) the principal amount
of all Indebtedness of the Company owing in respect of the Notes, (b) premium,
if any, due and owing in respect of said Indebtedness, (c) interest due and
owing in respect of said Indebtedness, (d) all other amounts from time to time
owing to the holders of the Notes and Warrants pursuant to this Agreement, the
Warrants or the Notes, and (e) all amounts payable under any guaranties,
howsoever arising, by the Company of amounts described in clauses (a) through
(d), above; provided, however, that "Subordinated Indebtedness Liabilities"
shall not include any costs or expenses incurred by any holder of the Notes, or
any agent or advisor acting on behalf of any holder of the Notes, in connection
with the collection of any amounts payable in respect of the Notes upon the
occurrence of any Default or Event of Default or thereon, including, without
limitation, all fees and disbursements of counsel representing any holder of the
Notes or any such agent or advisor.
The term "subsidiary" shall mean as to any particular parent corporation
any corporation of which more than 50% (by number of votes) of the Voting Stock
shall be beneficially owned, directly or indirectly, by such parent corporation.
The term "Subsidiary" shall mean a subsidiary of the Company.
"Subsidiary Guarantors" shall mean, collectively, Bushnell Corporation, a
Delaware corporation, Old WSR, Inc., a Delaware corporation, Bushnell
Corporation of Canada, a corporation organized under the laws of the Province of
Ontario, Canada, Voit Corporation, a New York corporation, Voit Sports, Inc., a
New York corporation, and each other Subsidiary which becomes a party to a
Subsidiary Guaranty Agreement pursuant to (S)5.27 hereof.
"Subsidiary Guaranty Agreements" shall have the meaning assigned thereto in
(S)1.5.
"Target IRR" shall mean, as of any date set forth in the chart below, the
internal rate of return calculated in accordance with generally accepted
financial practice, set forth in the chart corresponding to such date:
If Target IRR Calculation is
Made During the 12-Month Target IRR (from Closing Date to
Period Ending August 5 the Date of Such Calculation)
2000 25.0%
2001 22.0%
2002 20.0%
2003 20.0%
2004 17.0%
"Total Indebtedness" shall mean, as of the date of any measurement, the sum
of (a) the average revolving loan balance outstanding under the Senior Credit
Agreement as of the last day of each of the 12 calendar months ended on and
prior to the date of measurement, (b) the outstanding principal amount of the
term loans outstanding under the Senior Credit Agreement as of the date of
measurement, (c) the principal portion of Capital Lease Obligations and
Indebtedness secured by purchase money Liens as of the date of measurement, (d)
Indebtedness evidenced by the Notes as of the date of measurement, (e) Junior
Subordinated Indebtedness
-55-
<PAGE>
evidenced by the Seller Junior Subordinated Notes as of the date of measurement
and (f) all other Indebtedness of the Company and its Subsidiaries as of the
date of measurement.
Notwithstanding the foregoing, the first year after the Closing Date, the
average revolving balance outstanding under the Senior Credit Agreement shall be
calculated using average month-end balances for a 12 month period based upon a
combination of actual month-end balances plus proforma balances for each
successive month necessary to compute a 12 month average. Accordingly, with
respect to the calculation pursuant to clause (a) above of the average revolving
loan balance outstanding under the Senior Credit Agreement as of October 31,
1999, January 31, 2000, April 30, 2000 and June 30, 2000, such average shall be
calculated using (a) the actual revolving loan balance outstanding under the
Senior Credit Agreement as of the last day of each calendar month, commencing
August 31, 1999, through and including the last day of the most recent calendar
month, and (b) the applicable Proforma Revolving Loan Balance set forth below
for the immediately succeeding months necessary to compute a 12 month average.
For example, the average revolving loan balance as of January 31, 2000 shall be
calculated using actual revolving loan balances outstanding under the Senior
Credit Agreement as of August 31, 1999, September 30, 1999, October 31, 1999,
November 30, 1999, December 31, 1999 and January 31, 2000 and Proforma Revolving
Loan Balances (as set forth below) for February 29, 2000, March 31, 2000, April
30, 2000, May 31, 2000, June 30, 2000 and July 31, 2000.
Month Proforma Revolving
Loan Balance
November 30, 1999 $19,024,000
December 31, 1999 $10,360,000
January 31, 2000 $ 4,602,000
February 29, 2000 $ 3,590,000
March 31, 2000 $ 5,864,000
April 30, 2000 $ 7,806,000
May 31, 2000 $10,227,000
June 30, 2000 $15,241,000
July 31, 2000 $18,457,000
"Valuation Agent" shall mean any firm of independent certified public
accountants, an investment banking firm or appraisal firm (which firm shall own
no Securities of, and shall not be an Affiliate, Subsidiary or related Person
of, the Company) of recognized national standing retained by the Company and
reasonably acceptable to the holders of the Notes, and whose fees and
disbursements shall be borne by the holders of the Notes unless the Realizable
IRR determined by the Valuation Agent is less than 95% of the Realizable IRR
determined by the Company, in which event such fees and disbursements shall be
borne by the Company.
-56-
<PAGE>
"Voting Stock" shall mean Securities of any class or classes, the holders
of which are ordinarily, in the absence of contingencies, entitled to elect a
majority of the corporate directors (or Persons performing similar functions).
"Warrant Shares" shall mean all shares of Common Stock of the Company
issuable upon exercise of any of the Warrants.
"Warrants" shall have the meaning set forth in (S)1.2.
"Wholly-owned" when used in connection with any Subsidiary shall mean a
Subsidiary of which all of the issued and outstanding shares of stock (except
shares required as directors' qualifying shares) and all Indebtedness for
borrowed money shall be owned by the Company and/or one or more of its Wholly-
owned Subsidiaries.
"Wind Point Partners" shall mean, collectively, Wind Point Partners III,
L.P., Wind Point Partners IV, L.P., Wind Point IV Executive Advisors L.P., Wind
Point Investors L.L.C., Wind Point Partners IV, L.P., and Wind Point III
Executive Advisors Partners, L.P.
"WSR Merger" shall mean the transaction pursuant to which WSR Acquisition
Co., Inc. is merged into Worldwide Sports & Recreation, Inc., pursuant to the
terms and conditions of the WSR Merger Documentation.
"WSR Merger Documentation" shall mean that certain Agreement and Plan of
Merger and Recapitalization, dated as of June 1, 1999, among Wind Point
Partners, the Company, WSR, Excorp Holdings Limited, and Pacific Investments
(BVI) Limited.
Section 9.2. Accounting Principles. Where the character or amount of any
asset or liability or item of income or expense is required to be determined or
any consolidation or other accounting computation is required to be made for the
purposes of this Agreement, the same shall be done in accordance with GAAP, to
the extent applicable, except where such principles are inconsistent with the
requirements of this Agreement.
Section 9.3. Directly or Indirectly. Where any provision in this
Agreement refers to action to be taken by any Person, or which such Person is
prohibited from taking, such provision shall be applicable whether the action in
question is taken directly or indirectly by such Person.
Section 10. Miscellaneous.
Section 10.1. Registered Notes. The Company shall cause to be kept at its
principal office a register for the registration and transfer of the Notes, and
the Company will register or transfer or cause to be registered or transferred,
as hereinafter provided, any Note issued pursuant to this Agreement.
At any time and from time to time the holder of any Note which has been
duly registered as hereinabove provided may transfer such Note upon compliance
with the legend thereon and surrender thereof at the principal office of the
Company duly endorsed or accompanied by a
-57-
<PAGE>
written instrument of transfer duly executed by the holder of such Note or its
attorney duly authorized in writing.
The Person in whose name any Note shall be registered shall be deemed and
treated as the owner and holder thereof for all purposes of this Agreement.
Payment of or on account of the principal, premium, if any, and interest on any
Note shall be made to or upon the written order of such holder.
NML agrees to use reasonable efforts to provide the Company with notice of
any pending or completed sale of any Note or Warrant, provided that the failure
to provide such notice to the Company shall not give rise to any liability of or
other consequence to NML.
Section 10.2. Exchange of Notes. At any time and from time to time, upon
not less than three days' notice to that effect given by the holder of any Note
initially delivered or of any Note substituted therefor pursuant to (S)10.1,
this (S)10.2 or (S)10.3, and, upon surrender of such Note at its office, the
Company will deliver in exchange therefor, without expense to such holder,
except as set forth below, a Note for the same aggregate principal amount as the
then unpaid principal amount of the Note so surrendered, or Notes in the
denomination of $1,000,000 (or such lesser amount as shall constitute 100% of
the Notes of such holder) or any amount in excess thereof as such holder shall
specify, dated as of the date to which interest has been paid on the Note so
surrendered or, if such surrender is prior to the payment of any interest
thereon, then dated as of the date of issue, registered in the name of such
Person or Persons as may be designated by such holder, and otherwise of the same
form and tenor as the Notes so surrendered for exchange. The Company may require
the payment of a sum sufficient to cover any stamp tax or governmental charge
imposed upon such exchange or transfer.
Section 10.3. Loss, Theft, Etc. of Notes. Upon receipt of evidence
satisfactory to the Company of the loss, theft, mutilation or destruction of any
Note, and in the case of any such loss, theft or destruction upon delivery of a
bond of indemnity in such form and amount as shall be reasonably satisfactory to
the Company, or in the event of such mutilation upon surrender and cancellation
of the Note, the Company will make and deliver without expense to the holder
thereof, a new Note, of like tenor, in lieu of such lost, stolen, destroyed or
mutilated Note. If the Purchaser or any subsequent Institutional Holder is the
owner of any such lost, stolen or destroyed Note, then the affidavit of an
authorized officer of such owner, setting forth the fact of loss, theft or
destruction and of its ownership of such Note at the time of such loss, theft or
destruction shall be accepted as satisfactory evidence thereof and no further
indemnity shall be required as a condition to the execution and delivery of a
new Note other than the written agreement of such owner to indemnify the
Company.
Section 10.4. Expenses, Stamp Tax Indemnity. Whether or not the
transactions herein contemplated shall be consummated, the Company agrees to pay
directly all of your out-of-pocket expenses in connection with the preparation,
execution and delivery of this Agreement, the Notes, the Warrants, the Stock
Purchase Agreement, the Stockholders Agreement, the Strip Equity and the
Registration Rights Agreement and the transactions contemplated hereby and
thereby, including but not limited to expenses incurred in connection with
subsequent Stock Closings under the Stock Purchase Agreement, the charges and
disbursements of Chapman and
-58-
<PAGE>
Cutler, your special counsel, duplicating and printing costs and charges for
shipping the Notes, the Strip Equity and Warrants, adequately insured to you at
your home office or at such other place as you may designate, and all such
expenses relating to any amendments, waivers or consents pursuant to the
provisions hereof (whether or not the same are actually executed and delivered),
including, without limitation, any amendments, waivers, or consents resulting
from any work-out, renegotiation or restructuring relating to the performance by
the Company of its obligations under this Agreement, the Notes, the Warrants,
the Stock Purchase Agreement, the Stockholders Agreement, the Strip Equity and
the Registration Rights Agreement. The Company also agrees to pay, within 15
days of receipt thereof, supplemental statements of Chapman and Cutler for
disbursements unposted or not incurred as of the Closing Date. The Company
agrees that it will pay and save you harmless against any and all liability with
respect to stamp and other taxes, if any, which may be payable or which may be
determined to be payable in connection with the execution and delivery of this
Agreement, the Notes, the Warrants, the Stockholders Agreement, the Strip Equity
or the Registration Rights Agreement, whether or not any Notes are then
outstanding. The Company agrees to protect and indemnify you against any
liability for any and all brokerage fees and commissions payable or claimed to
be payable to any Person in connection with the transactions contemplated by
this Agreement (other than those incurred by a holder). Without limiting the
foregoing, the Company agrees to pay the cost of obtaining the private placement
numbers for the Notes, the Warrants, the Preferred Stock of the Company and the
Common Stock of the Company and authorize the submission of such information as
may be required by Standard & Poor's CUSIP Service Bureau for the purpose of
obtaining such numbers.
Section 10.5. Powers and Rights Not Waived; Remedies Cumulative. No delay
or failure on the part of the holder of any Note in the exercise of any power or
right shall operate as a waiver thereof; nor shall any single or partial
exercise of the same preclude any other or further exercise thereof, or the
exercise of any other power or right, and the rights and remedies of the holder
of any Note are cumulative to, and are not exclusive of, any rights or remedies
any such holder would otherwise have.
Section 10.6. Notices. All communications provided for hereunder shall be
in writing and, if to you, delivered or mailed prepaid by registered or
certified mail or overnight air courier, or by facsimile communication, in each
case addressed to you at your address appearing on Schedule I to this Agreement
or such other address as you or the subsequent holder of any Note initially
issued to you may designate to the Company in writing, and if to the Company,
delivered or mailed by registered or certified mail or overnight air courier, or
by facsimile communication, to the Company at
Worldwide Sports & Recreation, Inc.
9200 Cody
Overland Park, Kansas 66214
Attention: Chief Executive Officer and Chief Financial Officer
Facsimile: (913) 752-3580
-59-
<PAGE>
With copies to:
Wind Point Partners
One Town Square
Suite 780
Southfield, Michigan 48076
Attention: James TenBroek and Salam Chaudhary
Facsimile: (248) 945-7220
and
Wind Point Partners
676 North Michigan Avenue
Suite 3300
Chicago, Illinois 60611
Attention: Richard R. Kracum
Facsimile: (312) 255-4820
or to such other address as the Company may in writing designate to you or to a
subsequent holder of the Note initially issued to you; provided, however, that a
notice to you by overnight air courier shall only be effective if delivered to
you at a street address designated for such purpose in Schedule I, and a notice
by facsimile communication shall only be effective if confirmed by transmission
of a copy thereof by prepaid overnight air courier.
Section 10.7. Successors and Assign. This Agreement shall be binding upon
the Company and their successors and assigns and shall inure to your benefit and
to the benefit of your successors and assigns, including each successive holder
or holders of any Notes.
Section 10.8. Survival of Covenants and Representations. All covenants,
representations and warranties made by the Company herein and in any
certificates delivered pursuant hereto, whether or not in connection with the
Closing Date, shall survive the closing and the delivery of this Agreement and
the Notes.
Section 10.9. Severability. Should any part of this Agreement for any
reason be declared invalid or unenforceable, such decision shall not affect the
validity or enforceability of any remaining portion, which remaining portion
shall remain in force and effect as if this Agreement had been executed with the
invalid or unenforceable portion thereof eliminated and it is hereby declared
the intention of the parties hereto that they would have executed the remaining
portion of this Agreement without including therein any such part, parts or
portion which may, for any reason, be hereafter declared invalid or
unenforceable.
Section 10.10. Governing Law. This Agreement and the Notes issued and sold
hereunder shall be governed by and construed in accordance with Illinois law,
including all matters of construction, validity and performance.
-60-
<PAGE>
Section 10.11. Submission to Jurisdiction; Waiver of Jury Trial. (a) Any
legal action or proceeding with respect to this Agreement or the Notes or any
document related thereto shall be brought in the courts of the State of Illinois
or of the United States of America for the Northern District of Illinois and in
no other courts, and, by execution and delivery of this Agreement, the Company
hereby accepts for itself and in respect of its property generally and
unconditionally, the jurisdiction of the aforesaid courts. The Company hereby
irrevocably and unconditionally waives any objection, including, without
limitation, 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 respective jurisdiction.
(b) The Company, NML and each subsequent holder of the Notes by its
acceptance thereof waive any right to have a jury participate in resolving any
dispute, whether sounding in contract, tort, or otherwise, between them arising
out of, connected with, related to or incidental to the relationship established
between them in connection with this agreement, any financing agreement, any
loan party document or any other instrument, document or agreement executed or
delivered in connection herewith or the transactions related hereto. The parties
hereto hereby agree and consent that any such claim, demand, action or cause of
action shall be decided by court trial without a jury and that any of them may
file an original counterpart or a copy of this agreement with any court as
written evidence of the consent of the parties hereto the waiver of their right
to trial by jury.
(c) Nothing contained in this (S)10.11 shall be deemed or construed
to bind the holders of the Notes and the holders of the Indebtedness outstanding
under the Senior Credit Agreement with respect to the jurisdiction or venue of
any legal action or proceedings involving such Persons with respect to the
transactions contemplated by this Agreement and the Senior Credit Agreement.
Section 10.12. General Indemnity; Special Environmental Indemnity and
Covenant Not to Sue. (a) The Company agrees to defend, protect, indemnify and
hold harmless the Purchaser and each other holder of the Notes, each Person
claiming by, through, under or on account of any foregoing and the respective
directors, trustees, officers, counsel, consultants, agents and employees
(collectively called the "Indemnitees") from and against any and all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
claims, costs, expenses and disbursements of any kind or nature whatsoever
(including, without limitation, the reasonable fees and disbursements of counsel
for and consultants of such Indemnitees in connection with any investigative,
administrative or judicial proceeding, whether or not such Indemnitees shall be
designated a party thereto), which may be imposed on, incurred by, or asserted
against such Indemnitees (whether direct, indirect, or consequential and whether
based on any Federal or state laws or other statutory regulations, including,
without limitation, securities and commercial laws and regulations, under common
law or at equitable cause or on contract or otherwise, arising from or in
connection with the past, present or future operations of the Company or its
predecessors in interest) in any manner relating to or arising out of the Notes,
this Agreement, the Warrants, the Stock Purchase Agreement, the Stockholders
Agreement, the Strip Equity or any other document or agreement, or any act,
event or transaction related or attendant thereto, the agreements of the
Purchaser and the holders of the Notes contained herein), or the use or intended
use of the proceeds from the issuance of the Notes (collectively the
"Indemnified
-61-
<PAGE>
Matters"); provided that the Company shall have no obligation to any Indemnitee
hereunder with respect to Indemnified Matters to the extent that any of such
loses, claims, damages, liabilities or related expenses are found in a final
judgment by a court of competent jurisdiction to have arisen from the willful
misconduct or gross negligence of such Indemnitee. To the extent that the
undertaking to indemnify, pay and hold harmless set forth in the preceding
sentence may be unenforceable because it is volative of any law or public
policy, the Company shall contribute the maximum portion which it is permitted
to pay and satisfy under applicable law, to the payment and satisfaction of all
Indemnified Matters incurred by the Indemnitees. This indemnification shall
survive the payment in full of the Notes and the termination of this Agreement,
the Warrants, the Stock Purchase Agreement, the Stockholders Agreement and the
Registration Rights Agreement.
The general indemnity provided for in this (S)10.12(a), as it relates to
the transactions contemplated under the Stock Purchase Agreement, the
Stockholders Agreement and the Strip Equity, shall apply only with respect to
the transactions consummated on the Closing Date, but not to the consummation of
any Future Preferred Commitment under the Stock Purchase Agreement. All rights
and remedies in respect of such Future Preferred Commitments shall be as
provided in the Stock Purchase Agreement, the Stockholders Agreement and the
Registration Rights Agreement, as applicable, and as are otherwise available at
law and in equity.
(b)(1) Without limiting clause (a) of this (S)10.12, the Company hereby
also agrees to defend, protect, indemnify and hold harmless from time to time
the Indemnitees from and against any and all losses, claims, cost recovery
actions, administrative orders or proceedings, damages, personal injuries,
property damages and liabilities to which any such Indemnitee may become subject
under any Environmental Law applicable to, and arising out of the ownership or
operation of, the Company or any of its Subsidiaries (collectively, the
"Indemnitors") or any of their respective properties: (i) as a result of the
breach, violation or non-compliance by any Indemnitors with any Environmental
Law applicable to any Indemnitors, (ii) due to past ownership of any of their
respective properties or past activity on any of their respective properties
which, though lawful and fully permissible at the time, could result in present
liability, (iii) the presence, release or disposal of Hazardous Substances by
any Indemnitors, or at any of their respective properties, or (iv) any
environmental, health or safety condition at any property of any Indemnitors.
The provisions of this (S)10.12(b) shall survive payment in full of all of the
Notes and termination of this Agreement, the Warrants, the Stock Purchase
Agreement, the Stockholders Agreement and the Registration Rights Agreement and
shall survive the transfer of any Notes or Warrants issued hereunder.
(2) Without limiting the provisions of clause (b)(1) of this
(S)10.12, each Indemnitor, its successors and assigns, hereby waives, releases
and covenants not to bring against any of the Indemnitees any demand, claim,
cost recovery action or lawsuit they may now or hereafter have or accrue arising
from (i) any Environmental Law now or hereafter enacted applicable to, and
arising out of the ownership or operations of, any Indemnitor, (ii) the
presence, use, release, storage, treatment or disposal of Hazardous Substances
on or at any of the properties owned or operated by any Indemnitor, (iii) the
breach, violation or non-compliance by any Indemnitor with any Environmental Law
or environmental covenant applicable to, and the arising out of the
-62-
<PAGE>
ownership or operations of, any Indemnitor, or (iv) any environmental, health or
safety condition at any property of any Indemnitor.
Section 10.13. Interest. In the event the obligation of the Company to pay
interest on the principal balance of the Notes is or becomes in excess of the
maximum interest rate which the Company or any Subsidiary is permitted by law to
contract or agree to pay, giving due consideration to the execution date of this
Agreement and the consummation of the transactions herein and therein
contemplated, then, in that event, the rate of interest applicable with respect
to the Notes shall be deemed to be immediately reduced to such maximum rate and
all previous payments in excess of the maximum rate shall be deemed to have been
payments in reduction of principal and not of interest. Without limiting the
foregoing, it is the intention of the parties hereto that each holder of the
Notes shall conform to usury laws, if any, applicable to it. Accordingly, if the
transactions with any holder of the Notes contemplated hereby would be usurious
under such applicable laws, then, notwithstanding anything to the contrary in
the Notes, this Agreement or any other agreement entered into in connection with
or as security for or guaranteeing this Agreement or the Indebtedness evidenced
by the Notes, it is agreed as follows: (a) the aggregate of all consideration
which constitutes interest under applicable law that is contracted for, taken,
reserved, charged or received by each holder of the Notes under the Notes
payable to such holder, this Agreement, the Subsidiary Guaranty Agreements or
under any other agreement entered into in connection with or as security for or
guaranteeing this Agreement or the Notes shall under no circumstances exceed the
maximum amount allowed by such applicable law, and any excess shall be credited
automatically, if theretofore paid, on the principal amount of the Indebtedness
owed to such holder or, if no Indebtedness to such holder is outstanding, shall
be refunded to the Company by such holder, and (b) in the event that the
maturity of any Note is accelerated or in the event of any required or permitted
prepayment, then such consideration that constitutes interest under law
applicable to such holder may never include more than the maximum amount allowed
by such applicable law and excess interest, if any, to such holder shall be
canceled automatically as of the date of such acceleration or prepayment and, if
theretofore paid, shall be credited by such holder on the principal amount of
the Indebtedness owed to such holder by the Company or, if no Indebtedness to
such holder is then outstanding, shall be refunded by such holder to the
Company.
Section 10.14. Captions. The descriptive headings of the various Sections
or parts of this Agreement are for convenience only and shall not affect the
meaning or construction of any of the provisions hereof.
-63-
<PAGE>
The execution hereof by you shall constitute a contract between us for the
uses and purposes hereinabove set forth, and this Agreement may be executed in
any number of counterparts, each executed counterpart constituting an original
but all together only one agreement.
Worldwide Sports & Recreation, Inc.
By:________________________________
Its:_____________________________
Accepted as of August 5, 1999.
The Northwestern Mutual Life
Insurance Company
By:________________________________
Its:_____________________________
-64-
<PAGE>
Principal Amount
Name And Address Of Notes
Of Purchaser To Be Purchased
The Northwestern Mutual $22,800,000
Life Insurance Company
720 East Wisconsin Avenue
Milwaukee, Wisconsin 53202
Attention: Securities Department
Telecopier Number: (414) 299-7124
Payments
All payments on or in respect of the Notes to be by bank wire transfer of
Federal or other immediately available funds (identifying each payment as
"Worldwide Sports & Recreation, Inc., 12% Senior Subordinated Notes, Due August
5, 2007, PPN 98160# AA4, principal, premium or interest") to:
Bankers Trust Company (ABA #0210-01033)
16 Wall Street
Insurance Unit, 4th Floor
New York, New York 10005
for credit to: The Northwestern Mutual Life Insurance Company
Account Number 00-000-027
Notices
All notices and communications to be addressed as first provided above, except
notices with respect to payments and written confirmation of each such payment
to be addressed, Attention: Securities Operations.
Name of Nominee in which Notes are to be issued: None
Taxpayer I.D. Number: 39-0509570
<PAGE>
SCHEDULE I
(to Note Agreement)
SCHEDULE II
[Prepared by Company]
Indebtedness, Subsidiaries And Disclosures
<PAGE>
SCHEDULE II
(to Note Agreement)
This Note Has Not Been Registered Under The United States Securities Act Of
1933, As Amended, Or Any State Securities Laws And May Be Reoffered And Sold
Only If Registered Pursuant To The Provisions Of Said Securities Act And
Applicable State Securities Laws Or If An Exemption From Registration Is
Available.
The Obligations Evidenced By This Note Are Subject To The Terms Of Subordination
Set Forth In The Note Agreement Referred To Below. Reference Should Be Made To
The Note Agreement For A Complete Statement Of The Terms Of Such Subordination.
Worldwide Sports & Recreation, Inc.
12% Senior Subordinated Note
Due August 5, 2007
No.
____________, ____
PPN 98160# AA4
$
Worldwide Sports & Recreation, Inc., a Delaware corporation (the
"Company"), for value received, hereby promises to pay to
or registered assigns
on the fifth day of August, 2007
the principal amount of
Dollars ($ )
and to pay interest (computed on the basis of a 360-day year of twelve 30-day
months) on the principal amount from time to time remaining unpaid hereon at the
rate of 12% per annum from the date hereof until maturity, payable quarterly on
the fifth day of February, May, August and November in each year (commencing
November 5, 1999) and at maturity. The Company agrees to pay interest on overdue
principal (including any overdue required or optional prepayment of principal)
and premium, if any, and (to the extent legally enforceable) on any overdue
installment of interest, at the Overdue Rate after the due date, whether by
acceleration or otherwise, until paid. "Overdue Rate" shall mean the lesser of
(a) the maximum interest rate permitted by law and (b) the greater of (1) 14%
per annum and (2) the rate which Morgan Guaranty Trust Company of New York, New
York, announces from time to time as its prime lending rate as in effect from
time to time, plus 2%.
<PAGE>
Exhibit A
(to Note Agreement)
Both the principal hereof and interest hereon are payable at the principal
office of the Company in Overland Park, Kansas in coin or currency of the United
States of America which at the time of payment shall be legal tender for the
payment of public and private debts. If any amount of principal, premium, if
any, or interest on or in respect of this Note becomes due and payable on any
date which is not a Business Day, such amount shall be payable on the
immediately preceding Business Day. "Business Day" means any day other than a
Saturday, Sunday or other day on which banks in New York, New York or Chicago,
Illinois are required by law to close or are customarily closed.
This Note is one of the Company's $22,800,000 maximum principal amount 12%
Senior Subordinated Notes, due August 5, 2007 (the "Notes"), issued or to be
issued under and pursuant to the terms and provisions of the Note Agreement,
dated as of August 5, 1999 (the "Note Agreement"), entered into by the Company
with the original Purchaser therein referred to and this Note and the holder
hereof are entitled equally and ratably with the holders of all other Notes
outstanding under the Note Agreement to all the benefits provided for thereby or
referred to therein. Reference is hereby made to the Note Agreement for a
statement of such rights and benefits, including, without limitation, rights and
benefits contained in the Warrants (as defined in the Note Agreement).
This Note and the holder hereof are also entitled equally and ratably with
the holders of all other Notes to the rights and benefits provided pursuant to
the terms and provisions of certain Subsidiary Guaranty Agreements (as such term
is defined in the Note Agreement). Reference should be made to the foregoing for
a statement of the nature and extent of the benefits afforded thereby.
This Note and the other Notes outstanding under the Note Agreement may be
declared due prior to their expressed maturity dates and certain prepayments are
required to be made thereon, all in the events, on the terms and in the manner
and amounts as provided in the Note Agreement.
This Note is registered on the books of the Company and is transferable
only by surrender thereof at the principal office of the Company, duly endorsed
or accompanied by a written instrument of transfer duly executed by the
registered holder of this Note or its attorney duly authorized in writing.
Payment of or on account of principal, premium, if any, and interest on this
Note shall be made only to or upon the order in writing of the registered
holder.
A-2
<PAGE>
This Note and said Note Agreement are governed by and construed in
accordance with the laws of Illinois, including all matters of construction,
validity and performance.
Worldwide Sports & Recreation, Inc.
By:___________________________________
Its:__________________________________
A-3
<PAGE>
EXHIBIT (b)(4)
First Amendment to Note Agreement
This First Amendment dated as of August 18, 1999 to the Note Agreement,
dated as of August 5, 1999, is between Worldwide Sports & Recreation, Inc., a
Delaware corporation (the "Company"), and The Northwestern Mutual Life Insurance
Company (the "Noteholder").
Recitals:
A. The Company and the Noteholder have heretofore entered into the Note
Agreement, dated as of August 5, 1999 (the "Note Agreement"), pursuant to which
the Company issued its 12% Senior Subordinated Notes due August 5, 2007 in the
aggregate principal amount of $22,800,000 (the "Notes"). The Noteholder is the
owner and holder of 100% of the outstanding principal amount of the Notes.
B. The Company and the Noteholder now desire to amend the Note Agreement
in the respect, but only in the respect, hereinafter set forth.
Now, therefore, the Company and the Noteholder, in consideration of good
and valuable consideration the receipt and sufficiency of which is hereby
acknowledged, do hereby agree as follows:
Section 9.1 of the Note Agreement is amended by deleting the first
paragraph of the definition of "Total Indebtedness" and inserting in
lieu thereof the following:
"Total Indebtedness" shall mean, as of the date of any measurement,
the total of (a) the average revolving loan balance outstanding under
the Senior Credit Agreement as of the last day of each of the 12
calendar months ended on and prior to the date of measurement, plus
(b) the outstanding principal amount of the term loans outstanding
under the Senior Credit Agreement as of the date of measurement, plus
(c) the principal portion of Capital Lease Obligations and
Indebtedness secured by purchase money Liens as of the date of
measurement, plus (d) Indebtedness evidenced by the Notes as of the
date of measurement, plus (e) all other Indebtedness of the Company
and its Subsidiaries as of the date of measurement, minus (f) Junior
Subordinated Indebtedness evidenced by the Seller Junior Subordinated
Notes as of the date of measurement.
This First Amendment shall be construed in connection with and as part of
the Note Agreement, and except as modified and expressly amended by this
amendment, all terms, conditions and covenants contained in the Note Agreement
and the Notes are hereby ratified and shall be and remain in full force and
effect.
<PAGE>
Any and all notices, requests, certificates and other instruments executed
and delivered after the execution and delivery of this amendment may refer to
the Note Agreement without making specific reference to this amendment but
nevertheless all such references shall be deemed to include this amendment
unless the context otherwise requires.
This First Amendment shall be governed by and construed in accordance with
Illinois law.
<PAGE>
In Witness Whereof, the Company and the Noteholder have caused this
instrument to be executed, all as of the day and year first above written.
Worldwide Sports & Recreation, Inc.
By:__________________________________
Its:_______________________________
The Northwestern Mutual Life
Insurance Company
By:__________________________________
Its:_______________________________
<PAGE>
EXHIBIT (C)(1)
WIND POINT PARTNERS
One Towne Square
Suite 780
Southfield, MI 48076
CONFIDENTIALITY AGREEMENT
September 1, 1999
PERSONAL AND CONFIDENTIAL
Dear Sirs:
In connection with our interest in a possible transaction involving us and
Bolle Inc. (the "Company"), the Company is furnishing us with certain
information which is either non-public, confidential or proprietary in nature.
All information furnished to us, our directors, officers, employees, agents or
representatives, including without limitation attorneys, accountants,
consultants and financial advisors (collectively, "representatives"), by the
Company, or any of their respective representatives, and all analyses,
compilations, data, studies or other documents prepared by us or our
representatives containing or based in whole or in part on any such furnished
information or reflecting our review of, or interest in, the Company is
hereinafter referred to as the "Information." In consideration of our being
furnished with the Information, we agree that:
1. The Information will be kept confidential. and will not, without the
prior written consent of the Company, be disclosed by us or our representatives
to any other person, in any manner whatsoever, in whole or in part, and will not
be used by us or our representatives directly or indirectly for any purpose
other than evaluating the transaction referred to above. Moreover, we agree to
transmit the Information only to those representatives who need to know the
Information for the purpose of evaluating the transaction referred to above, who
are informed by us of the confidential nature of the Information and who agree
to be bound by the terms of this Agreement. We agree to notify the Company prior
to the delivery or disclosure of any Information to our representatives, as to
the identity of such representatives. We will be responsible for any breach of
this Agreement by our representatives,
2. Without the prior written consent of the Company, except to the extent
provided by this Agreement, we and our representatives will not disclose to any
other person the fact that the Information has been made available, that
discussions or negotiations are taking place concerning a possible transaction
involving us and the Company, or any of the terms, conditions or other facts
with respect to any such possible transaction, including the status thereof,
except as required by law and then only with proper written notice as soon as
possible to the Company. The term "person" as used in this letter shall be
broadly interpreted to include without limitation any corporation, company,
group, partnership or individual.
<PAGE>
3. We shall keep a record of each location of the Information. The
Information and all copies thereof will be destroyed or returned immediately
without retaining any copies thereof, if we do not within a reasonable time
proceed with a transaction involving the Company, or upon request. However, our
attorneys shall be allowed to retain a copy of the Information until the
expiration of this Agreement.
4. This Agreement shalt be inoperative as to such portions of the
Information which (i) are or become generally available to the public other than
as a result of a disclosure by us or our representatives; (ii) become available
to us on a non-confidential basis from a source other than the Company or one of
their representatives which has represented to us (and which we have no reason
to disbelieve after due inquiry) is entitled to disclose it; or (iii) were known
to us on a non-confidential basis prior to their disclosure to us by the Company
or one of their representatives.
5. For a period of three years from the date of this Agreement, we and
our affiliates (including any person or entity directly or indirectly, through
one or more intermediaries, controlling us or controlled by or under common
control with us) will not (and we and they will not assist or encourage others
to), directly or indirectly, (i) purchase or agree or offer to purchase any
securities or assets of the Company or any rights or options to acquire the same
(including from a third party); (ii) enter into, or offer or agree to enter into
an acquisition or other business combination transaction relating to the Company
(including with a third party); or (iii) propose any of the foregoing, unless
and until such offer or proposal shall have been specifically invited in writing
by the Company or through its authorized representatives acting as agents on
behalf of the Company. If at any time during such period, we are approached by
any third party concerning our or their participation in a transaction involving
the Company's securities or assets, we will promptly inform the Company of the
nature of each contact and the parties thereto.
6. Until the earliest of (i) a definitive agreement regarding the
acquisition of substantially all of the assets or stock of the Company by us has
been executed; (ii) an acquisition of substantially all of the assets or stock
of the Company by a third party bu been consummated; or (iii) three years from
the date of this Agreement, we agree not to initiate or maintain contact (except
for those contacts made in the ordinary course of our business) with any
officer, director or employee of the Company regarding the Company's business,
prospects, operations or finances, except with the express permission of the
Company acting through its authorized representative or by Banc of America
Securities LLC, acting on behalf of the Company. It is understood that the
Company or its authorized agents will arrange for appropriate contacts for due
diligence purposes. All (i) communications regarding this possible transaction,
(ii) requests for additional information, (iii) requests for facility tours or
management meetings, and (iv) discussions or questions regarding procedures,
will be submitted or directed to the Company's agents.
7. We understand that the Company has endeavored to include in the
Information those materials which it believes to be reliable and relevant for
the purpose of our evaluation, but we acknowledge that neither the Company nor
any of its representatives or advisors makes any
2
<PAGE>
representation or warranty as to the accuracy or completeness of the
Information. We agree that neither the Company nor any of its representatives or
advisors shall have any liability to us or to any of our representatives as a
result of the use of the Information by us and our representatives, and we
understand that only those particular representations and warranties which may
be made by the Company to the purchaser of the assets, stock or business of the
Company in a definitive agreement when, as and if it is executed, and subject to
such limitations and restrictions as may be specified in such definitive
agreement, shall have any legal effect.
8. We agree that, without the Company's prior written consent, we will
not, for a period of two years from the date of this Agreement, directly or
indirectly, (i) solicit the employment of any key employee, officer or senior
manager of the Company or (ii) hire any key employee, officer or senior manager
employed by the Company or any former key employee, officer or senior manager
whose employment with the Company has ceased within 90 days of such solicitation
or hire.
9. In the event that we or anyone to whom we transmit the Information
pursuant to this Agreement are requested or become legally compelled (by oral
questions, interrogatories, request for information or documents, subpoena,
civil investigative demand or similar process) to disclose any of the
Information, we will provide the Company with prompt written notice so that the
Company may seek a protective order or other appropriate remedy and/or waive
compliance with the provisions of this Agreement. In the event that such
protective order or other remedy is not obtained, or that the Company waives
compliance with the provisions of this Agreement, we will furnish only that
portion of the Information which is legally required and will exercise our best
efforts to obtain reliable assurance that confidential treatment will be
accorded the Information.
10. We agree that money damages would not be a sufficient remedy for any
breach of this Agreement by us or our directors, officers, employees and agents,
and the Company shall be entitled to equitable relief, including injunction and
specific performance, in the event of any breach of the provisions of paragraphs
1, 2, 3, 5, 6 or 8 of this Agreement. Such remedies shall not be deemed to be
the exclusive remedies for a breach of this Agreement by us or our
representatives but shall be in addition to all other remedies available at law
or equity. We agree to waive and to use our best efforts to cause our directors,
officers, employees or agents to waive, any requirement for the securing or
posting of any bond in connection with such remedy. We understand and agree that
in the event that there is a sale or a controlling interest in the Company, the
acquiror of such interest shall, should the Company so elect, also acquire all
rights of the Company pursuant to this Agreement including without limitation,
the right to enforce all terms of this Agreement. We understand that this
Agreement is for the benefit of the Company and the Company shall have the right
to enforce all the terms of this Agreement.
11. It is further understood and agreed that no failure or delay by the
Company in exercising any right, power or privilege under this Agreement shall
operate as a waiver thereof nor shall any single or partial exercise thereof
preclude any other or further exercise of any right, power or privilege
hereunder.
3
<PAGE>
12. This Agreement shall be governed and construed in accordance with the
laws of the State of California applicable to agreements made and to be
performed within such state.
Very truly yours,
Wind Point Partners
Salam Chaudhary
Vice President
4
<PAGE>
EXHIBIT (C)(2)
AGREEMENT AND PLAN OF MERGER
DATED AS OF NOVEMBER 24, 1999
BY AND AMONG
WORLDWIDE SPORTS AND RECREATION, INC.,
SHADE ACQUISITION, INC.
AND
BOLLE INC.
<PAGE>
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER, dated as of November 24, 1999, is by and
among Worldwide Sports and Recreation, Inc., a Delaware corporation
("Purchaser"), Shade Acquisition, Inc., a newly formed Delaware corporation and
a wholly owned Subsidiary of Purchaser ("Acquisition Sub"), and Bolle Inc., a
Delaware corporation (the "Company").
WHEREAS, the Board of Directors of each of Purchaser, Acquisition Sub and
the Company has approved, and deems it advisable and in the best interests of
its respective stockholders to consummate, the acquisition of the Company by
Purchaser, upon the terms and subject to the conditions set forth herein; and
WHEREAS, in furtherance thereof, it is proposed that Acquisition Sub make a
cash tender offer (the "Offer") to acquire all of the issued and outstanding
shares of common stock, par value $0.01 per share (the "Company Common Stock"),
of the Company and all associated rights (the "Shares") for $5.25 per Share, net
to the seller in cash, without interest thereon (such price, as it may be
modified as provided herein from time to time being referred to herein as the
"Per Share Amount"), upon the terms and subject to the conditions of this
Agreement and the Offer; and
WHEREAS, also in furtherance of such acquisition, the Board of Directors of
each of Purchaser, Acquisition Sub and the Company has approved the merger of
Acquisition Sub with and into the Company (the "Merger") following the
consummation of the Offer in accordance with the General Corporation Law of the
State of Delaware (the "DGCL") and upon the terms and subject to the conditions
set forth herein; and
WHEREAS, also in furtherance of such acquisition, concurrently with the
execution of this Agreement and as an inducement for Purchaser and Acquisition
Sub to enter into this Agreement, Purchaser, Acquisition Sub and each of the
stockholders of the Company listed on Exhibit A attached hereto (the "Tendering
---------
Stockholders") are entering into a Tender and Voting Agreement of even date
herewith (the "Tender and Voting Agreements"), pursuant to which each of the
Tendering Stockholders has agreed, upon the terms and subject to the conditions
set forth therein, to tender all of the Shares owned by each such Tendering
Stockholder to Acquisition Sub pursuant to the Offer and to approve this
Agreement, the Offer, the Merger and each of the transactions contemplated
hereby (collectively, the "Transactions"); and
WHEREAS, the Board of Directors of the Company (the "Board") has, in light
of and subject to the terms and conditions set forth herein, (i) determined that
the consideration to be paid for each Share in the Offer and the Merger is fair
to the holders of such Shares and in the best interests of such stockholders,
(ii) approved and adopted this Agreement and the transactions contemplated
hereby, and (iii) resolved to recommend that the holders of such Shares accept
the Offer and approve this Agreement, the Merger and each of the transactions
contemplated hereby, upon the terms and subject to the conditions set forth
herein; and
WHEREAS, Purchaser, Acquisition Sub and the Company desire to make certain
representations, warranties, covenants and agreements in connection with the
Offer and Merger.
<PAGE>
NOW, THEREFORE, in consideration of the premises and the representations,
warranties, covenants and agreements herein contained, and intending to be
legally bound hereby, Purchaser, Acquisition Sub and the Company hereby agree as
follows:
ARTICLE I
THE OFFER
Section 1.1 The Offer.
---------
(a) Provided that this Agreement shall not have been terminated in
accordance with Section 8.1 and subject to the other provisions of this
Agreement, as promptly as practicable but in no event later than five (5)
Business Days after the date of the public announcement by Purchaser and the
Company of this Agreement, Acquisition Sub shall, and Purchaser shall cause
Acquisition Sub to, commence the Offer. The obligation of Acquisition Sub to,
and of Purchaser to cause Acquisition Sub to, commence the Offer and accept for
payment, and pay for, any Shares of Company Common Stock properly tendered
pursuant to the Offer shall be subject only to the conditions set forth in Annex
-----
A attached hereto (the "Offer Conditions"), any of which may be waived, in whole
- -
or in part, by Acquisition Sub, in its sole discretion. Acquisition Sub
expressly reserves the right to modify the terms of the Offer in a manner not
inconsistent with this Agreement, except that, without the prior written consent
of the Company, Acquisition Sub shall not (i) waive or otherwise modify the
Minimum Condition so as to reduce the minimum number of Shares that Acquisition
Sub will accept in the Offer to an amount constituting less than fifty-one
percent (51%) of the aggregate outstanding Shares (assuming the exercise of all
options to purchase, and the conversion or exchange of all securities
convertible or exchangeable into, Shares outstanding as of the consummation of
the Offer), (ii) reduce the Per Share Amount, (iii) impose any conditions to the
Offer in addition to the Offer Conditions or modify the Offer Conditions (other
than to waive any Offer Conditions to the extent permitted by this Agreement),
(iv) except as provided in the next sentence, extend the Offer, (v) change the
form of consideration payable in the Offer or (vi) accept for payment or pay for
any Shares pursuant to the Offer prior to January 4, 2000. Notwithstanding the
foregoing, Acquisition Sub may, without the consent of the Company, (i) extend
the Offer if, at the scheduled or extended expiration date of the Offer, any of
the Offer Conditions shall not be satisfied or waived, until such time as such
conditions are satisfied or waived but, in any event, Acquisition Sub shall not,
without the prior written consent of the Company, extend the Offer beyond the
Cut-Off Date (as defined in Section 8.1(b) hereof), (ii) extend the Offer for
any period required by any rule, regulation, interpretation or position of the
SEC or the staff thereof applicable to the Offer but, in any event, Acquisition
Sub shall not, without the prior written consent of the Company, extend the
Offer beyond the Cut-Off Date, or (iii) extend the Offer for a period of up to
five (5) Business Days if, on any scheduled expiration date on which the Offer
Conditions shall have been satisfied or waived, the number of Shares which have
been validly tendered and not withdrawn represent more than 50% of the aggregate
outstanding Shares (assuming the exercise of all options to purchase, and the
conversion or exchange of all securities convertible or exchangeable into Shares
which are outstanding as of the consummation of the Offer), but less than 90% of
the then issued and outstanding Shares.
2
<PAGE>
Purchaser and Acquisition Sub each agree that Acquisition Sub will not terminate
the Offer between scheduled expiration dates (except in the event that this
Agreement is terminated) and that, in the event that Acquisition Sub will
otherwise be entitled to terminate the Offer at any scheduled expiration date
thereof due to the failure of one or more of the Offer Conditions, unless this
Agreement shall have been terminated, Acquisition Sub shall, and Purchaser shall
cause Acquisition Sub to, extend the Offer until such date as the Offer
Conditions have been satisfied or such later date as required by applicable
federal securities law; provided however, that nothing herein shall require
Acquisition Sub to extend the Offer beyond the Cut-Off Date (as defined in
Section 8.1(b) hereof). Subject to the terms and conditions of the Offer in this
Agreement, Acquisition Sub shall, and Purchaser shall cause Acquisition Sub to,
accept for payment all Shares validly tendered and not withdrawn pursuant to the
Offer as soon as Acquisition Sub is permitted to accept such Shares for payment
pursuant to the Offer, and then pay for such Shares within two (2) Business Days
thereafter. The Per Share Amount shall, subject to all applicable withholding of
taxes, be paid net to the seller in cash, without interest thereon, upon the
terms and subject to the conditions of the Offer and this Agreement. If this
Agreement is terminated by either Purchaser or Acquisition Sub or by the
Company, Acquisition Sub shall, and Purchaser shall cause Acquisition Sub to,
terminate promptly the Offer. The Company agrees that no Shares held by the
Company or any of its Subsidiaries will be tendered in the Offer.
(b) As soon as reasonably practicable on the date of commencement
of the Offer, Purchaser and Acquisition Sub shall file with the Securities and
Exchange Commission (the "SEC") a Tender Offer Statement on Schedule 14D-1
(together with any supplements or amendments thereto, the "Schedule 14D-1") with
respect to the Offer, which shall contain an offer to purchase (the "Offer to
Purchase") and a related letter of transmittal, summary advertisement and
related documents (such Schedule 14D-1 and the documents included therein
pursuant to which the Offer would be made, together with any supplements or
amendments thereto, the "Offer Documents"), and Purchaser and Acquisition Sub
shall cause the Offer Documents to be disseminated to holders of Shares as and
to the extent required by SEC Rule 14d-5 and other applicable federal and state
securities laws and the rules of any stock exchange or stock market in which the
Shares are then traded. Purchaser, Acquisition Sub, and the Company each agree
promptly to correct any information provided by it for use in the Offer
Documents if and to the extent that such information shall have become false or
misleading in any material respect, and Purchaser and Acquisition Sub further
agree to take all steps necessary to cause the Schedule 14D-1 as so corrected to
be promptly filed with the SEC and the other Offer Documents as so corrected to
be promptly disseminated to holders of the Shares, in each case as and to the
extent required by applicable federal and state securities laws and the rules of
any stock exchange or stock market in which the Shares are then traded. The
Company and its counsel shall be given reasonable opportunity to review and
comment upon the Offer Documents prior to their filing with the SEC or
dissemination to the stockholders of the Company. Purchaser and Acquisition Sub
agree to provide the Company and its counsel any comments Purchaser, Acquisition
Sub or their counsel may receive from the SEC or its staff with respect to the
Offer Documents promptly after the receipt of such comments.
3
<PAGE>
1.2 Company Actions.
---------------
(a) Subject to the terms and conditions set forth herein (including,
but not limited to, the Offer Conditions), the Company hereby approves of and
consents to the Offer and represents and warrants that the Board, at a meeting
duly called and held, in which a quorum of directors were present, duly adopted
by the resolutions set forth as Exhibit B attached hereto, which in the manner
---------
set forth therein, approve this Agreement, the Offer and the Merger, determine
that, in the opinion of the Board, the Offer, the Merger and the Transactions
contemplated herein are in the best interests of the Company and its
stockholders and are fair to the stockholders and recommend that the holders of
the Shares accept the Offer and, if required by applicable law, approve the
Merger. The Company hereby consents to the inclusion in the Offer Documents and
in the Schedule 14D-9 referred to below of the recommendation of the Company's
Board of Directors described in this Section 1.2. The Company represents and
warrants that the Board has received the written opinion of Bank of America
Securities LLC (the "Financial Advisor"), the form of which is attached as
Exhibit C attached hereto. The Company has been authorized by the Financial
- ---------
Advisor, to permit, subject to prior review and consent by the Financial Advisor
(such consent not to be unreasonably withheld), the inclusion of such fairness
opinion (or a reference thereto) in the Offer Documents and in the Schedule
14D-9 referred to below.
(b) As soon as reasonably practicable after the Offer Documents are
filed with the SEC and as otherwise required by applicable law, the Company
shall, pursuant to SEC Rule 14d-9, file with the SEC a
Solicitation/Recommendation Statement on Schedule 14D-9 with respect to the
Offer (such Schedule 14D-9, as amended or supplemented from time to time, the
"Schedule 14D-9") containing the recommendation of the Board described in
Section 1.2(a) and a copy of the written opinion of the Financial Advisor
described in Section 1.2(a) and shall mail a copy of Schedule 14D-9 to the
stockholders of the Company. The Company shall cooperate with Purchaser in
mailing or otherwise disseminating the Schedule 14D-9 with the appropriate Offer
Documents to the Company's stockholders. Each of the Company, Purchaser and
Acquisition Sub agrees promptly to correct any information provided by it for
use in the Schedule 14D-9 if and to the extent that such information shall
become false or misleading in any material respect, and the Company further
agrees to take all steps necessary to amend or supplement the Schedule 14D-9 and
to cause the Schedule 14D-9 as so amended or supplemented to be promptly filed
with the SEC and promptly disseminated to the Company's stockholders, in each
case as and to the extent required by applicable federal and state securities
laws and the rules of any stock exchange or stock market in which the Shares are
then traded. Purchaser and its counsel shall be given reasonable opportunity to
review and comment upon the Schedule 14D-9 prior to its filing with the SEC or
dissemination to the Company's stockholders. The Company agrees to provide
Purchaser and its counsel any comments the Company or its counsel may receive
from the SEC or its staff with respect to the Schedule 14D-9 promptly after the
receipt of such comments.
(c) In connection with the Offer, the Company shall cause its
transfer agent to furnish Acquisition Sub promptly with mailing labels
containing the names and addresses of the recordholders of Shares as of a recent
date and of those persons becoming recordholders subsequent to such date,
together with copies of all lists indicating current stockholders, security
4
<PAGE>
position listings and related computer files, if available, and all information
in the Company's possession or control regarding the names, addresses and
holdings of beneficial owners of Shares, and shall furnish to Acquisition Sub
such information and assistance (including updated lists of stockholders,
security position listings and computer files) as Purchaser or Acquisition Sub
may reasonably request in communicating the Offer to the Company's stockholders.
The Company represents that the information provided to Purchaser or Acquisition
Sub pursuant to this Section 1.2(c) shall be true and correct as of its
respective dates. Subject to the requirements of applicable law and except for
such steps as are necessary to disseminate the Offer Documents and any other
documents necessary to consummate the Offer and the Merger, Purchaser and
Acquisition Sub and their officers, agents, employees and advisors shall hold in
confidence the information contained in any such labels, listings and files,
will use such information only in connection with the Offer and the Merger and,
if this Agreement shall be terminated, will promptly, upon request, deliver to
the Company or destroy, and will use their commercially reasonable efforts to
cause their officers, agents, employees, advisors, associates and agents to
deliver or destroy, all copies of such information then in their possession or
control.
1.3 Directors. (a) Effective upon the acceptance for payment by
---------
Acquisition Sub of Shares constituting fifty-one percent (51%) of the aggregate
outstanding Shares (assuming the exercise of all options to purchase, and the
conversion or exchange of all securities convertible or exchangeable into,
Shares outstanding as of the consummation of the Offer) pursuant to the Offer,
Purchaser shall be entitled to designate the number of directors, rounded up to
the next whole number, on the Board that equals the product of (i) the total
number of directors on the Board (after giving effect to the election of any
additional directors pursuant to this Section 1.3) and (ii) the percentage that
the number of Shares owned by Purchaser or Acquisition Sub (including Shares
accepted for payment) bears to the total number of shares of Company Common
Stock outstanding, and the Company shall take all action necessary to cause the
Company's designees to be elected or appointed to the Board, including, without
limitation, increasing the number of directors, or seeking and accepting
resignations of incumbent directors, or both. At such times, the Company will
use its best efforts to cause individuals designated by Purchaser to constitute
the same percentage as such individuals represent on the Board of (x) each
committee of the Board, (y) each board of directors of each Subsidiary of the
Company and (z) each committee of each such board.
(b) The Company's obligations to appoint designees to the Board shall
be subject to Section 14(f) of the Securities Exchange Act of 1934, as amended
(the "Exchange Act") and Rule 14f-1 promulgated thereunder. The Company shall
promptly take all actions required pursuant to Section 14(f) and Rule 14f-1 in
order to fulfill its obligations under this Section 1.3 and shall include in the
Schedule 14D-9 such information with respect to the Company and its officers and
directors as is required under Section 14(f) and Rule 14f-1 to fulfill its
obligations under this Section 1.3. Purchaser will supply to the Company in
writing and be solely responsible for any information with respect to itself and
its nominees, officers, directors and affiliates required by Section 14(f) and
Rule 14f-1.
1.4 Consummation Of Merger. From the date of acceptance for payment by
----------------------
Acquisition Sub of Shares satisfying the Minimum Condition (as defined in Annex
-----
A attached
- -
5
<PAGE>
hereto) pursuant to the Offer, the Company shall take all actions necessary to
consummate the Merger as soon thereafter as reasonably practicable.
ARTICLE II
THE MERGER
Section 2.1 The Merger. Subject to the terms and conditions of this
----------
Agreement, at the Effective Time (as hereinafter defined), the Company and
Acquisition Sub shall consummate the Merger in accordance with the DGCL pursuant
to which (i) Acquisition Sub shall merge with and into the Company and the
separate corporate existence of Acquisition Sub shall thereupon cease, (ii) the
Company shall be the successor or the surviving corporation in the Merger
(sometimes hereinafter referred to as the "Surviving Corporation"), shall
continue to be governed by the laws of the State of Delaware and shall be a
wholly-owned Subsidiary of Purchaser, and (iii) the corporate existence of the
Company with all of its rights, privileges, immunities, powers and franchises
shall continue unaffected by the Merger. Purchaser may, upon notice to the
Company, modify the structure of the Merger if Purchaser determines it advisable
to do so because of tax or other considerations, and the Company shall promptly
enter into any amendments to this Agreement necessary or desirable to accomplish
such structure modification, provided that no such amendments shall reduce the
Merger Consideration or otherwise adversely affect the non-affiliated
stockholders of the Company.
Section 2.2 Effective Time. As soon as practicable after the satisfaction
--------------
or waiver of the conditions set forth in Article VII, the parties hereto shall
cause (i) a Certificate of Merger to be executed and filed on the Merger Closing
Date (as hereinafter defined) (or on such other date as Purchaser and the
Company may agree) with the Secretary of State of the State of Delaware in such
form as required by, and executed in accordance with the relevant provisions of
the DGCL, and (ii) all other filings or recordings required by the DGCL in
connection with the Merger. Prior to the filing referred to in this Section 2.2,
a closing (the "Merger Closing") will be held at the offices of Katten Muchin &
Zavis, 525 West Monroe Street, Suite 1600, Chicago, Illinois 60661, at 9:00 a.m.
Chicago time (or such other place as the parties may agree). The date on which
the Merger Closing occurs is referred to herein as the "Merger Closing Date").
The Merger shall become effective at such time as such Certificate of Merger is
duly filed with the Secretary of State of the State of Delaware, or at such
later time specified in such Certificate of Merger (the time the Merger becomes
effective being referred to herein as the "Effective Time").
Section 2.3 Effects of the Merger. At the Effective Time, the Merger
---------------------
shall have the effects as set forth in the applicable provisions of the DGCL.
Without limiting the generality of the foregoing, and subject thereto, at the
Effective Time, all the properties, rights, privileges, powers and franchises of
the Company and Acquisition Sub shall vest in the Surviving Corporation, and all
debts, liabilities and duties of the Company and Acquisition Sub shall become
the debts, liabilities and duties of the Surviving Corporation.
6
<PAGE>
Section 2.4 Certificate of Incorporation; Certificate of Designation and
------------------------------------------------------------
By-Laws.
- -------
(a) The Certificate of Incorporation of Acquisition Sub in effect
at the Effective Time shall be amended as of the Effective Time in order to
change the name of Acquisition Sub to "Bolle Inc." and such Certificate of
Incorporation, as so amended, shall be the Certificate of Incorporation of the
Surviving Corporation until amended in accordance with applicable law and such
Certificate of Incorporation.
(b) The By-laws of Acquisition Sub in effect at the Effective Time
shall be the By-laws of the Surviving Corporation until amended in accordance
with applicable law, the Certificate of Incorporation of the Surviving
Corporation and such By-laws.
Section 2.5 Directors. The directors of Acquisition Sub at the Effective
---------
Time (which shall include Martin E. Franklin) shall be the initial directors of
the Surviving Corporation, each to hold office in accordance with the
Certificate of Incorporation and By-laws of the Surviving Corporation until such
director's successor is duly elected or appointed and qualified. The Company
shall cause each director of the Company's Subsidiaries which are corporations
to tender his or her resignation prior to the Effective Time, with each such
resignation to be effective as of the Effective Time.
Section 2.6 Officers. The officers of Acquisition Sub at the Effective
--------
Time shall be the initial officers of the Surviving Corporation, each to hold
office in accordance with the Certificate of Incorporation and By-laws of the
Surviving Corporation until such officer's successor is duly elected or
appointed and qualified.
Section 2.7 Subsequent Actions. If at any time after the Effective Time
------------------
the Surviving Corporation shall consider or be advised that any deeds, bills of
sale, assignments, assurances or any other actions or things are necessary or
desirable to vest, perfect or confirm of record or otherwise in the Surviving
Corporation its right, title or interest in, to or under any of the rights,
properties or assets of either of the Company or Acquisition Sub acquired or to
be acquired by the Surviving Corporation as a result of, or in connection with
the Merger or otherwise to carry out this Agreement, the officers and directors
of the Surviving Corporation shall be authorized to execute and deliver, in the
name and on behalf of either the Company or Acquisition Sub, all such deeds,
bills of sale, assignments and assurances and to take and do, in the name and on
behalf of each of such corporations or otherwise, all such other actions and
things as may be necessary or desirable to vest, perfect or confirm any and all
rights, title and interest in, to and under such rights, properties or assets in
the Surviving Corporation or otherwise to carry out this Agreement.
Section 2.8 Conversion of Shares. As of the Effective Time, by virtue of
--------------------
the Merger and without any action on the part of any holder of Shares or any
shares of common stock of Acquisition Sub:
(a) Each issued and outstanding share of common stock of
Acquisition Sub shall be converted into and become one validly issued, fully
paid and non-assessable share of Common Stock of the Surviving Corporation.
7
<PAGE>
(b) Subject to Sections 2.8(d) and 3.1, each issued and
outstanding Share (other than Shares to be canceled in accordance with Section
2.8(c)) shall be canceled and become the right to receive in cash, without
interest, the Per Share Amount set forth in the Offer (the "Merger
Consideration"). As of the Effective Time, all such Shares shall be canceled in
accordance with this Section 2.8(b), and when so canceled, shall no longer be
outstanding and shall automatically be retired and shall cease to exist, and
each holder of a certificate representing any such Shares shall cease to have
any rights with respect thereto, except the right to receive the Merger
Consideration, without interest.
(c) Each share of Company Common Stock (including, without
limitation, the Shares purchased pursuant to the Offer) owned by the Company,
any Company Subsidiary, Purchaser, or Acquisition Sub shall automatically be
canceled and retired and shall cease to exist, and no consideration shall be
delivered in exchange therefor.
(d) Each option granted to an employee, consultant or director of
the Company or its Subsidiaries to acquire Shares ("Option") that is outstanding
as of the Effective Time, whether or not then vested or exercisable, shall be
terminated and canceled. At the Effective Time, all holders of canceled Options,
whether or not then vested or exercisable, having an exercise price per share
that is less than the Per Share Price shall be canceled in exchange for a single
lump sum cash payment equal to the product of (1) the number of Shares subject
to such Option and (2) the excess of the Per Share Price over the exercise price
per share of such Option.
(e) Each share of Company Series A Stock (as hereinafter defined)
and Company Series B Stock (as hereinafter defined) that is outstanding as of
the Effective Time shall be redeemed and canceled and become the right to
receive in cash, without interest, a single lump sum cash payment equal to its
respective Liquidation Preference (as defined in the Company's Certificate of
Incorporation as in effect on the date of this Agreement).
(f) Each Company Warrant that is outstanding as of the Effective
Time, and whether or not then exercisable, shall, effective as of the Effective
Time, automatically be canceled, and the holder thereof shall cease to have any
rights with respect thereto, except the right to receive in cash, without
interest, a single lump sum cash payment equal to the product of the number of
Shares subject to such Company Warrant, times the Per Share Amount, provided
that such holder shall have first paid to the Company, in cash, the aggregate
exercise price payable for such Shares based upon the exercise price per share
as of the date of this Agreement.
(g) Each Zero Coupon Subordinated Note issued by the Company on
May 29, 1998 (each, a "Zero Coupon Note") that is outstanding as of the
Effective Time shall be redeemed in full and canceled, without any premium or
prepayment penalty, in accordance with its terms.
Section 2.9 Stockholders' Meetings.
----------------------
(a) In order to consummate the Merger, the Company, acting through
the Board, Purchaser and Acquisition Sub shall, in accordance with applicable
legal, regulatory and stock exchange or stock market requirements and subject to
their fiduciary duties and obligations:
8
<PAGE>
(i) duly call, give notice of, convene and hold an annual or
special meeting of its stockholders (the "Stockholders' Meeting") to be
held as soon as practicable following the acceptance for payment and
purchase of Shares pursuant to the Offer for the purpose of considering and
taking action upon the approval of the Merger;
(ii) include in the Merger Proxy Statement (as hereinafter
defined) (i) the recommendation of the Board that the stockholders of the
Company vote in favor of the approval of the Merger and (ii) the written
opinion of the Financial Advisor that the consideration to be received by
the stockholders of the Company pursuant to the Merger is fair to such
stockholders from a financial point of view;
(iii) prepare and file with the SEC a preliminary proxy or
information statement relating to this Agreement and the Merger and use its
best efforts (A) to obtain and furnish the information required to be
included by it in the Merger Proxy Statement and, after consultation with
Purchaser, respond promptly to any comments made by the SEC with respect to
the preliminary proxy or information statement, and cause a definitive
proxy or information statement, including any amendments or supplements
thereto (the "Merger Proxy Statement"), to be mailed to its stockholders at
the earliest practicable time following the expiration or termination of
the Offer; provided, however, that no amendment or supplement to the Merger
-------- -------
Proxy Statement will be made by the Company without consultation with
Purchaser and its counsel, and (B) subject to its fiduciary duties as
unanimously determined in good faith by the Board, based as to legal
matters on the advice of legal counsel, to obtain the necessary approvals
by its stockholders of this Agreement, the Merger and the Transactions. At
such meeting, Purchaser and its affiliates shall vote, or cause to be
voted, all Shares owned by them in favor of approval and adoption of the
Merger; and
(iv) Purchaser will provide the Company with the information
concerning Purchaser required to be included in the Merger Proxy Statement.
(b) Notwithstanding anything herein to the contrary, Purchaser,
the Company and Acquisition Sub agree that, in lieu of holding the Stockholders'
Meeting, the Company may obtain the approval and adoption of this Agreement, the
Merger and the other Transactions by the holders of a majority of the
outstanding Shares, by written consent pursuant to Section 228 of the DGCL
("Approval by Consent"). In addition, the Company agrees with and covenants to
Purchaser and Acquisition Sub that the Company shall use all reasonable efforts
to permit Company's stockholders to effect Approvals by Consent to adopt and
approve, for purposes of Section 251 of the DGCL, this Agreement, the Merger and
the other Transactions and to comply with and satisfy as promptly as practicable
any applicable legal, regulatory or stock exchange or stock market requirements
that apply to approving this Agreement, the Merger and the other Transactions by
way of Approval by Consent. If Company stockholder approval and adoption is
obtained by Approval by Consent, the Company shall not be required to call the
Stockholders' Meeting.
9
<PAGE>
ARTICLE III
DISSENTING SHARES; EXCHANGE OF SHARES
Section 3.1 Dissenting Shares.
-----------------
(a) Notwithstanding anything in this Agreement to the contrary
(except for the provisions of Section 3.1(b)), any Shares held by a holder who
has demanded and perfected his demand for appraisal of his Shares in accordance
with the DGCL (including, but not limited to, Section 262 thereof) and as of the
Effective Time has neither withdrawn nor lost his, her or its right to such
appraisal ("Dissenting Shares") shall not be converted into or represent a right
to receive the Merger Consideration pursuant to Section 2.8, but the holder
thereof shall be entitled to only such rights as are granted by the DGCL.
(b) Notwithstanding the provisions of Section 3.1(a), if any
holder of Shares who demands appraisal of his Shares under the DGCL effectively
withdraws or loses (through failure to perfect or otherwise) his, her or its
right to appraisal, then as of the Effective Time or the occurrence of such
event, whichever later occurs, such holder's Shares shall automatically be
converted into and represent only the right to receive the Merger Consideration
as provided in Section 3.1(a), without interest thereon, upon surrender of the
certificate or certificates representing such Shares pursuant to Section 3.2
hereof.
(c) If applicable, the Company shall give Purchaser (i) prompt
notice of any demands for appraisal or payment of the fair value of any Shares,
withdrawals of such demands, and any other instruments served pursuant to the
DGCL received by the Company and (ii) the opportunity to direct all negotiations
and proceedings with respect to demands for appraisal under the DGCL. The
Company shall not voluntarily make any payment with respect to any demands for
appraisal and shall not, except with the prior written consent of Purchaser,
settle or offer to settle any such demands.
Section 3.2 Exchange of Certificates.
------------------------
(a) Prior to the Effective Time, Purchaser shall designate a bank
or trust company who shall be reasonably satisfactory to the Company to act as
paying agent in the Merger (the "Exchange Agent"), and on or prior to the
Effective Time, Purchaser shall make available, or cause the Surviving
Corporation to make available, to the Exchange Agent, cash in an amount
necessary for the payment of the Merger Consideration as provided in Section 2.8
upon surrender of certificates representing Shares (the "Certificates") as part
of the Merger. Funds made available to the Exchange Agent shall be invested by
the Exchange Agent as directed by Acquisition Sub or, after the Effective Time,
the Surviving Corporation, provided that such investments shall only be in
obligations of or guaranteed by the United States of America, in commercial
paper obligations rated A-1 or P-1 or better by Moody's Investors Service, Inc.
or Standard & Poor's Corporation, respectively, or in certificates of deposit,
bank repurchase agreements or banker's acceptances of commercial banks with
capital exceeding $1 billion (it being understood that any
10
<PAGE>
and all interest or income earned on funds made available to the Exchange Agent
pursuant to this Agreement shall be turned over to Purchaser).
(b) As soon as practicable after the Effective Time, the Exchange
Agent shall mail to each holder of record of a Certificate a letter of
transmittal (which shall specify that delivery shall be effected, and risk of
loss and title to the Certificates shall pass, only upon actual and proper
delivery of the Certificates to the Exchange Agent, shall contain instructions
for use in effecting the surrender of the Certificates in exchange for payment
of the Merger Consideration and shall be in such form and contain such other
provisions as Purchaser and the Company may reasonably specify (together, the
"Transmittal Documents")). Upon surrender of a Certificate for cancellation to
the Exchange Agent, together with duly executed Transmittal Documents, the
holder of such Certificate shall be entitled to receive in exchange therefor (as
promptly as practicable) the Merger Consideration in respect of all Shares
formerly represented by such Certificate which such holder has the right to
receive, as set forth in Section 2.8. The Certificate(s) so surrendered shall
forthwith be canceled. All cash paid upon the surrender of Certificates in
accordance with the terms of this Article III shall be deemed to have been paid
in full satisfaction of all rights pertaining to the Shares theretofore
represented by such Certificates. Until surrendered in accordance with the
provisions of and as contemplated by this Section 3.2, any Certificate (other
than Certificates representing Shares subject to Sections 2.8(c) and other than
Dissenting Shares, if applicable) shall be deemed at any time after the
Effective Time to represent only the right to receive the Merger Consideration.
(c) At the Effective Time, the stock transfer books of the Company
shall be closed and there shall not be any further registration of transfers of
any shares of capital stock thereafter on the records of the Company. If, after
the Effective Time, Certificates are presented to the Surviving Corporation or
its transfer agent, they shall be canceled and exchanged for the consideration
provided for, and in accordance with the procedures set forth, in this Article
III. No interest shall accrue or be paid on any cash payable upon the surrender
of a Certificate or Certificates which immediately before the Effective Time
represented outstanding Shares.
(d) From and after the Effective Time, the holders of Certificates
evidencing ownership of Shares outstanding immediately prior to the Effective
Time shall cease to have any rights with respect to such Shares except as
otherwise provided herein or by applicable law.
(e) If any Certificate shall have been lost, stolen or destroyed,
upon the making of an affidavit of that fact by the person claiming such
Certificate to be lost, stolen or destroyed, the Surviving Corporation shall pay
or cause to be paid in exchange for such lost, stolen or destroyed Certificate
the Merger Consideration, in accordance with Section 2.8, for Shares represented
thereby. When authorizing such payment of any portion of the Merger
Consideration in exchange therefor, the Board of Directors of the Surviving
Corporation may, in its discretion and as a condition precedent to the payment
thereof, require the owner of such lost, stolen or destroyed Certificate to
execute and deliver to the Surviving Corporation an indemnity agreement, in a
form acceptable to the Surviving Corporation, pursuant to which such owner
agrees to indemnify the Surviving Corporation against any claim that may be made
against the Surviving Corporation with respect to the Certificate alleged to
have been lost, stolen or destroyed.
11
<PAGE>
(f) Promptly following the date which is six months after the
Effective Time, the Surviving Corporation shall be entitled to require the
Exchange Agent to deliver to it any cash (including any interest received with
respect thereto), Certificates and other documents in its possession relating to
the Transactions, which had been made available to the Exchange Agent and which
have not been disbursed to holders of Certificates, and thereafter such holders
shall be entitled to look to the Surviving Corporation (subject to abandoned
property, escheat or similar laws) only as general creditors thereof with
respect to any portion of the Merger Consideration payable upon due surrender of
their Certificates, without any interest thereon.
(g) Subject to Article II, the Merger Consideration paid in the
Merger, if any, shall be net to the holder of Shares in cash, subject to
reduction only for any applicable Federal withholding taxes or stock transfer
taxes payable by such holder.
(h) Notwithstanding anything to the contrary in this Section 3.2, none
of the Exchange Agent, Purchaser or the Surviving Corporation shall be liable to
any holder of a Certificate formerly representing Shares for any amount properly
delivered to a public official pursuant to any applicable abandoned property,
escheat or similar law.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as set forth in that certain Company Disclosure Schedule dated the
date hereof and delivered to Purchaser prior to the execution hereof (the
"Schedule"), The Company represents and warrants the following to Purchaser and
Acquisition Sub. Any information disclosed in any Section of the Schedule, if
reasonably related to any other Section or Sections of the Schedule and
described in reasonable detail so as to allow a reasonable person to make the
applicable cross-reference or connection, shall be deemed disclosed in reference
to all applicable Sections of the Schedule.
Section 4.1 Organization, Good Standing, etc. The Company and each of
---------------------------------
its Subsidiaries are corporations duly organized, validly existing and in good
standing under the laws of the respective states of their incorporation, have
all requisite power to own their properties and to carry on their businesses as
now being conducted and are duly qualified to do business and are in good
standing in all other jurisdictions in which qualification as a foreign
corporation is required, except for such failure to be qualified and in good
standing, if any, which when taken together with all other such failures of the
Company and its Subsidiaries would not in the aggregate have a Company Material
Adverse Effect, as defined below. Each such corporation, state of incorporation
and jurisdiction is set forth in Section 4.1 of the Schedule. As used herein,
the term "Subsidiary" shall mean, with respect to any party, any corporation or
other organization, whether incorporated or unincorporated or domestic or
foreign to the United States of which (i) such party or any other Subsidiary of
such party is a general partner (excluding such partnerships where such party or
any Subsidiary of such party do not have a majority of the voting interest in
such partnership) or (ii) at least a majority of the securities or other
interests having by
12
<PAGE>
their terms ordinary voting power to elect a majority of the Board or others
performing similar functions with respect to such corporation or other
organization is directly or indirectly owned or controlled by such party or by
any one or more of its Subsidiaries, or by such party and one or more of its
Subsidiaries. As used herein, "Company Material Adverse Effect" means (i) any
events, changes in or effects on the business of the Company or its Subsidiaries
that individually or in the aggregate is or are, as the case may be, materially
adverse to the business, assets, results of operations or financial condition of
the Company and its Subsidiaries, taken as a whole; or (ii) materially impairs
the ability of the Company to consummate the Merger or the other Transactions
contemplated by this Agreement; provided, however, that a Company Material
Adverse Effect of the type described in clause (i) above shall not include
changes resulting from changes in general economic conditions or in economic
conditions generally affecting the industry in which the Company operates.
Section 4.2 Authorized Shares, Absence of Options, Warrants, etc. The
-----------------------------------------------------
authorized capital stock of the Company consists of 30,000,000 Shares, and
200,000 shares of Preferred Stock of which 64,120 shares are designated as
Series A Preferred Stock of the Company ("Company Series A Stock") and 10,000
shares are designated as Series B Preferred Stock of the Company ("Company
Series B Stock"). As of the close of business on the day immediately prior to
the date of this Agreement, 7,091,774 Shares were issued and outstanding, and as
of the date of this Agreement, (i) all of the shares of Company Series A Stock
are issued and outstanding, (ii) 9,625 shares of Company Series B Stock are
issued and outstanding and (iii) no shares of capital stock are held in the
Company's treasury. As of the date of this Agreement, there are no other
outstanding shares of capital stock or voting securities of the Company and no
outstanding commitments to issue any shares of capital stock or voting
securities of the Company after the date of this Agreement other than pursuant
to the exercise of options outstanding as of the date of this Agreement under
the Plans, or warrants outstanding as of the date of this Agreement and held by
members of the Bolle family to purchase 663,618 shares of Company Common Stock
(the "Company Warrants"). A true, accurate and complete list of all of such
options and the Company Warrants (including the exercise prices thereof) is
included on Section 4.2 of the Schedule. All of the outstanding Shares are, and
all Shares issuable upon due exercise of the securities listed below will be,
when issued in accordance with the terms of such securities, duly authorized,
validly issued, fully paid and nonassessable by the Company and are free of any
Liens (as hereinafter defined) other than Liens created or imposed upon by the
holders thereof. Except as set forth in Section 4.2 of the Schedule, there are
no voting trusts or other agreements or understandings with respect to the
voting of any such Shares known to the Company; and there are no outstanding
preemptive rights, calls, rights of conversion or exchange or other rights,
commitments or agreements of any character relating to the authorized or issued
Shares known to the Company. Except for the Liens set forth in Section 4.2 of
the Schedule, all of which shall be released as a condition to the consummation
of the Offer (the "Permitted Liens"), and Liens arising by operation of law in
the ordinary course of business, none of which has had or could reasonably be
expected to have a Company Material Adverse Effect, the Company is the owner of
all outstanding equity securities of each of its Subsidiaries, free and clear of
any Liens; no equity securities of any of such Subsidiaries are held in the
treasury of any of such Subsidiaries; there are no other equity securities of
any class of any of such Subsidiaries reserved for issuance as of the date of
this Agreement; there are no voting trusts or other agreements or understandings
13
<PAGE>
with respect to the voting of any of the equity securities of such Subsidiaries;
and, except as set forth on Section 4.2 of the Schedule, there are no
outstanding options, warrants, preemptive rights, calls, rights of conversion or
exchange or other rights, commitments or agreements of any character relating to
equity securities of any of such Subsidiaries. Section 4.2 of the Schedule
lists all stocks, bonds, debentures and other interests in or securities of such
Subsidiaries and of other business enterprises owned by the Company or any of
its Subsidiaries. The securities of AAi/Foster Grant, Inc. listed on Section
4.2 of the Schedule and held by the Company (the "AAI Securities") are scheduled
for redemption on their terms in February, 2000 for $1,000,000. For purposes of
this Agreement, "Lien" means, with respect to any asset (including, without
limitation, any security, any option, claim, mortgage, lien, pledge, charge,
security interest or encumbrance or restrictions of any kind in respect of such
asset.
Section 4.3 Effect of Agreement. The execution and delivery of this
-------------------
Agreement by the Company and the consummation of the Merger have been duly
authorized by the Board, do not require the consent, approval or authorization
of or filing with any person or any Federal, state or local government or any
court, administrative agency or commission or other governmental entity or
agency or foreign government, court, administrative agency or commission or
other governmental authority or agency (a "Governmental Entity") (i) except in
connection with the applicable requirements of the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended (the "HSR Act"), (ii) pursuant to the
applicable requirements of the Exchange Act and the SEC's rules and regulations
promulgated thereunder, (iii) the filing and, if applicable, recordation of the
Certificate of Merger pursuant to the DGCL and (iv) and the consents, waivers or
approvals from persons to specified contracts listed in Section 4.3 of the
Schedule and will not, subject to obtaining the aforesaid consents, waivers or
approvals and making the aforesaid filings, violate any material law, statute,
regulation, injunction, order or decree of any Governmental Entity, or conflict
with or result in a material breach of or constitute a material default under
any of the terms or provisions of, or give any person the right to terminate,
any mortgage, note, bond or indenture or material obligation to which the
Company or any of its Subsidiaries is a party or by which it or any of its or
their properties may be bound. Subject to securing the consents, waivers and
approvals set forth in Section 4.3 of the Schedule, the execution and delivery
of this Agreement by the Company and the consummation of the Merger will not
give to others any interests or rights, including rights of termination or
cancellation, in or with respect to any material property, asset, contract,
agreement, license or other commitment or instrument of the Company or any of
its Subsidiaries.
Section 4.4 Contracts and Commitments. Neither the Company nor any of its
-------------------------
Subsidiaries is in breach or violation of or in default (i) under any of the
terms or provisions of any mortgages, leases, notes, bonds, indentures,
commitments, contracts, agreements, licenses or other instruments to which such
corporation is a party or by which it or any of its properties is bound and
which singularly is or in the aggregate are material to the business,
properties, financial condition or operations of such corporation, (ii) under
any material law, judgment or decree, or any order, rule or regulation
applicable to such corporation or to any of its properties or (iii) in the
payment of any of its material obligations for borrowed funds, and there exists
no known condition or known event which, after notice or lapse of time or both,
would constitute a default in connection with any of the foregoing. Section 4.4
of the Schedule contains a correct
14
<PAGE>
and complete list of every Material Contract (as hereinafter defined) to which
the Company or any of its Subsidiaries is a party or by which any of the
Company's or any of its Subsidiaries' assets or properties are bound, including
all amendments and other modifications thereto. For purposes of this Agreement,
"Material Contract" means any contract, agreement, lease or commitment, written
or oral, (i) involving annual payments of $100,000 or more, (ii) involving an
obligation, whether contingent or otherwise, in excess of $100,000, or (iii) if
breached, canceled or terminated could reasonably be expected to have a Company
Material Adverse Effect. The Company has provided Purchaser with a true and
complete copy of all Material Contracts. Each Material Contract is a valid and
binding obligation of the Company or its Subsidiaries, as applicable,
enforceable in accordance with its terms, and is in full force and effect,
subject to bankruptcy, reorganization, receivership and other laws affecting
creditors' rights generally. No other party to any Material Contract, is (with
or without the lapse of time or the giving of notice, or both) in material
breach or default in any material respect thereunder and there exists no
condition which would constitute a material breach or default by any other party
thereunder. To the Company's Knowledge (as defined in this Section 4.4), none of
the Company or any of its Subsidiaries has been notified that any other party to
any Material Contract intends to cancel, terminate, not renew or exercise an
option under any Material Contract, whether in connection with the transactions
contemplated hereby or otherwise. For purposes of this Agreement, "Company's
Knowledge" means (i) the actual knowledge, after reasonable inquiry, of Martin
E. Franklin, Ian G.H. Ashken, Thomas R. Reed, or Ken D'Arcy, and (ii) the actual
knowledge, after reasonable inquiry, of Gary Kiedaisch as of the date of this
Agreement but not as of dates after the date of this Agreement.
Section 4.5 SEC Documents; Financial Statements. The Company has
-----------------------------------
furnished or made available to Purchaser a true and complete copy of each
statement, report, registration statement (with the prospectus in the form filed
pursuant to Rule 424(b) under the Securities Act of 1933, as amended (the
"Securities Act")), definitive proxy statement and other filings filed with the
SEC by the Company since November 14, 1997, and not available through "EDGAR"
(the "Non-EDGAR Company SEC Documents") and, prior to the Effective Time, the
Company will have furnished Purchaser with true and complete copies of any
additional documents filed with the SEC by the Company prior to the Effective
Time (the "Post-Execution Company SEC Documents", and together with the Non-
EDGAR Company SEC Documents and any such statements, reports, registration
statements, prospectuses, proxy statements and other filings filed by the
Company since November 14, 1997 which are available through "EDGAR", the
"Company SEC Documents"). In addition, the Company has made available to
Purchaser all exhibits (including those exhibits incorporated by reference) to
the Company SEC Documents filed prior to the date hereof which are not available
through "EDGAR", and will promptly make available to Purchaser all exhibits to
any additional Company SEC Documents filed prior to the Effective Time. The
Company has filed with the SEC all reports and registration statements and other
filings required to be filed with the SEC under the rules and regulations of the
SEC. All material documents required to be filed as exhibits to the Company SEC
Documents have been so filed. As of their respective filings dates, the Company
SEC Documents complied in all material respects with the requirements of the
Exchange Act and the Securities Act, and none of the Company SEC Documents
contained any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary to make the statements made
therein, in light of the
15
<PAGE>
circumstances under which they were made and at the time, not misleading, except
to the extent corrected by a subsequently filed the Company SEC Document. The
financial statements of the Company (including, but not limited to, the
financial statements of the Company through the period ended September 30, 1999
(the "September 1999 Balance Sheet")), including any amendments or restatements
thereof prior to the date hereof and the notes thereto, included in the Company
SEC Documents filed prior to the date hereof (the "Company Financial
Statements"), copies of which have been delivered to the Purchaser by the
Company prior to the date of this Agreement, complied as to form in all material
respects with applicable accounting requirements and with the published rules
and regulations of the SEC with respect thereto as of their respective dates,
and were prepared in accordance with generally accepted accounting principles
applied on a basis consistent throughout the periods indicated and consistent
with each other ("GAAP") (except as may be indicated in the notes thereto or, in
the case of unaudited statements included in Quarterly Reports on Form 10-Q, as
permitted by Form 10-Q of the SEC). The Company Financial Statements fairly
present the consolidated financial condition, operating results, and cash flows
of the Company and its Subsidiaries at the dates and during the periods
indicated therein (subject, in the case of unaudited statements, to normal,
recurring year-end adjustments which are not material). There has been no change
in the Company's accounting policies except as described in the notes to the
Company Financial Statements. The Company has not received from its independent
auditors, either in connection with the preparation and audit of the Company's
Financial Statements for the period ended December 31, 1998 or at any time since
December 31, 1998, a letter or any other written notice stating that the
auditors' review of the Company's system of internal accounting controls or any
of its Subsidiaries' systems of internal accounting controls, to the extent the
auditors deemed such a review necessary in establishing the scope of their
examinations of the Company's consolidated financial statements since such date,
disclosed any weakness in internal controls that the auditors considered a
material weakness.
Section 4.6 Absence of Liabilities. Neither the Company nor any of its
----------------------
Subsidiaries has any material liabilities or obligations, either accrued,
absolute, contingent or otherwise, which have not been (i) reflected in the
Company's Annual Report on Form 10-K for the period ended December 31, 1998
(including the Company's Balance Sheet as of December 31, 1998 included in the
Company Financial Statements (the "December 1998 Balance Sheet")) and filed with
the SEC, (ii) specifically described in Section 4.6 of the Schedule, (iii)
incurred in the ordinary course of the Company's business since December 31,
1998, none of which have had or could reasonably be expected to have a Company
Material Adverse Effect or (iv) incurred under or in connection with this
Agreement.
Section 4.7 Absence of Certain Changes or Events. Since September 30,
------------------------------------
1999, except as set forth in Section 4.7 of the Schedule, the Company and its
Subsidiaries have conducted their business in the ordinary course, consistent
with past practice. Without limiting the generality of the foregoing, since
September 30, 1999, except as disclosed in Section 4.7 of the Schedule, (i)
neither the Company nor any of its Subsidiaries has sustained any damage,
destruction or loss by reason of fire, flood, accident or other calamity
(whether or not covered by insurance) that would reasonably be expected to have
a Company Material Adverse Effect; (ii) there have been no changes in the
condition (financial or otherwise), business, net worth, assets, properties,
obligations or liabilities (fixed or otherwise) of the Company or any of its
Subsidiaries that would
16
<PAGE>
reasonably be expected to have a Company Material Adverse Effect; (iii) neither
the Company nor any of its Subsidiaries has incurred any material obligation for
the payment of money extending more than one year, except for operating leases
entered into in the ordinary course of business; (iv) neither the Company nor
any of its Subsidiaries has paid any obligation or liability (fixed or
contingent) except current liabilities included in the September 1999 Balance
Sheet and current liabilities incurred since September 30, 1999 in the ordinary
course of business or pursuant to the terms of this Agreement; (v) the Company
has not declared any other dividend or other distribution on or with respect to
any Shares or other securities of the Company; (vi) the Company has not
purchased, redeemed or otherwise acquired for consideration, directly or
indirectly, any Shares or other securities of the Company; (vii) neither the
Company nor any of its Subsidiaries has disposed of, or agreed to dispose of,
any material property or asset, other than in the ordinary course of business
and for a consideration at least equal to the fair market value of such property
or asset; (viii) neither the Company nor any of its Subsidiaries has made any
expenditures or commitments for the purchase, acquisition, construction or
improvement of a capital asset except in the ordinary course of business and in
an aggregate amount not exceeding $100,000; (ix) neither the Company nor any of
its Subsidiaries has repaid Indebtedness (as hereinafter defined) of the Company
to any affiliates of the Company or any of its Subsidiaries; (x) neither the
Company nor any of its Subsidiaries has amended its Certificate of Incorporation
or By-Laws; and (xi) except as set forth above, neither the Company nor any of
its Subsidiaries has entered into any other transaction or contract other than
in the ordinary course of business. Except as set forth in Section 4.7 of the
Schedule, there are no scheduled, and the Company does not expect to make any,
dividends on other distributions (whether cash, stock or otherwise) on or
respect to any Shares or other securities of the Company between the date of the
Agreement and the Cut-Off Date. For purposes of this Agreement, "Indebtedness"
means any liability, whether or not contingent, (i) in respect of borrowed money
or evidenced by bonds, notes, debentures, or similar instruments, (ii)
representing the balance deferred and unpaid of the purchase price of any
property (including pursuant to capital leases) but excluding trade payables, if
and to the extent any of the foregoing indebtedness would appear as a liability
upon a balance sheet prepared on a consolidated basis in accordance with GAAP,
and (iii) guaranties, direct or indirect, in any manner, of all or any part of
any Indebtedness of any person.
Section 4.8 Tax and Other Returns. Except as set forth in Section 4.8 of
---------------------
the Schedule (i) all federal tax returns and tax reports required to be filed by
the Company and its Subsidiaries have been timely filed with the appropriate
Governmental Entities where such returns and reports are required to be filed
and all such tax returns were true, accurate and complete in all material
respects; (ii) all material foreign, state and local tax returns and tax reports
required to be filed by the Company or any of its Subsidiaries in those
jurisdictions where either the Company or any of its Subsidiaries have qualified
to do business, and which relate to income, profits, franchise or property
taxes, have been filed with the appropriate Governmental Entity in such
jurisdiction, and all such tax returns were true, accurate and complete in all
material respects; (iii) all federal, state, local and foreign income, profits
and franchise taxes (including interest and penalties) shown due on the tax
returns and tax reports referred to in (i) and (ii) of this Section 4.8 were
timely and fully paid; (iv) the Company and its Subsidiaries have provided in
its Company Financial Statements, and at the Effective Time will have provided
in its financial statements for periods through the Effective Time, adequate
accruals in accordance with GAAP for all taxes that have
17
<PAGE>
been, or will have been, incurred but have not been paid, whether or not shown
as being due on any tax returns; (v) no waivers of statutes of limitation have
been given or requested; (vi) there is no dispute or claim concerning any
additional tax liability of the Company or any of its Subsidiaries made by any
taxing authority with respect to the returns and reports filed by the Company or
its Subsidiaries referred to in (i) and (ii) of this Section 4.8 and (vii)
neither the Company nor its Subsidiaries expect any taxing authority to assess
any additional tax liability for any tax return or report filed by the Company
or its Subsidiaries referred to in (i) and (ii) of this Section 4.8. No power of
attorney has been executed or filed by or on behalf of the Company or its
Subsidiaries with respect to taxes.
Section 4.9 Employment Arrangements. Except as disclosed in Section 4.9
-----------------------
of the Schedule, neither the Company nor any of its Subsidiaries is a party to
any employment, agency, commission or consultant contract, written or oral, with
any present or former officer, director or employee, consultant or agent, or any
collective bargaining agreement, nor does the Company or any of its Subsidiaries
have any Company Plan (as defined in Section 4.17 below). Except as disclosed
in Section 4.9 of the Schedule, since December 31, 1998, there has been no
change in any such plan or arrangement or in compensation to any director or
officer, or any change, either material in amount or other than in the ordinary
course of business, in compensation to any other employee of the Company or any
of its Subsidiaries. Except as disclosed in Section 4.9 of the Schedule, since
December 31, 1998, there have been no bonus, profit sharing, incentive, pension
or similar payments made to any employee, consultant or agent by the Company or
any of its Subsidiaries, nor has the Company or any of its Subsidiaries
committed to make any such payments. Except as set forth in Section 4.9 of the
Schedule, no director, officer, employee or agent of the Company or any of its
Subsidiaries is entitled to receive, or has any claim with respect to, a bonus,
"success fee", severance or separation payment or other payment as a result of
the Transactions contemplated by this Agreement.
Section 4.10 Property. The Company and each of its Subsidiaries have
--------
good and marketable title in fee simple to all of the real property respectively
owned by them, and good and marketable title to all of the other tangible
properties and assets respectively owned by them, free and clear of all Liens
except (i) Liens for taxes not yet delinquent; (ii) Liens being contested in
good faith by appropriate proceedings (which Liens are described in Section 4.10
of the Schedule); (iii) such imperfections of title and encumbrances, if any, as
do not materially detract from the value of, or materially interfere with the
present use of, such property; and (iv) for those listed in Section 4.10 of the
Schedule, all of which will be released at or prior to the Merger Closing.
Neither the Company nor any of its Subsidiaries has received notice of violation
of any zoning regulation, ordinance or other law, order, regulation or
requirement relating to real property owned or leased by it which violation
would reasonably be expected to have a Company Material Adverse Effect. The
tangible personal property of the Company and its Subsidiaries that is material
to the operation of the business of the Company and its Subsidiaries is fit for
the use which is intended, free from any material defects and is in good
operating condition and repair (ordinary wear and tear excepted). None of such
material tangible personal property requires any repair or replacement except
for maintenance or replacement in the ordinary course of business or replacement
in accordance with the normal useful life for such tangible personal property.
None of the Company or any of its Subsidiaries owns any material amounts of
personal property
18
<PAGE>
that are obsolete or of below standard quality. None of the material tangible
personal property is located other than at the locations of the Company or any
of its Subsidiaries set forth on Section 4.10 of the Schedule. No portion of the
real property owned or leased by the Company or any of its Subsidiaries is
subject to any pending condemnation proceeding or proceeding by any Governmental
Entity materially adverse to such property, and, none of the Company or any of
its Subsidiaries knows of any threatened condemnation proceeding with respect to
such property. The buildings, plants, improvements, structures and fixtures on
the real property owned or leased by the Company or any of its Subsidiaries,
including, without limitation, heating, ventilation, mechanical, electrical,
sewer, sprinkler and air conditioning systems, roof, foundation and floors, (i)
have been properly maintained in all material respects, (ii) are in good
operating condition in all material respects, ordinary wear and tear excepted,
and are fit for the purposes for which they are being utilized, and (iii) are in
accordance with all applicable laws, ordinances, rules and regulations
applicable to the Company or any of its Subsidiaries or such property (including
those relating to building, zoning, fire or health codes), except for such
failures to be in accordance with such laws, ordinances, rules or regulations
which have not had or could not reasonably be expected to have a Company
Material Adverse Effect, and neither the Company nor any of its Subsidiaries has
received any notice alleging any such violation or requiring or calling
attention to the need for any work, repairs, construction, alteration or
installation on or in connection with such real property which has not been
heretofore been complied with by the Company or its Subsidiaries.
Section 4.11 Patents, Trademarks, etc. (a) Section 4.11 of the Schedule
-------------------------
correctly lists all domestic and foreign letters patent, patent applications,
patent, technology and know-how licenses and royalty agreements, trade names,
trademark (including service mark) registrations and applications, common law
trademarks, trademark licenses and royalty agreements, copyrights, copyright
registrations and applications and copyright licenses and royalty agreements
("Intellectual Property") used or held by the Company or any of its
Subsidiaries. Unless otherwise indicated in Section 4.11 of the Schedule, the
Company or such Subsidiary either owns or has the right to use (in the manner
presently being used by the Company or such Subsidiary) by license, sublicense,
agreement, or permission all of the Intellectual Property set forth on Section
4.11 of the Schedule. Except as otherwise set forth in Section 4.11 of the
Schedule, the Company has not granted a license, nor reached an understanding
with any person, nor entered into a written agreement, relating in whole or in
part, to any of the Intellectual Property used in connection with the conduct of
the Company's business, and there has been no assertion thereof by any Person.
To the Company's Knowledge, there is no infringement or other adverse claim
against the rights of the Company with respect to any of the Intellectual
Property used or owned by the Company in connection with the conduct of its
business. None of the Intellectual Property is subject to any pending or, to the
Company's Knowledge, threatened litigation or other adverse claims except as set
forth in Section 4.11 of the Schedule. Neither the Company nor any of its
Subsidiaries has received notice that the use by it of such Intellectual
Property may infringe upon or conflict with any intellectual property rights of
any person. Subject to securing the consents, waivers and approvals set forth
in Section 4.11 of the Schedule, the execution and delivery of this Agreement by
the Company and the consummation of the Merger will not give to any person any
interests or rights, including rights of termination or cancellation, in or with
respect to any of the
19
<PAGE>
Intellectual Property owned, used or held by the Company or any of its
Subsidiaries in connection with the conduct of the Company's business.
Section 4.12 Absence of Defaults by Others. To the Company's Knowledge,
-----------------------------
no party with whom the Company or any of its Subsidiaries has an agreement which
is of material importance to the business, properties, financial condition or
operations of the Company or any of its Subsidiaries is in material default
thereunder.
Section 4.13 Litigation. Except as disclosed in Section 4.13 of the
----------
Schedule, neither the Company nor any of its Subsidiaries is a party to or
threatened with any litigation, governmental or other proceeding, investigation,
strike or other labor dispute or other controversy which might affect the
validity of this Agreement or which, individually or in the aggregate, through
settlement or judgement, might reasonably be expected to result in damages and
expenses to the Company in excess of $100,000, and there is no outstanding
order, writ, injunction or decree of any Governmental Entity against or
affecting the Company or any of its Subsidiaries or a material portion of their
respective businesses, properties, assets or goodwill.
Section 4.14 Disclosure Documents. Each document required to be filed by
--------------------
the Company with the SEC in connection with the transactions contemplated by
this Agreement will, when filed, comply as to form in all material respects with
the applicable requirements of the Exchange Act, and none of the information
supplied or to be supplied by the Company for inclusion in (i) the Schedule 14D-
1 and the Schedule 14D-9 and (ii) insofar as it relates to the Company, the
Offer, will contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein, in light of the circumstances under
which they were made, not misleading.
Section 4.15 Brokers' and Finders' Fees. Except as disclosed in Section
--------------------------
4.15 of the Schedule, no agent, broker, person or firm acting on behalf of the
Company or under its authority has claimed or is or will be entitled to any
commission or broker's or finder's fee from the Company in connection with the
transactions contemplated by this Agreement.
Section 4.16 Insurance. Section 4.16 of the Schedule correctly lists all
---------
policies of fire, liability, workmen's compensation, life, business interruption
and other types of insurance held by the Company or any of its Subsidiaries and
indicates for each such policy the carrier, risks insured, amounts of coverage,
deductible and expiration date. All such insurance policies are in full force
and effect. The consummation of the transactions contemplated by this Agreement
(including, but not limited to, the Offer and the Merger) does not constitute a
breach of, or give the insurer thereunder or other party thereto a right of
termination with respect to, such policies or bonds.
Section 4.17 Pension, Retirement and Profit Sharing Plans. Section 4.17
--------------------------------------------
of the Schedule lists each pension, profit sharing, stock-bonus, thrift or other
retirement plan, employee stock ownership plan, deferred compensation, stock
purchase, performance share, bonus or other incentive plan, severance plan,
health or welfare plan or other similar plan, agreement, arrangement or
understanding, whether or not reduced to writing, whether or not terminated and
whether or not such plan is or is intended to be qualified under Section 401(a)
of the Internal
20
<PAGE>
Revenue Code or any similar provision of applicable foreign laws, including,
without limitation, any employee welfare benefit plan or employee pension
benefit plan within the meaning of the Employee Retirement Income Security Act
of 1974, as amended ("ERISA") and any similar plans under applicable foreign
laws ("Company Plan"), maintained or sponsored, or with respect to which there
may be any liability (contingent or otherwise), by the Company or any of its
current or former Plan Affiliates (as hereinafter defined). Each Company Plan is
in full force and effect and is and has been administered in all material
respects in accordance with its terms and is and has been, and, to the Company's
Knowledge, each plan administrator and fiduciary of a Company Plan are and have
been, in compliance in all material respects with all applicable requirements of
ERISA (including the funding, reporting and disclosure and prohibited
transaction provisions thereof) and other applicable laws, regulations and
rulings. Each Company Plan intended to qualify under Section 401(a) of the
Internal Revenue Code of 1986, as amended (the "Code") and has received a
determination letter from the IRS to the effect that such Company Plan is
qualified under Section 401(a) of the Code as to form, and no event has
occurred, and no condition exists, which has resulted could reasonably be
expected to result in the revocation of such determination. No Company Plan is a
"multiemployer plan" (within the meaning of Section 3(37) of ERISA) or a
"defined benefit plan" or is subject to the provisions of Title IV of ERISA. The
Company or one of its Subsidiaries has made, accrued or provided for all
contributions required under each Company Plan. No Company Plan provides for
post-retirement "welfare-type" benefits except as may be required under COBRA.
For purposes of the foregoing, the term "Plan Affiliate" means any other person
or entity with whom the Company or any of its Subsidiaries or their respective
predecessors and successors constitute or have constituted all or part of a
controlled group, or which would be treated or have been treated with the
Company or any of its Subsidiaries or their respective predecessors and
successors as under common control or whose employees would be treated or have
been treated as employed by the Company or any of its Subsidiaries or their
respective predecessors and successors, under Section 414 of the Code or Section
4001(b) of ERISA and any regulations, administrative rulings and case law
interpreting the foregoing. For purposes of the foregoing representation,
information about Company Plans of Plan Affiliates shall be limited to Company
Plans for which the Company or any of its Subsidiaries may have any potential
liability, including contingent liability, arising under law, pursuant to any
indemnification agreement or otherwise.
Section 4.18 Environmental.
-------------
(a) Except as disclosed in Section 4.18.1 of the Schedule, the
Company and its Subsidiaries have complied, and the Company and its Subsidiaries
and all properties owned or leased by the Company and its Subsidiaries, either
currently or in the past (collectively, "Real Estate") are in compliance with
all applicable environmental and health and safety laws and all federal,
foreign, state and local laws, ordinances, orders, rules, and regulations
relating to the operation and occupancy of the Company's and its Subsidiaries
business and the Real Estate.
(b) Except as disclosed in Section 4.18.2 of the Schedule, none
of the Company or any of its Subsidiaries has any liability, responsibility or
obligation, whether fixed, unliquidated, absolute, contingent or otherwise,
under any federal, foreign, state or local environmental laws or regulations,
including any liability, responsibility, or obligation for fines
21
<PAGE>
or penalties, or for investigation, expense, removal, or response action to
effect compliance with or discharge any duty, obligation, or claim under any
such laws or regulations, and, to the Company's Knowledge, there is no reason to
believe that any such claims, actions, suits, proceedings, or investigations
under such laws or regulations exist or may be brought or threatened.
(c) Except as disclosed in Section 4.18.3 of the Schedule, there never
has been any and there is no past or continuing release or threat of release of
any hazardous or toxic substance, including, but not limited to, a "hazardous
substance" as defined in 42 U.S.C. (S) 9601(14) and oil, gasoline and other
petroleum-based substances (each, a "Hazardous Substance"), into the environment
at, on or from the Real Estate.
(d) Except as disclosed in Section 4.18.4 of the Schedule, there have
been no Hazardous Substances used or generated by the Company or any of its
Subsidiaries that have been disposed of or come to rest at any site that has
been included in any published federal, state or local "Superfund" site list or
any other list of hazardous or toxic waste sites.
(e) Except as disclosed in Section 4.18.5 of the Schedule, there never
have been any and there are no underground or above-ground storage tanks located
on, no polychlorinated biphenyls ("PCBs") or PCB-containing equipment used or
stored on, and no hazardous waste, as defined by the RCRA or comparable state or
local laws, treated, stored, or disposed on, the Real Estate or other real
property previously owned, leased or used by the Company or any of its
Subsidiaries.
(f) Except as disclosed in Section 4.18.6 of the Schedule, there is no
Hazardous Substance or other condition or use of the Real Estate or their
vicinities, whether natural or man-made, which poses a present or potential
threat of damage to the health of persons, to property, to natural resources, or
to the environment.
Section 4.19 Schedule 14D-9. The Schedule 14D-9 at the time filed with
--------------
the SEC will not contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they were
made, not misleading. The Schedule 14D-9 will, when filed by the Company with
the SEC, comply as to form in all material respects with the applicable
provisions of the Exchange Act and the SEC rules and regulations promulgated
thereunder. Notwithstanding the foregoing, the Company makes no representation
or warranty with respect to the statements made in any of the foregoing
documents based on written information supplied by or on behalf of Purchaser or
any of its affiliates specifically for inclusion therein.
Section 4.20 Opinions of Financial Advisors. The Financial Advisor has
------------------------------
delivered its written opinion, dated the date of this Agreement, to the Board to
the effect that, as of such date, the consideration to be received in the Offer
and the Merger by the holders of Shares (other than Purchaser and its
affiliates) is fair from a financial point of view to such holders and such
opinion has not been withdrawn or modified in any material respect prior to
consummation of the Offer, or prior to the Effective Time, a copy of which
opinion has been delivered to Purchaser.
22
<PAGE>
Section 4.21 Certain Business Practices. Neither the Company nor any of
--------------------------
its Subsidiaries nor any of their respective directors, officers, agents,
representatives or employees (in their capacity as directors, officers, agents,
representatives or employees) has: (a) used any funds for unlawful
contributions, gifts, entertainment or other unlawful expenses relating to
political activity; (b) directly or indirectly, paid or delivered any fee,
commission or other sum of money or item of property, however characterized, to
any finder, agent, or other party acting on behalf of or under the auspices of a
governmental official or party acting on behalf of or under the auspices of a
governmental official or Governmental Entity, in the United States or any other
country, which is in any manner related to the business or operations of the
Company or any of its Subsidiaries, that was illegal under any federal, state or
local laws of the United States or any other country having jurisdiction; or (c)
made any payment to any customer or supplier of the Company or any of its
Subsidiaries or any officer, director, partner, employee or agent of any such
customer or supplier for the unlawful sharing of fees or to any such customer or
supplier or any such officer, director, partner, employee or agent for the
unlawful rebating of charges, or engaged in any other unlawful reciprocal
practice, or made any other unlawful payment or given any other unlawful
consideration to any such customer or supplier or any such officer, director,
partner, employee or agent, in respect of the business of the Company and its
Subsidiaries.
Section 4.22 Compliance with Applicable Law. Except as set forth in
------------------------------
Section 4.22 of the Schedule, the Company and its Subsidiaries hold all material
permits, licenses, variances, exemptions, orders and approvals of all
Governmental Entities necessary for the lawful conduct of their respective
businesses (the "Company Permits"), except where the failure to have any such
Company Permit has not had and could not reasonably be expected to have a
Company Material Adverse Effect. Except as set forth in Section 4.22 of the
Schedule, the Company and its Subsidiaries are in compliance in all material
respects with the terms of the Company Permits. Except as set forth in Section
4.22 of the Schedule, the businesses of the Company and its Subsidiaries are not
being, and have not been, conducted in violation of any material law, ordinance
or regulation of any Governmental Entity. Except as set forth in Section 4.22
of the Schedule, no investigation or review by any Governmental Entity with
respect to the Company or any of its Subsidiaries is pending or, to the
Company's Knowledge, threatened nor, to the Company's Knowledge, has any
Governmental Entity indicated an intention to conduct the same.
Section 4.23 Affiliate Agreements. Except as set forth on Section 4.23
--------------------
of the Schedule, there are no material written or oral contracts, agreements,
arrangements or understandings between the Company or its Subsidiaries and/or
their affiliates in connection with its business, including, without limitation,
any such contracts, agreements, arrangements or understandings relating to the
provision of any products or services by the Company or its Subsidiaries to any
such affiliate, or by any such affiliate to the Company or its Subsidiaries.
Section 4.24 Labor Relations. Except as set forth on Section 4.24 of the
---------------
Schedule, there are no controversies or unfair labor practice proceedings
pending or, to the Company's Knowledge, threatened against the Company or its
Subsidiaries by any of their current or former employees or any labor or other
collective bargaining unit representing any current or former employees of the
Company or its Subsidiaries that would likely result in a labor strike or work
stoppage or otherwise have a Company Material Adverse Effect. Except as set
forth on Section
23
<PAGE>
4.24 of the Schedule, no organizational effort is presently being made or, to
the Company's Knowledge, threatened by or on behalf of any labor union with
respect to employees of the Company or its Subsidiaries which (a) with respect
to efforts commenced on or prior to the date hereof, if successful, would have a
Company Material Adverse Effect or (b) with respect to efforts commenced after
the date hereof would have a Company Material Adverse Effect. As of the date of
this Agreement, to the Company's Knowledge, except as set forth on Section 4.24
of the Schedule, no officer of the Company or any of its Subsidiaries has any
announced plan to terminate employment with the Company or any of its
Subsidiaries.
Section 4.25 [INTENTIONALLY OMITTED]
Section 4.26 Minute Books. The minute books of the Company and its
------------
Subsidiaries have been made available to Purchaser and contain all minutes of
meetings of directors and stockholders or actions by written consent since the
date of incorporation of the Company and the respective Subsidiaries through the
date of this Agreement, except for minutes of meetings of directors held on
October 27, 1999, November 12, 1999 and November 23, 1999, none of which Recent
Minutes shall reflect, or involve discussions regarding, a Company Material
Adverse Effect (the "Recent Minutes").
Section 4.27 Complete Copies Of Materials. The Company has delivered or
----------------------------
made available true, accurate and complete copies of each document described
or identified in the Schedule.
Section 4.28 Customers and Suppliers. As of the date hereof, no
-----------------------
customer which individually accounted for more than 5% of the gross revenues of
the Company or its Subsidiaries during the 12-month period preceding the date
hereof has indicated to the Company or its Subsidiaries that it will stop, or
decrease the rate of, buying services or products from the Company or its
Subsidiaries. As of the date hereof, no material supplier of the Company or its
Subsidiaries has indicated to the Company or its Subsidiaries that it will stop,
or decrease the rate of, supplying materials, products or services to the
Company or its Subsidiaries. Neither the Company nor any of its Subsidiaries
has knowingly breached any agreement with, or engaged in any fraudulent conduct
with respect to, any supplier of the Company or its Subsidiaries.
Section 4.29 Year 2000 Compliance. All of the material computer
--------------------
hardware and software systems of the Company and its Subsidiaries (including,
without limitation, those related to their facilities, equipment manufacturing
processes, quality control activities, accounting and bookkeeping records and
record keeping activities) are expected to be Year 2000 Compliant by December
31, 1999, except for such noncompliance which has not had or could not
reasonably be expected to have a Company Material Adverse Effect. As used in
this Agreement, the phrase "Year 2000 Compliant" shall mean with respect to the
Company's and its Subsidiaries' material hardware and software systems, that
such hardware and software is designed to be used prior to, during, and after
the calendar Year 2000 A.D., and such hardware and software used during each
such time period will accurately receive, provide and process date/time data
from, into and between the twentieth and twenty-first centuries, and will not
malfunction, cease to function, or
24
<PAGE>
provide invalid or incorrect results as a result of date/time data, provided
that the Company makes no representations as to compliance of systems owned or
operated by its customers or suppliers.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser represents and warrants as follows:
Section 5.1 Organization, Good Standing, etc. Each of Purchaser and
--------------------------------
Acquisition Sub is a corporation duly incorporated, validly existing and in good
standing under the laws of the State of Delaware and has all requisite corporate
power and authority to own its properties and to carry on its business as now
being conducted thereby.
Section 5.2 Authorization of Agreement. The execution and delivery of
--------------------------
this Agreement by Purchaser and Acquisition and the Transactions contemplated
hereby have been duly authorized by the Board of Directors of each of Purchaser
and Acquisition Sub and do not require the consent, approval or authorization of
or filing with any person or public authority other than the filings under and
pursuant to the HSR Act contemplated by Section 4.3 and will not violate any
law, statute, regulation, injunction, order or decree of any Governmental Entity
or conflict with or result in a breach of or constitute a default under any of
the terms or provisions of any material mortgage, note, bond or indenture or
obligation to which Purchaser is a party or by which it or any of its properties
may be bound.
Section 5.3 Disclosure Documents. Each document required to be filed by
--------------------
the Purchaser with the SEC in connection with the transactions contemplated by
this Agreement will, when filed, comply as to form in all material respects with
the applicable requirements of the Exchange Act, and none of the information
supplied or to be supplied by the Purchaser for inclusion in (i) the Offer and
(ii) insofar as it relates to the Purchaser, the Schedule 14D-1 or the Schedule
14D-9 will contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
Section 5.4 Brokers and Finders. Except as disclosed to the Company in
-------------------
writing, no agent, broker, person or firm acting on behalf of Purchaser or
Acquisition Sub or under its authority has claimed or is or will be entitled to
any commission or broker's or finder's fee from Purchaser or Acquisition Sub in
connection with the transactions contemplated by this Agreement.
Section 5.5 Financing. After preliminary discussions with its lenders and
---------
other financing sources, Purchaser believes, in good faith, that Purchaser will
be able to obtain sufficient financing, on terms and conditions satisfactory to
Purchaser, to enable the consummation of the Offer and the Merger.
25
<PAGE>
ARTICLE VI
COVENANTS
Section 6.1 Conduct of Business of the Company and its Subsidiaries. (1)
-------------------------------------------------------
Except as expressly contemplated by this Agreement, during the period from the
date hereof until such time as Purchaser's designees shall constitute a majority
of the Board, the Company shall, and the Company shall cause each of its
Subsidiaries to: (i) conduct its business only in the ordinary course consistent
with past practice in all material respects; (ii) use commercially reasonable
efforts to preserve, maintain, and protect its assets and the business of the
Company and each of its Subsidiaries; (iii) use commercially reasonable efforts
to preserve intact the business organization of the business of the Company and
each of its Subsidiaries, to keep available the services of the employees of its
business, and to maintain existing relationships with licensors, licensees,
suppliers, contractors, distributors, customers, and others having business
relationships with its business; and (iv) comply in all material respects with
all applicable laws, including all applicable federal and state securities laws,
rules and regulations and including, without limitation, the timely filing of
all periodic reports with the SEC required to be filed pursuant to the Exchange
Act.
(b) Without limiting the generality of the foregoing, and except
as otherwise expressly provided in this Agreement, prior to the time persons
designated or elected by Purchaser or any of its affiliates shall constitute a
majority of the Board, the Board will not, without the prior written consent of
Purchaser, permit the Company or any of its Subsidiaries to:
(i) amend or propose to amend its certificate of
incorporation or by-laws;
(ii) authorize for issuance, issue, sell, deliver, or agree
or commit to issue, sell or deliver, dispose of, encumber or pledge any
stock of any class, options, warrants, commitments, subscriptions, rights
to purchase, stock appreciation rights, restricted stock, performance
units, stock equivalents or other securities, except as required by
agreements with the Company's employees or Company Plans, in either case in
effect as of the date of this Agreement, or amend any of the terms of any
such securities or agreements outstanding as of the date of this Agreement;
(iii) split, combine or reclassify any shares of its capital
stock, declare, set aside or pay any dividend or other distribution
(whether in cash, stock or property or any combination thereof) in respect
of its capital stock other than as set forth in Section 6.1 of the
Schedule, or redeem or otherwise acquire any of its securities or any
securities of its Subsidiaries;
(iv) (A) incur or assume any long-term or short-term
Indebtedness or issue any debt securities except for borrowings under
existing lines of credit in the ordinary course of business and in amounts
not material to the Company and its Subsidiaries taken as a whole; (B)
assume, guarantee, endorse or otherwise become liable
26
<PAGE>
or responsible (whether directly, contingently or otherwise) for the
obligations of any other person except in the ordinary course of business
consistent with past practice and in amounts not material to the Company
and its Subsidiaries, taken as a whole, and except for obligations of
wholly owned Subsidiaries of the Company to the Company or to other wholly
owned Subsidiaries of the Company; (C) make any loans, advances or capital
contributions to, or investments in, any other person (other than to wholly
owned Subsidiaries of the Company or customary loans or advances to
employees in the ordinary course of business consistent with past practice
and in amounts not material to the maker of such loan or advance) or make
any change in its existing borrowing or lending arrangements for or on
behalf of any such person, whether pursuant to an employee benefit plan or
otherwise; (D) pledge or otherwise encumber shares of capital stock of the
Company or any of its Subsidiaries; or (E) mortgage or pledge any of its
material assets, tangible or intangible, or create or suffer to exist any
material Lien thereupon;
(v) except as set forth on Section 6.1(b)(v) of the Schedule
with respect to certain proposed reorganizations of Holdings BF, S.A. and
Bolle Asia, Ltd., which restructuring shall be subject to Purchaser's prior
written consent, adopt a plan of complete or partial liquidation or adopt
resolutions providing for the complete or partial liquidation, dissolution,
consolidation, merger, restructuring or recapitalization of the Company or
any of its Subsidiaries;
(vi) (A) except as may be required by law or as contemplated by
this Agreement, or as required under any agreement or Company Plan as in
effect on the date of this Agreement, enter into, adopt or pay, agree to
pay, grant, issue, accelerate or accrue salary or other payments or
benefits pursuant to, or amend or terminate any bonus, profit sharing,
compensation, severance, termination, pension, retirement, deferred
compensation, employment, severance, welfare, insurance or other employee
benefit agreement, trust, plan, fund or other arrangement for the benefit
or welfare of any director, officer or employee in any manner; or (B)
except for normal increases in the ordinary course of business consistent
with past practice that, in the aggregate, do not result in a material
increase in benefits or compensation expense to the Company or its
Subsidiaries, and as required under existing agreements or in the ordinary
course of business consistent with past practice, increase in any manner
the compensation or fringe benefits of any director, officer or employee or
pay any benefit not required by any plan and arrangement as in effect as of
the date hereof (including, without limitation, the granting of stock
appreciation rights or performance units);
(vii) acquire, sell, transfer, lease, encumber or dispose of any
assets outside the ordinary course of business or any assets which in the
aggregate are material to the Company and its Subsidiaries, taken as a
whole, or enter into any commitment or transaction outside the ordinary
course of business consistent with past practice which would be material to
the Company and its Subsidiaries, taken as a whole;
(viii) except as may be required as a result of a change in law
or in GAAP, change any of the accounting principles or practices used by
it;
27
<PAGE>
(ix) revalue in any material respect any of its assets,
including, without limitation, writing down the value of inventory or
writing-off notes or accounts receivable other than in the ordinary course
of business;
(x) (A) acquire (by merger, consolidation, or acquisition of
stock or assets) any corporation, partnership or other business
organization or division thereof or any equity interest therein; (B) enter
into any contract or agreement other than in the ordinary course of
business consistent with past practice which would be material to the
Company and its Subsidiaries, taken as a whole; (C) authorize any new
capital expenditure or expenditures which, individually, is in excess of
$50,000 or, in the aggregate, are in excess of $200,000; or (D) enter into
or amend any contract, agreement, commitment or arrangement (including any
Material Contract) providing for the taking of any action that would be
prohibited hereunder;
(xi) make any tax election (unless required by law) or settle
or compromise any income tax liability of the Company or any of its
Subsidiaries, except if such action is taken in the ordinary course of
business, and, in any event, the Company shall consult with Purchaser
before filing or causing to be filed any tax return of the Company or its
Subsidiaries or before executing or causing to be executed any agreement or
waiver extending the period for assessment or collection of any taxes of
the Company or its Subsidiaries;
(xii) pay, discharge or satisfy any claims, liabilities or
obligations (absolute, accrued, asserted or unasserted, contingent or
otherwise), other than the payment, discharge or satisfaction in the
ordinary course of business of liabilities reflected or reserved against
in, or contemplated by, the consolidated financial statements (or the notes
thereto) of the Company and its Subsidiaries or incurred in the ordinary
course of business consistent with past practice;
(xiii) permit any insurance policy naming the Company or any of
its Subsidiaries as a beneficiary or a loss payable payee to be canceled or
terminated without notice to Purchaser except in the ordinary course of
business and consistent with past practice unless the Company or such
Subsidiary shall have obtained a comparable replacement policy;
(xiv) settle or compromise any pending or threatened suit,
action or claim relating to the Transactions;
(xv) amend, modify, or change in any material respect any
existing Material Contract relating to the business of the Company or its
Subsidiaries, other than in the ordinary course of business consistent with
past practice;
(xvi) waive, release, grant, or transfer any rights of material
value relating to the business of the Company or its Subsidiaries, other
than in the ordinary course of business consistent with past practice; or
28
<PAGE>
(xvii) take, or agree in writing or otherwise to take, any of the
actions described in Sections 6.1(b)(i) through 6.1(b)(xvi) or any action
which would make any of the representations or warranties of the Company
contained in this Agreement untrue or incorrect as of the date when made or
would result in any of the Offer Conditions set forth in Annex A not being
-------
satisfied.
(c) Until Purchaser's designees constitute a majority of the Board,
the Company will deliver to Purchaser accurate and complete copies of all
documents filed with the SEC or any exchange on which the Shares are listed for
trading.
Section 6.2 Acquisition Proposals. (1) The Company and each of its
---------------------
Subsidiaries shall, and shall direct and use its commercially reasonable efforts
to cause its officers, directors, employees, agents and other representatives
to, immediately cease any discussions, negotiations or contacts with any
Persons that may be ongoing with respect to an Acquisition Proposal (as
hereinafter defined). With respect to any Person or Persons with whom the
Company or any of its Subsidiaries has been discussing any Acquisition Proposal
prior to the date hereof, the Company and its Subsidiaries shall promptly
following the execution of this Agreement request each such Person who has
heretofore entered into a confidentiality agreement with the Company or any of
its Subsidiaries regarding an Acquisition Proposal to return to the Company all
confidential information heretofore furnished to such Person or Persons by or on
behalf of the Company or its Subsidiaries. Neither the Company nor any of its
Subsidiaries shall, directly or indirectly, through any officer, director,
employee, agent or otherwise, solicit, initiate or encourage the submission of
any proposal or offer from any Person (as hereinafter defined) relating to any
acquisition or purchase of all or (other than in the ordinary course of
business) any portion of the assets of, or any equity interest in, the Company
or any of its Subsidiaries or any recapitalization, business combination or
similar transaction with the Company or any of its Subsidiaries (any
communication with respect to the foregoing being an "Acquisition Proposal") or
participate in any negotiations regarding, or furnish to any other Person any
information with respect to, or otherwise cooperate in any way with, or assist
or participate in, facilitate or encourage any effort or attempt by any other
Person to do or seek any of the foregoing; provided, however, that, at any time
-------- -------
prior to the purchase of Shares by Acquisition Sub pursuant to the Offer, the
Company may furnish information to, and negotiate or otherwise engage in
discussions with, any party who delivers a written Acquisition Proposal which
was not solicited or encouraged after the date of this Agreement if the Board by
majority vote determines in good faith (i) after consultation with and receipt
of advice from its outside legal counsel, that failing to take such action may
reasonably be determined to constitute a breach of the fiduciary duties of the
Board under applicable law, (ii) that commitments (financing and other) of
substantially the same sufficiency and firmness as those then obtained by
Purchaser have been obtained with respect to such Acquisition Proposal that the
Board reasonably expects a transaction pursuant to such Acquisition Proposal
could be consummated and (iv) that such Acquisition Proposal is not subject to
any regulatory approvals that could reasonably be expected to prevent
consummation. In connection with the Acquisition Proposal of a party that
satisfies the criteria set forth in the proviso to the preceding sentence, the
Company will enter into a confidentiality agreement with such party, which
confidentiality agreement shall have terms and conditions that will be no less
29
<PAGE>
favorable to the Company than the terms and provisions relating to
confidentiality contained in that certain Letter of Intent dated November 10,
1999 by and between the Company and Purchaser.
(b) From and after the execution of this Agreement, the Company shall
promptly give Purchaser written notice of the receipt, directly or indirectly,
of any inquiries, discussions, negotiations, or proposals relating to an
Acquisition Proposal (including the material terms thereof and the identity of
the other party or parties involved) and furnish to Purchaser as soon as
reasonably practicable and in any event no later than 24 hours after such
receipt an accurate description of all material terms (including any changes or
adjustments to such terms as a result of negotiations or otherwise) of any such
written proposal. The Company shall promptly provide to Purchaser any non-public
information regarding the Company provided to any other party, which information
was not previously provided to Purchaser. In addition, the Company shall
promptly advise Purchaser, in writing, if the Board shall make any determination
as to any Acquisition Proposal as contemplated by the proviso to the first
sentence of this Section 6.2. The Company agrees that it shall keep Purchaser
informed, on a current basis, of the status of any Acquisition Proposal.
Notwithstanding the foregoing, the Company shall be permitted to take such
actions as may be required to comply with Rule 14e-2 of the Exchange Act. It is
understood and agreed that any violation of this Section 6.2 by any officer,
director, employee, agent or other representative of the Company, whether or not
such Person is purporting to act on behalf of the Company, shall be deemed a
breach of this Section 6.2 by the Company. For purposes of this Agreement,
"Person" means a natural person, partnership, corporation, limited liability
company, business trust, joint stock company, trust, unincorporated association,
joint venture, Governmental Entity or other entity or organization.
(c) Except as set forth in this Section 6.2, neither the Board nor
any committee thereof shall (i) withdraw or modify, or propose publicly to
withdraw or modify, in a manner adverse to Purchaser, the approval or
recommendation by such Board or such committee of the Offer, the Merger or this
Agreement; provided, however, that the Board may (A) in respect to any takeover
or Acquisition Proposal, suspend such recommendation for a period of up to five
(5) days pending its analysis of such Acquisition Proposal, or (B) at any time
prior to consummation of the Offer, modify or withdraw such recommendation if
the Board determines in good faith, after consultation with and the advice of
outside counsel, that it would be consistent with its fiduciary responsibilities
to so modify or withdraw such recommendation; provided, further that, unless
this Agreement shall have been terminated, any such suspension, modification or
withdrawal shall not prevent Purchaser and Acquisition Sub, in its or their
discretion, from consummating the Offer and shall not affect any of the actions
taken by the Company pursuant to this Agreement, (ii) approve or recommend, or
propose publicly to approve or recommend, any Acquisition Proposal, or (iii)
cause the Company to enter into any letter of intent, agreement in principle,
acquisition or other similar agreement (each, an "Acquisition Agreement")
related to any Acquisition Proposal. Notwithstanding the foregoing, in the event
that prior to the acceptance for payment of Shares pursuant to the Offer, the
Board determines in good faith, after consultation with and the advice of
outside counsel, that it would be consistent with its fiduciary responsibilities
to the Company's shareholders under applicable law, the Board may (subject to
this and the following provisions of this Section 6.2) (i) withdraw or modify
its approval or recommendation of the Offer, the Merger and this Agreement, (ii)
approve or recommend a Superior Proposal (as defined below), (iii) cause
30
<PAGE>
the Company to enter into an Acquisition Agreement related to any Superior
Proposal or (iv) terminate this Agreement, but in each case, only at a time that
is after the second Business Day following Purchaser's receipt of written notice
(or such earlier time as is necessary for the Board to comply with its fiduciary
duties) (a "Notice of Superior Proposal"), which obligation shall be satisfied
by delivery by facsimile transmission and by overnight delivery by Federal
Express or other nationally recognized overnight carrier as well as by delivery
of the notice required by Section 6.2(b) advising Purchaser that the Board has
received an Acquisition Proposal that may constitute a Superior Proposal,
subject to the fiduciary duties of the Board, specifying the material terms and
conditions of such Superior Proposal and identifying the Person making such
Superior Proposal. For purposes of this Agreement, a "Superior Proposal" means
any Acquisition Proposal determined by the Board in good faith, after
consultation with and advice from outside counsel, to be a bona fide proposal
and made by a third party for consideration consisting of cash, property and/or
securities, for more than a substantial minority (on an as-converted basis or
otherwise) of the combined voting power of the shares of Company Common Stock
then outstanding or all or substantially all of the assets of the Company or its
Subsidiaries and otherwise on terms which the Board determines in its good faith
judgment, after consultation with outside counsel, to be more favorable to the
Company's stockholders than the Offer and the Merger.
(d) During the period from the date of this Agreement until such time
as Purchaser's designees shall constitute a majority of the Board, the Company
shall not terminate, amend, modify or waive any provision of any confidentiality
or standstill agreement to which the Company or any of its Subsidiaries is a
party (other than any involving Purchaser) unless the Board shall have
determined in good faith, in reliance upon advice from its outside counsel, that
failing to release any third party or to amend, modify or waive such provisions
would not be consistent with the Board's fiduciary responsibilities under
applicable law.
Section 6.3 Access to Information.
---------------------
(a) Between the date hereof and the consummation of the Offer and/or
Effective Time, as the case may be, the Company will give Purchaser and its
authorized representatives and Persons providing or committed to provide
Purchaser with financing for the Transactions and their representatives,
reasonable access to all management, plants, offices, warehouses and other
facilities and properties and to all books and records of the Company and its
Subsidiaries, will permit Purchaser to make such inspections (including an
environmental audit and assessment of the Company's facility in France (the
"French Environmental Audit") and any physical inspections or soil or
groundwater investigations) as they may reasonably request and will cause the
Company's officers and those of its Subsidiaries to furnish Purchaser with such
financial and operating data and other information with respect to the business
and properties of the Company and any of its Subsidiaries as Purchaser may from
time to time reasonably request; provided, however, that no investigation
pursuant to this Section 6.3 shall affect any representation or warranty of any
party contained in this Agreement or in any agreement, instrument, or document
delivered pursuant hereto or in connection herewith; and provided further that
the Company shall have the right to have a representative present at all times.
31
<PAGE>
(b) Purchaser will hold and will cause its consultants and advisors
to hold in confidence, unless compelled to disclose by judicial or
administrative process or, in the opinion of its or their legal counsel, by
other requirements of law, all documents and information concerning the Company
and its Subsidiaries furnished to Purchaser in connection with the Transactions
(except to the extent that such information can be shown to have been (i)
previously known by Purchaser from sources other than the Company, or its
directors, officers, representatives or affiliates, (ii) in the public domain
through no fault of Purchaser or (iii) later lawfully acquired by Purchaser on a
non-confidential basis from other sources who are not known by Purchaser to be
bound by a confidentiality agreement or otherwise prohibited from transmitting
the information to Purchaser by a contractual, legal or fiduciary obligation)
and will not release or disclose such information to any other Person, except
its auditors, attorneys, financial advisors and other consultants and advisors
(including financing sources) in connection with this Agreement who need to know
such information. If the Transactions are not consummated, such confidence shall
be maintained and, if requested by or on behalf of the Company, Purchaser will,
and will use all reasonable efforts to cause their auditors, attorneys,
financial advisors and other consultants, agents and representatives to, return
to the Company or destroy all copies of written information or copies thereof
furnished by the Company to Purchaser or its agents, representatives or
advisors. It is understood that Purchaser shall be deemed to have satisfied
their obligation to hold such information confidential if they exercise the same
care as they take to preserve confidentiality for their own similar information.
(c) If Purchaser requests, the Company and each of its Subsidiaries
will cooperate, and will cause its accountants to cooperate, in all material
respects with any financing efforts of Purchaser or its affiliates. If
Purchaser requests, the Company (a) shall furnish to Purchaser's independent
accountants such customary management representation letters as Purchaser's
accountants may reasonably require of Purchaser, the Company or their
Subsidiaries as a condition to its execution of any required accountants'
consents necessary in connection with the delivery of any customary "comfort"
letters reasonably requested by financing sources of Purchaser or its
affiliates, and (b) shall furnish to Purchaser all financial statements (audited
and unaudited) and other information in the possession of the Company or its
Subsidiaries or their representatives or agents as Purchaser shall reasonably
determine as necessary or appropriate in connection with such financing. Without
limiting the generality of the foregoing, the Company and each of its
Subsidiaries agrees to cooperate with Purchaser's and Acquisition Sub's efforts
to secure any financing, such cooperation to include providing such information
to Purchaser's and Acquisition Sub's financing sources as Purchaser or
Acquisition Sub may reasonably request and making available to such financing
sources senior officers and such other employees of the Company or its
Subsidiaries as Purchaser and Acquisition Sub may reasonably request to assist
in the preparation of financing documents and otherwise participate in efforts
relating to obtaining such financing as Purchaser and Acquisition Sub may
reasonably request upon reasonable notice and consistent with such officers' and
employees' other business responsibilities to the Company or its Subsidiaries.
32
<PAGE>
Section 6.4 Additional Agreements; Reasonable Efforts.
-----------------------------------------
(a) Prior to the consummation of the last to occur of any of the
Transactions, upon the terms and subject to the conditions of this Agreement,
each of Purchaser and the Company agrees to use its reasonable best efforts to
take, or cause to be taken, all actions, and to do, or cause to be done, all
things necessary, proper or advisable under any applicable laws to consummate
and make effective the Transactions as promptly as practicable including, but
not limited to (i) the preparation and filing of all forms, registrations and
notices required to be filed to consummate the Transactions and the taking of
such actions as are necessary to obtain any requisite approvals, consents,
orders, exemptions or waivers by any third party or Governmental Entity, (ii)
the preparation of any financing documents requested by Purchaser, (iii) the
satisfaction of the other parties' conditions to the consummation of the Offer
or the Merger and (iv) the cure of any breaches (whether material or immaterial)
of such party's representations, warranties, covenants or agreements in this
Agreement of which such party receives notice. In addition, no party hereto
shall take any action after the date hereof that would reasonably be expected to
materially delay the obtaining of, or result in not obtaining, any permission,
approval or consent from any Governmental Entity necessary to be obtained prior
to the consummation of the Offer or the Merger.
(b) Prior to the consummation of the Offer or the Merger, each party
shall promptly consult with the other parties hereto with respect to, provide
any necessary information with respect to and provide the other (or its counsel)
copies of, all filings made by such party with any Governmental Entity or any
other information supplied by such party to a Governmental Entity in connection
with this Agreement and the Transactions. Each party hereto shall promptly
inform the other of any communication from any Governmental Entity regarding any
of the Transactions. If any party hereto or affiliate thereof receives a request
for additional information or documentary material from any such Governmental
Entity with respect to the Transactions, then such party will endeavor in good
faith to make, or cause to be made, as soon as reasonably practicable and after
consultation with the other party, an appropriate response in compliance with
such request. To the extent that transfers of Company Permits are required as a
result of execution of this Agreement or consummation of the Transactions, the
Company shall use its best efforts to effect such transfers.
(c) Notwithstanding the foregoing, nothing in this Agreement shall be
deemed to require Purchaser to (i) enter into any agreement with any
Governmental Entity or to consent to any order, decree or judgment requiring
Purchaser to hold separate or divest, or to restrict the dominion or control of
Purchaser or any of its affiliates over, any of the assets, properties of
businesses of Purchaser, its affiliates or the Company, in each case as in
existence on the date hereof, or (ii) defend against any litigation brought by
any Governmental Entity seeking to prevent the consummation of the Transactions.
Section 6.5 Consents. Purchaser and the Company each will use all
--------
reasonable efforts to obtain consents of all third parties and Governmental
Entities necessary, proper or advisable for the consummation of the
Transactions.
33
<PAGE>
Section 6.6 Public Announcements. Purchaser and the Company will consult
--------------------
with each other before issuing any press releases or otherwise making any public
statements with respect to this Agreement, the Offer and the Merger, and shall
not issue any such press release or make any such public statement without the
prior consent of the other party (which consent shall not be unreasonably
withheld or delayed) except as may be required by law or by obligations pursuant
to any listing agreement with any national securities exchange or as may be
advised by counsel, in writing, to be necessary.
Section 6.7 Company Actions Regarding Options, Company Warrants,
----------------------------------------------------
Convertible Notes and Kiedaisch Success Fee. (a) Prior to the consummation of
- -------------------------------------------
the Offer, the Company shall take all actions reasonably necessary (including,
but not limited to, the giving of notices) to effectuate Section 2.8 hereof.
Without limiting the generality of the foregoing, prior to the consummation of
the Offer, the Company shall use reasonable efforts to obtain written
agreements, in forms acceptable to Purchaser and Acquisition Sub, from each of
the holders of the Company Warrants pursuant to which such holders shall agree
that the Company Warrants held thereby shall become the right, following the
Merger, upon payment by such holder of the aggregate exercise price payable on
the Company Warrants held by such holder at the exercise price in effect
immediately prior to the Merger, to receive from Acquisition Sub the
consideration which such holder would have received from Acquisition Sub in
connection with the Offer had such holder exercised its Company Warrants
immediately prior to the consummation of the Offer, and that, upon consummation
of the Merger, this right shall be the sole right of such holders with respect
to the Company Warrants held thereby.
(b) Prior to the consummation of the Offer, the Company shall obtain
a written consent and waiver, in a form acceptable to Purchaser and Acquisition
Sub, from Gary Kiedaisch ("Kiedaisch") pursuant to which Kiedaisch shall waive
any and all rights or claims that he may have under that certain Employment
Agreement and a Memorandum of Understanding, each dated as of July 17, 1997,
between the Company and Kiedaisch or otherwise to severance or separation pay or
a sale or success bonus in connection with his departure from the Company or the
Transactions completed hereby (the "Kiedaisch Consent and Waiver").
Section 6.8 Post-Execution Due Diligence Deliveries. As soon as
---------------------------------------
reasonably practicable after the date of this Agreement, the Company shall
deliver, or cause to be delivered, to Purchaser and its authorized
representatives and Persons providing or committing to provide Purchaser with
financing for the Transactions and their representatives true, correct and
complete photocopies of the contracts, agreements, tax returns, environmental
audits and other materials identified on Annex B attached hereto (the "Post-
-------
Execution Documents").
Section 6.9 Hart-Scott-Rodino. As promptly as practicable, and in any
-----------------
event within ten (10) Business Days following the execution and delivery of this
Agreement by the parties, to the extent required by the HSR Act, the Company and
Purchaser shall each prepare and file, or shall cause its "ultimate parents" (as
defined in the HSR Act) to prepare and file, any required notification and
report form under the HSR Act, in connection with the transactions contemplated
hereby, the filing fees for which shall be shared equally by the Company and
Purchaser; the Company and Purchaser shall cause their ultimate parents to
request early termination of the
34
<PAGE>
waiting period thereunder; and the Company and Purchaser shall cause their
ultimate parents to respond with reasonable diligence to any request for
additional information made in response to such filings. As promptly as
practicable, and in any event within ten (10) Business Days following the
execution and delivery of this Agreement by the parties, the Company and
Purchaser shall prepare and file any other application, report, or other filing
required to be submitted to any other Governmental Entity in connection with the
transactions contemplated hereby.
Section 6.10 Indemnification.
---------------
(a) Purchaser agrees that all rights to indemnification or
exculpation now existing in favor of the directors, officers, employees and
agents of the Company and its Subsidiaries (the "Indemnified Parties") as
provided in their respective charters or by-laws or otherwise in effect as of
the date hereof with respect to matters occurring prior to the Effective Time
shall survive such Effective Time and shall continue in full force and effect
for six (6) years after the Effective Time; provided that such indemnification
shall be subject to any limitations imposed from time to time under applicable
law.
(b) Purchaser shall cause the Company or the Surviving Corporation,
as the case may be, to maintain in effect for not less than three (3) years
after the Effective Time, the policies of the directors' and officers' liability
and fiduciary insurance most recently maintained by the Company (provided that
the Surviving Corporation may substitute therefor policies of at least the same
coverage containing terms and conditions which are no less advantageous to the
beneficiaries thereof so long as such substitution does not result in gaps or
lapses in coverage) with respect to matters occurring prior to the consummation
of the Merger to the extent available, provided that in no event shall the
Company or the Surviving Corporation, as the case may be, be required to expend
more than an amount per year equal to 200% of the current annual premiums paid
by the Company (the "Premium Amount") to maintain or procure insurance coverage
pursuant hereto and further provided that if the Surviving Corporation is unable
to obtain the insurance called for by this Section 6.10(b), the Surviving
Corporation will obtain as much comparable insurance as is available for the
Premium Amount per year.
Section 6.11 Financial Statements. The Company shall prepare in the
--------------------
ordinary course, consistent with past practice, at the end of each month and
promptly deliver to Purchaser upon completion the balance sheet, income
statement and statement of cash flows prepared in accordance with GAAP of the
Company and its Subsidiaries for each month ended between the date of this
Agreement and the Merger Closing Date, as the case may be. The Company shall
promptly prepare all reasonably requested financial statements required to be
included in Purchaser's financing documents.
Section 6.12 Notification of Certain Matters. The Company shall give
-------------------------------
prompt notice to Purchaser of any breach by the Company, either individually or
in the aggregate with other breaches, of (i) any representation or warranty of
the Company contained in Article IV of this Agreement which has had or could
reasonably be expected to have a Company Material Adverse Effect, or (ii) any
covenant, condition, or agreement to be complied with or satisfied by the
Company hereunder which has had or could reasonably be expected to have a
Company Material
35
<PAGE>
Adverse Effect. The Company shall give prompt notice to Purchaser if there
occurs any event which has resulted in or is reasonably likely to result in a
Company Material Adverse Effect or, subject to the fiduciary duties of the
Board, will prevent or result in a third party materially delaying the
consummation of the Offer or the Merger. Purchaser shall give prompt notice to
the Company of any breach by Purchaser or Acquisition Sub, either individually
or in the aggregate with other breaches, of (i) any representation or warranty
of Purchaser or Acquisition Sub contained in Article V of this Agreement which
has had or could reasonably be expected to have a Company Material Adverse
Effector, or (ii) any covenant, condition, or agreement to be complied with or
satisfied by Purchaser hereunder. The delivery of any notice pursuant to this
Section shall not be deemed to (i) modify the representations or warranties
hereunder of the party delivering such notice, (ii) modify the conditions set
forth in Article VII, or (iii) limit or otherwise affect the remedies available
hereunder to the party receiving such notice.
Section 6.13 Bank of America. Upon the consummation of the Offer,
---------------
Purchaser shall (i) pay in full the Indebtedness owed by the Company to Bank of
America, National Association ("Bank of America") under that certain Credit
Agreement, dated March 11, 1998, between the lenders party thereto and the
Company, as amended, or (ii) have obtained from Bank of America a waiver of the
default thereunder caused by the consummation of the Offer.
Section 6.14 Recent Minutes. As soon as reasonably practicable after the
--------------
date of this Agreement, the Company shall deliver to Purchaser and Acquisition
Sub the Recent Minutes.
Section 6.15 401(K) Plan. If reasonably requested by the Purchaser, the
-----------
Company shall terminate its 401(K) Plan effective immediately prior to the
consummation of the Offer.
ARTICLE VII
CONDITIONS TO CONSUMMATION OF THE MERGER
Section 7.1 Conditions to the Merger. The obligation of the Company,
------------------------
Purchaser and Acquisition Sub to effect the Merger is subject to the
satisfaction (or waiver) at or prior to the Merger Closing Date of each of the
following conditions:
(i) Stockholder Approval; Purchase of Shares.
----------------------------------------
(A) This Agreement and the Merger shall have been
approved and adopted by the affirmative vote of the stockholders of
the Company by the requisite vote or by the Approved Consent;
provided, however, that Purchaser and Acquisition Sub shall vote all
of their shares of Company Common Stock entitled to vote thereon in
favor of the Merger; and
(B) Acquisition Sub shall have previously accepted for
payment and paid for Shares pursuant to the Offer.
36
<PAGE>
(ii) Legal Proceedings. There shall not be any statute, rule or
-----------------
regulation that makes consummation of the transactions contemplated hereby
illegal or otherwise prohibited and no Governmental Entity shall have
issued an order, decree, or ruling or taken any other action permanently
restraining, enjoining or otherwise prohibiting the consummation of the
transactions contemplated hereby, and such order, decree, ruling, or other
action shall have become final and nonappealable.
(iii) HSR Act. All applicable waiting periods (and any
-------
extensions thereof) under the HSR Act shall have expired or otherwise been
terminated without objection from any of the relevant federal authorities.
ARTICLE VIII
TERMINATION; APPROVALS; WAIVER
Section 8.1 Termination. This Agreement may be terminated and the
-----------
Transactions may be abandoned at any time prior to the Effective Time
notwithstanding any requisite approval and adoption of this Agreement and the
Transactions by the stockholders of the Company:
(a) by mutual written consent of the Company, Purchaser and
Acquisition Sub; or
(b) either by the Company or Purchaser, if the Offer shall not have
been consummated on or before February 28, 2000 (the "Cut-Off Date") unless such
failure to consummate the Offer shall be due to a breach of this Agreement by
the party or parties seeking to terminate this Agreement pursuant to this
Section 8.1(b); or
(c) either by the Company or by Purchaser, if there shall be any
statute, rule, or regulation that makes consummation of the transactions
contemplated hereby illegal or otherwise prohibited; a Governmental Entity shall
have issued an order, decree, or ruling or taken any other action permanently
restraining, enjoining, or otherwise prohibiting the consummation of the
transactions contemplated hereby, and such order, decree, ruling, or other
action shall have become final and nonappealable; or the waiting period under
the HSR Act has not expired or been terminated prior to the Cut-Off Date; or
(d) either by Purchaser or by Acquisition Sub if as a result of the
failure of any of the Offer Conditions set forth in Annex A (including, but not
-------
limited to, the Minimum Condition but excluding the Offer Conditions described
in Sections 8.1(e), 8.1(f) and 8.1(g)), the Offer shall have been terminated or
expired in accordance with its terms without Acquisition Sub having accepted for
payment of any Shares pursuant to the Offer consistent with Acquisition Sub's
obligations under Section 1.1 of this Agreement; provided, however, that the
right to terminate this Agreement pursuant to this Section 8.1(d) shall not be
available to any party whose failure to perform any of its obligations under
this Agreement results in the failure of any such Offer Condition; or
37
<PAGE>
(e) either by Purchaser or by Acquisition Sub prior to the purchase
of Shares pursuant to the Offer in the event: (i) Purchaser, in its good faith
belief, determines that the facts or conditions disclosed in the French
Environmental Audit have or could reasonably be expected to have a Company
Material Adverse Effect but only if Purchaser terminates this Agreement as a
result of such determination on or prior to December 15, 1999; (ii) Purchaser
has failed to satisfy the Financing Condition on or prior to the Financing
Condition Termination Date but only if Purchaser terminates this Agreement as a
result thereof within two (2) Business Days after such date; or (iii) the
Company fails to satisfy the Transaction Fee Condition; or
(f) either by Purchaser or by Acquisition Sub prior to the purchase
of Shares pursuant to the Offer in the event of a breach by the Company of: (i)
Section 6.2 hereof in any respect in connection with the non-solicitation
agreements and covenants contained in Section 6.2 and in any material respect in
connection with any of the other agreements and covenants contained in Section
6.2 or (ii) any representation, warranty, covenant or other agreement contained
in this Agreement (other than Section 6.2) which (A) would give rise to the
failure of the Offer Condition set forth in paragraph (d) or (e) of Annex A and
-------
(B) cannot reasonably be or has not been cured within fifteen (15) Business Days
after the giving of written notice thereof to the Company; or
(g) either by Purchaser or by Acquisition Sub if either Purchaser or
Acquisition Sub is entitled to terminate the Offer as a result of the occurrence
of any event set forth in paragraph (c) of Annex A to this Agreement; provided
-------
that the temporary suspension of the recommendation of the Company's Board
referred to herein in accordance with Section 6.2 shall not give rise to a right
of termination pursuant to this Section 8.1(g); or
(h) by the Company in accordance with Section 6.2; provided, however,
that the Company has complied with all provisions thereof, including the notice
provisions therein, and that the Company complies with the requirements of
Section 8.3 relating to the payment (including the timing of any payment) of the
Termination Fee; or
(i) by the Company, if (i) there shall have occurred and be
continuing a breach of one or more of the representations or warranties of
Purchaser or Acquisition Sub set forth in this Agreement which (A) either
individually or in the aggregate, have resulted or could reasonably be expected
to result in a Purchaser Material Adverse Effect (as hereinafter defined) and
(B) cannot reasonably be or has not been cured within fifteen (15) Business Days
after the giving of written notice thereof to the Company, or (ii) Purchaser or
Acquisition Sub shall have failed to perform or to comply with one or more
obligations, covenants or agreements set forth in this Agreement to be performed
or complied with by it under the Agreement prior to the commencement of the
Offer which, either individually or in the aggregate, have resulted or could
reasonably be expected to result in a Purchaser Material Adverse Effect. For
purposes of this Agreement, "Purchaser Material Adverse Effect" means any
events, changes in or effects on the business of Purchaser or its Subsidiaries
that individually or in the aggregate materially impairs the ability of the
Purchaser to consummate the Merger or the other Transactions contemplated by
this Agent; or
38
<PAGE>
(j) by the Company, prior to the commencement of the Offer if
Acquisition Sub for any reason shall have failed to commence the Offer in
accordance with Section 1.1 within five (5) Business Days after the date of this
Agreement.
Section 8.2 Effect of Termination. In the event of the termination and
---------------------
abandonment of this Agreement pursuant to Section 8.1, written notice thereof
shall forthwith be given to the other party or parties specifying the provision
hereof pursuant to which such termination is made, and this Agreement shall
forthwith become void and have no effect, without any liability on the part of
any party hereto or its affiliates, directors, officers or stockholders, other
than the provisions of Section 6.2, this Section 8.2 and 8.3 hereof. Nothing
contained in this Section 8.2 shall relieve any party from liability for any
breach of this Agreement.
Section 8.3 Fees and Expenses.
-----------------
(a) Except as otherwise provided in this Agreement, Purchaser,
Acquisition Sub and Company shall each be responsible for their own fees and
expenses incurred in connection with the transactions contemplated by this
Agreement, whether the Offer or Merger is consummated.
(b) The Company shall pay, or cause to be paid to Purchaser, in
immediately available funds, $4,000,000.00 (less any Purchaser Reimbursement
previously paid to Purchaser under Section 8.3(c))(the "Termination Fee") under
the circumstances and at the times set forth as follows:
(i) Upon demand, if Purchaser or Acquisition Sub terminates
this Agreement under Section 8.1(g); or
(ii) Upon demand, if the Company terminates this Agreement under
Section 8.1(h); or
(iii) If Purchaser terminates this Agreement under (A) Section
8.1(d) in connection with, or as a result of, the failure to satisfy or the
Indebtedness Condition or the occurrence of a Company Material Adverse
Effect, or (B) Section 8.1(f) and, in connection with a termination under
and pursuant to clause (A) or (B) and prior to such termination or within
six (6) months thereafter, an Acquisition Proposal shall have been made and
accepted by the Company with respect to a Superior Proposal or a Superior
Proposal is consummated, then the Company shall pay to Purchaser the
Termination Fee upon the earlier of the acceptance of such Superior
Proposal, the execution of an agreement (including, without limitation, a
letter of intent) in connection therewith or upon consummation of such
Superior Proposal; provided, however, for purposes of this Section 8.3, if
a dispute exists between the Company and Purchaser concerning whether such
transaction constitutes a Superior Proposal, an independent investment
banking firm mutually acceptable to the Company and Purchaser shall
determine whether the proposal is more favorable to the Company's
stockholders than the Offer and the Merger.
39
<PAGE>
(c) If Purchaser terminates this Agreement under (A) Section 8.1(d)
in connection with, or as a result of, the failure to satisfy the Minimum
Condition (provided that Purchaser has previously announced publicly (at least
twenty (20) days prior to the scheduled or extended expiration of the Offer)
that it has satisfied the Financing Condition), or the Indebtedness Condition or
the occurrence of a Company Material Adverse Effect, or (B) Section 8.1(f) then
and in any of such events, the Company shall pay, or cause to be paid, to
Purchaser, on demand, in immediately available funds, an amount equal to the
actual out-of-pocket expenses actually incurred by Purchaser and Acquisition Sub
in an amount not to exceed $1,000,000 (the "Expense Reimbursement"); provided,
if Purchaser pays a commitment or similar fee with respect to financing the
Offer, the Company shall pay Purchaser, upon demand, an amount equal to such
commitment or similar fee not to exceed an additional $500,000 (the "Commitment
Fee Reimbursement" and, together with the Expense Reimbursement, the "Purchaser
Reimbursement"). Upon receipt of the Purchaser Reimbursement, Purchaser and
Acquisition Sub shall terminate the Agreement. Notwithstanding the foregoing,
Purchaser and Acquisition Sub shall not be required to terminate this Agreement
pursuant to this Section 8.3(c) or accept the Purchaser Reimbursement if any of
the foregoing conditions exist as a result of the following with respect to the
Company: (i) an intentional or willful breach of a representation or warranty,
(ii) intentional or willful failure to perform a covenant or (iii) fraud.
(d) If Purchaser terminates this Agreement as a result of its failure
to satisfy the Financing Condition, Purchaser shall pay, or cause to be paid, to
the Company, on demand, in immediately available funds, an amount equal to the
actual-out-of-pocket expenses actually incurred by the Company in an amount not
to exceed $1,000,000 unless: (i) Purchaser has terminated this Agreement under
and in accordance with Section 8.1(e)(i), Section 8.1(e)(ii) or Section
8.1(e)(iv); or (ii) there is or has occurred a (A) Company Material Adverse
Effect, (B) a breach by the Company of one or more representations, warranties,
covenants or other agreements contained in this Agreement under which Purchaser
could terminate this Agreement under Section 8.1(f) hereof or (C) an
identifiable event or circumstance occurring after the date of this Agreement
that has had or could reasonably be expected to have in the future a Company
Material Adverse Effect, in any which case Purchaser shall not be obligated to
pay for, or cause to be paid, to the Company any such expenses.
Section 8.4 Amendments. Subject to applicable law, this Agreement may
----------
be amended by action taken by the Company and Purchaser at any time before or
after approval of the Merger by the stockholders of the Company (if required by
applicable law) but, after any such approval, no amendments shall be made which
require the approval of such stockholders under applicable law. This Agreement
may not be amended except by an instrument in writing signed on behalf of the
parties hereto.
Section 8.5 Waiver. At any time prior to the Effective Time, any party
------
hereto may (i) extend the time for the performance of any of the obligations or
other acts of the other party, (ii) waive any inaccuracies in the
representations and warranties of the other party contained herein or in any
document, certificate or writing delivered pursuant hereto, or (iii) waive
compliance by the other party with any of the agreements or conditions contained
herein. Any agreement on the part of any party hereto to any such extension or
waiver shall be valid only if set forth in an
40
<PAGE>
instrument in writing signed on behalf of such party. The failure of either
party hereto to assert any of its rights hereunder shall not constitute a waiver
of such rights.
ARTICLE IX
FINANCING CONDITION
Section 9.1 Financing Condition. The Company acknowledges and agrees
-------------------
that the obligation of Purchaser and Acquisition Sub to consummate the Offer is
subject to, in addition to the other Offer Conditions set forth in Annex A,
-------
Purchaser obtaining, prior to January 15, 2000 (the "Financing Condition
Termination Date"), sufficient financing, on terms and conditions satisfactory
to Purchaser to enable consummation of the Offer and the Merger (the "Financing
Condition"). If Purchaser fails to satisfy the Financing Condition on or prior
to the Financing Condition Termination Date but fails to terminate this
Agreement under and pursuant to Section 8.1(e) within two (2) Business Days
after the Financing Condition Termination Date, the Financing Condition shall
thereafter cease to be an Offer Condition. Purchaser agrees to use its good
faith, reasonable best efforts to satisfy the Financing Condition.
ARTICLE X
MISCELLANEOUS
Section 10.1 Nonsurvival of Representations and Warranties. The
---------------------------------------------
representations and warranties made herein shall not survive beyond the
consummation of the Offer.
Section 10.2 Entire Agreement; Assignment. This Agreement (a) constitutes
----------------------------
the entire agreement between the parties hereto with respect to the subject
matter hereof and supersedes all other prior agreements and understandings, both
written and oral, between the parties with respect to the subject matter hereof,
and (b) shall not be assigned by operation of law or otherwise; provided,
--------
however, that Purchaser may assign any or all of its rights and obligations
- -------
under this Agreement to any Subsidiary or affiliate of Purchaser, but no such
assignment shall relieve Purchaser of its obligations hereunder if such assignee
does not perform such obligations.
Section 10.3 Validity. If any provision of this Agreement, or the
--------
application thereof to any person or circumstance, is held invalid or
unenforceable, the remainder of this Agreement, and the application of such
provision to other persons or circumstances, shall not be affected thereby, and
to such end, the provisions of this Agreement are agreed to be severable.
Section 10.4 Notices. All notices, requests, claims, demands and other
-------
communications hereunder shall be in writing (including by facsimile with
written confirmation thereof) and unless otherwise expressly provided herein,
shall be delivered during normal business hours by hand, by Federal Express,
United Parcel Service or other nationally recognized overnight commercial
delivery service, or by facsimile notice, confirmation of receipt received,
addressed as follows, or to such other address as may be hereafter notified by
the respective parties hereto:
41
<PAGE>
(a) If to Purchaser:
Worldwide Sports and Recreation, Inc.
c/o Wind Point Partners
675 North Michigan Avenue, Suite 3300
Chicago, Illinois 60611
Attention: Richard Kracum
Facsimile Number: 312-255-4820
and
Worldwide Sports and Recreation, Inc.
c/o Wind Point Partners
One Towne Square, Suite 780
Southfield, Michigan 48076
Attention: Salam Chaudhary
Facsimile Number: 248-945-7220
With a copy, which will not constitute notice, to:
Katten Muchin & Zavis
525 West Monroe Street, Suite 1600
Chicago, Illinois 60661
Attention: Steven V. Napolitano, Esq.
Facsimile Number: 312-902-1061
(b) If to the Company:
Bolle Inc.
555 Theodore Fremd Avenue, Suite B-320
Rye, New York 10580
Attention: Martin E. Franklin
Facsimile Number: 914-967-9405
With a copy, which will not constitute notice, to:
Willkie Farr & Gallagher
787 Seventh Ave.
New York, New York 10019-6099
Attention: William J. Grant, Jr., Esq.
Facsimile Number: 212-728-8111
Section 10.5 Governing Law. This Agreement shall be governed by and
-------------
construed in accordance with the laws of the State of Delaware, without regard
to the principles of conflicts of law thereof. The parties hereto hereby agree
and consent to be subject to the exclusive jurisdiction
42
<PAGE>
of the United States District Court for the District of Delaware in any suit,
action or proceeding seeking to enforce any provision of, or based on any matter
arising out of or in connection with, this Agreement or the Transactions. Each
party hereto hereby irrevocably waives, to the fullest extent permitted by law,
(i) any objection that it may now or hereafter have to laying venue of any suit,
action or proceeding brought in such courts, and (ii) any claim that any suit,
action or proceeding brought in such courts has been brought in an inconvenient
forum.
Section 10.6 Descriptive Headings. The descriptive headings herein are
--------------------
inserted for convenience of reference only and are not intended to be part of or
to affect the meaning or interpretation of this Agreement.
Section 10.7 Parties in Interest. This Agreement shall be binding upon and
-------------------
inure solely to the benefit of each party hereto and its successors and
permitted assigns, and except as provided in Section 10.2, nothing in this
Agreement, express or implied, is intended to or shall confer upon any other
person any rights, benefits or remedies of any nature whatsoever under or by
reason of this Agreement.
Section 10.8 Assignment of Standstill Agreements. The Company hereby
-----------------------------------
assigns to Purchaser all of the Company's rights, powers and privileges under
each Standstill Agreement (including, without limitation, the right to enforce
the terms thereof).
Section 10.9 Equitable Remedies. The parties agree that the assets and
------------------
business of the Company and its Subsidiaries as a going concern constitute a
unique property and, accordingly, Purchaser shall be entitled, at its option and
in addition to any other remedies available as herein provided, to the remedy of
specific performance, to effect the transactions described in this Agreement.
Section 10.10 Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which shall be deemed to be an original, but all of which
shall constitute one and the same agreement.
43
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to
be duly executed on its behalf as of the day and year first above written.
BOLLE INC.
By: /s/ Ian G. H. Ashken
-----------------------------------
Name: Ian G. H. Ashken
----------------------------
Title: Vice Chairman and Secretary
----------------------------
WORLDWIDE SPORTS AND RECREATION, INC.
By: /s/ Richard Kracum
------------------------------------
Name: Richard Kracum
-----------------------------
Title: Chairman
-----------------------------
SHADE ACQUISITION, INC.
By: /s/ Richard Kracum
-------------------------------------
Name: Richard Kracum
------------------------------
Title: President
------------------------------
<PAGE>
ANNEX A
OFFER CONDITIONS
Notwithstanding any other term of the Offer, but subject, in all cases to
Purchaser's and Acquisition Sub's obligations set forth under the Agreement,
including, without limitation, under Section 1.1, Acquisition Sub shall not be
required to accept for payment or, subject to any applicable rules and
regulations of the SEC, including Rule 14e-1(c) under the 1934 Act (relating to
Acquisition Sub's obligation to promptly pay for or return tendered Shares after
the termination or withdrawal of the Offer), to pay for any Shares tendered
pursuant to the Offer unless (i) there shall have been validly tendered and not
withdrawn prior to the expiration of the Offer such number of Shares that would
when combined with any Shares held by the Purchaser, Acquisition Sub or any of
their affiliates, would constitute ninety percent (90%) of the aggregate
outstanding Shares (including any Shares outstanding as of the consummation of
the Offer that have been issued upon the exercise of options to purchase, and
the conversion or exchange of all securities convertible or exchangeable into,
Shares) (the "Minimum Condition"), (ii) any waiting period under the HSR Act
applicable to the Offer shall have expired or been terminated prior to the
expiration of the Offer, (iii) the Financing Condition shall have been
satisfied, (iv) the Company shall have delivered to Purchaser a fully-executed
original of the Kiedaisch Consent and Waiver, and (v) the Company shall have
delivered, or caused to be delivered, to Purchaser a pay-off letter, in form
acceptable to Purchaser, from Bank of America with respect to the Company Credit
Facility. Furthermore, notwithstanding any other term of the Offer, but
subject, in all cases, to Purchaser's and Acquisition Sub's obligations set
forth in the Agreement, including, without limitation, under Section 1.1,
Acquisition Sub shall not be required to accept for payment or, to pay for any
Shares not theretofore accepted for payment or paid for, and may terminate the
Offer at any time if, at any time on or after the date of the Agreement and
before the acceptance of such Shares for payment or the payment therefor, any of
the following conditions exists (other than as a result of any action or
inaction of Purchaser or any of its Subsidiaries that constitutes a breach of
this Agreement):
(a) there shall be instituted or pending by any governmental agency
or similar authority in any United States federal or state court or
administrative agency any suit, action, Proceeding, application or counterclaim
which would reasonably be expected to (i) restrain or prohibit the acquisition
by Purchaser or Acquisition Sub of the Shares pursuant to the Offer, the
consummation of the Offer or the Merger, or require the Company, Purchaser or
Acquisition Sub to pay any damages that are material in relation to the Company
and its Subsidiaries, or Purchaser and its Subsidiaries, taken as a whole, (ii)
prohibit or limit in any material respect the ownership or operation of any
business or assets of the Company or its Subsidiaries or Purchaser or its
Subsidiaries, as they are presently being operated, or to compel the Company or
Purchaser to dispose of or hold separate any material business or assets of the
Company and its Subsidiaries or Purchaser and its Subsidiaries, as a result of
the Offer, or the Merger, (iii) impose material limitations on the ability of
Purchaser or Acquisition Sub to acquire or hold, to exercise full rights of
ownership of, any Shares to be accepted for payment pursuant to the Offer,
including, without limitation, the right to vote such Shares on all matters
properly presented to the shareholders of the Company, (iv) prohibit Purchaser
or any of its Subsidiaries from effectively controlling any material business or
operations of the Company or its Subsidiaries, or (v) which otherwise is
<PAGE>
reasonably likely to have a Company Material Adverse Effect on the Business,
properties, assets, financial condition or results of operations of the Company
and its Subsidiaries taken as a whole;
(b) there shall be enacted, entered, enforced, promulgated or deemed
applicable to the Offer or the Merger by any United States federal or state
governmental agency, court or similar authority, any statute, rule, regulation,
judgment, order of injunction, other than the application to the Offer or the
Merger of applicable waiting periods under the HSR Act, that would reasonably be
expected to result in any of the consequences referred to in clauses (i) through
(v) of paragraph (a) above (other than any state law, statute, rule or
regulation whose applicability can be avoided by not extending the Offer to
residents of such state provided that in the aggregate not more than 5% of the
outstanding Shares as of the consummation of the Offer shall be owned of record
by residents of all such states);
(c) (i) the Board or any committee thereof shall have and be
continuing to have suspended (in excess of three days), withdrawn or modified in
a manner adverse to Purchaser or Acquisition Sub its approval or recommendation
of the Offer, the Merger or this Agreement, or approved or recommended any
Acquisition Proposal, or shall have resolved to take any of the foregoing
actions or (ii) the Company enters into an agreement regarding an Acquisition
Proposal;
(d) there shall have occurred and be continuing a breach of one or
more representations or warranties of the Company set forth in the Agreement
which for purposes of this paragraph (d) shall be read without giving any effect
to any Company Material Adverse Effect or other materiality qualifiers contained
in any such representation and warranty and which, either individually or in the
aggregate, have resulted or could reasonably be expected to result in a Company
Material Adverse Effect, and the Company shall have executed and delivered to
Purchaser and Acquisition Sub a certificate, dated the date of consummation of
the Offer, executed by the Company's Secretary that no such breach has occurred;
(e) the Company shall have and be continuing to have failed to
perform or to comply with: Section 6.2 hereof in any respect in connection with
the non-solicitation agreements and covenants contained in Section 6.2 and in
any material respect in connection with any of the other agreements and
covenants contained in Section 6.2; or one or more obligations, covenants or
agreements set forth in this Agreement to be performed or complied with by it
under the Agreement prior to the consummation of the Offer which, either
individually or in the aggregate, have resulted in or could reasonably be
expected to result in a Company Material Adverse Effect, and the Company shall
have executed and delivered to Purchaser and Acquisition Sub a certificate,
dated the date of consummation of the Offer, executed by the Company's Secretary
that no such breach has occurred;
(f) there shall have occurred and be continuing (i) any general
suspension of trading in, or limitation on prices for, securities on a national
securities exchange in the United States (excluding any coordinated trading halt
triggered solely as a result of a specified increase or decrease in a market
index or similar "circuit breaker" process), (ii) a declaration of a banking
moratorium or any general suspension of payments in respect of or operations by
banks in the United States, whether as a result of their failure to be Year 2000
Compliant or otherwise, (iii)
2
<PAGE>
any material limitation (whether or not mandatory) by any Governmental Entity
on, or other similar event that materially adversely affects, the extension of
credit in the United States by banks or other lending institutions, (iv) a
commencement of a war or armed hostilities or other national or international
calamity directly or indirectly involving the United States which materially
adversely affects the extension of credit in the United States by banks or other
lending institutions, or (v) from the date of this Agreement through the date of
termination or expiration, a decline of at least 25% in either the Dow Jones
Industrial Average or the Standard & Poor's 500 Index;
(g) there shall have occurred and be continuing a Company Material
Adverse Effect with respect to the Company;
(h) the aggregate outstanding Indebtedness of the Company and its
Subsidiaries and the aggregate Liquidation Preference payable upon the Company
Series A Stock and the Company Series B Stock under Section 6.7 shall exceed $48
million (the "Indebtedness Condition"); or
(i) the aggregate Transaction Fees (as hereinafter defined) shall
exceed $3,300,000. For purposes of this Agreement, "Transaction Fees" shall
mean all fees and expenses paid or incurred by the Company or any of its
Subsidiaries as a result of or in connection with the Offer, the Merger and the
Transactions contemplated by this Agreement (including legal, accounting and
investment banking fees and expenses as well as any and all payments made or to
be made pursuant to any change in control, severance or other agreements to
which the Company or any of its Subsidiaries is a party and excluding amounts
payable to Bank of America or with respect to the Options, Company Series A
Stock, Company Series B Stock, Zero Coupon Notes and the Management Services
Agreement, dated March 11, 1998, between the Company and Marlin Holdings, Inc.,
as amended and as in effect on the date hereof);
which, in the judgment of Purchaser or Acquisition Sub with respect to each and
every matter referred to above and regardless of the circumstances (including
any action or inaction by Acquisition Sub or any of its Affiliates not
inconsistent with the terms hereof) giving rise to any such condition, makes it
inadvisable to proceed with the Offer or with such acceptance for payment of or
payment for Shares.
If the Agreement is terminated by Purchaser or Acquisition Sub or by the
Company in accordance with its terms, Acquisition Sub shall, and Purchaser shall
cause Acquisition Sub to, terminate promptly the Offer.
The foregoing conditions are for the benefit of Purchaser and Acquisition
Sub and may, subject to the terms and conditions of the Agreement, be waived by
Purchaser and Acquisition Sub in whole or in part at any time and from time to
time in their sole discretion; provided, however, that the Minimum Condition
must be satisfied prior to acceptance of any Shares for purchase pursuant to the
Offer. The failure by Purchaser or Acquisition Sub at any time to exercise any
of the foregoing rights shall not be deemed a waiver of any such right, the
waiver of any such right with respect to particular facts and circumstances
shall not be deemed a waiver with respect to any other facts and circumstances
and each such right shall be deemed an ongoing right that may be
3
<PAGE>
asserted at any time and from time to time. Notwithstanding the fact that
Acquisition Sub reserves the right to assert the occurrence or non-occurrence of
an Offer Condition following acceptance for payment but prior to payment in
order to delay or cancel its obligation to pay for properly tendered Shares,
Acquisition Sub shall either promptly pay for such Shares or promptly return
such Shares.
Each term which is defined in the Agreement has the same meaning wherever
it is used in this Annex A as the meaning given in the Agreement.
4
<PAGE>
ANNEX B
Section 1. Tax Issues.
----------
A. Federal and state tax income returns for Benson Eyecare Corporation and its
Subsidiaries for tax year 1996 relating to the period prior to the Spin-off of
BEC Group, Inc.
B. Federal and state income tax returns for BEC Group, Inc. and its Subsidiaries
for the following tax years: (1) for the post spin-off portion of tax year
1996, tax year 1997 and the pre-spin-off portion of tax year 1998.
C. Federal and state income tax returns for Bolle Inc. and its Subsidiaries for
the post spin-off portion of tax year 1998.
Section 2. Environmental Issues.
--------------------
A. All environmental studies and related documentation (including EPA "no-
action" letters) regarding the real property with respect to which BEC Group,
Inc. and Bolle Inc. has agreed to indemnify others under Indemnification
Agreements, dated February 11, 1996 and March 11, 1998 (the "Indemnification
Agreements").
Section 3. ERISA Issues.
------------
A. Form 5500's for all Company Plans (which include those of ERISA Affiliates)
for tax years 1995 - present.
Section 4. Contract Indemnity Issues.
-------------------------
A. All material contracts and agreements that relate to or are referred to or
disclosed in the Indemnification Agreements, the Agreement and Plan of Merger,
dated July 11, 1996, and the Agreement and Plan of Merger dated, as March 11,
1998.
<PAGE>
EXHIBIT A
---------
Martin E. Franklin
Ian G. H. Ashken
2
<PAGE>
EXHIBIT (C)(3)
November 24, 1999
Worldwide Sports and Recreation, Inc. Worldwide Sports and Recreation, Inc.
c/o Wind Point Partners c/o Wind Point Partners
675 North Michigan Avenue One Towne Square
Suite 3300 Suite 780
Chicago, Illinois 60611 Southfield, Michigan 48076
Attention: Richard Kracum Attention: Salam Chaudhary
Re: Tender and Voting Agreement
---------------------------
Gentlemen:
Bolle, Inc., a Delaware corporation (the "Company"), Worldwide Sports and
Recreation, Inc., a Delaware corporation (the "Purchaser") and Shade
Acquisition, Inc., a newly formed Delaware corporation and a wholly-owned
subsidiary of the Purchaser ("Acquisition Sub"), intend to enter an Agreement
and Plan of Merger, dated on or about November 24, 1999 (the "Merger
Agreement"), pursuant to which, Acquisition Sub will make a cash tender offer
(the "Offer") to acquire all of the issued and outstanding shares of common
stock of the Company and all associated rights (the "Shares"). In order to
induce the Purchaser to enter into the Agreement, the undersigned hereby agrees
to tender all of the Shares owned by the undersigned to Acquisition Sub pursuant
to the Offer and to vote the Shares owned by the undersigned in favor of the
Offer, the Merger, the Merger Agreement and each of the transactions
contemplated thereby at any meeting (whether special or annual, and whether or
not adjourned) or by written action of stockholders of the Company. Further, the
undersigned hereby confirms his intention to recommend the Merger to the
Company's stockholders, subject to the exercise of applicable fiduciary duties
as determined by the undersigned in good faith after consultation with, and
based upon the advice of, outside counsel. Capitalized terms used, but not
otherwise defined, herein shall have the meanings ascribed to them in the Merger
Agreement.
The term of this letter agreement shall be until the first to occur of (i)
the termination of the Merger Agreement, (ii) the closing of the Merger, or
(iii) February 28, 2000.
Very truly yours,
________________________________
Martin E. Franklin
<PAGE>
Worldwide Sports and Recreation, Inc.
November 24, 1999
Page 2
ACCEPTED AND AGREED:
Worldwide Sports and Recreation, Inc.
By:_______________________________
Title:____________________________
<PAGE>
EXHIBIT (C)(3)
November 24, 1999
Worldwide Sports and Recreation, Inc. Worldwide Sports and Recreation, Inc.
c/o Wind Point Partners c/o Wind Point Partners
675 North Michigan Avenue One Towne Square
Suite 3300 Suite 780
Chicago, Illinois 60611 Southfield, Michigan 48076
Attention: Richard Kracum Attention: Salam Chaudhary
Re: Tender and Voting Agreement
---------------------------
Gentlemen:
Bolle, Inc., a Delaware corporation (the "Company"), Worldwide Sports and
Recreation, Inc., a Delaware corporation (the "Purchaser") and Shade
Acquisition, Inc., a newly formed Delaware corporation and a wholly-owned
subsidiary of the Purchaser ("Acquisition Sub"), intend to enter an Agreement
and Plan of Merger, dated on or about November 24, 1999 (the "Merger
Agreement"), pursuant to which, Acquisition Sub will make a cash tender offer
(the "Offer") to acquire all of the issued and outstanding shares of common
stock of the Company and all associated rights (the "Shares"). In order to
induce the Purchaser to enter into the Agreement, the undersigned hereby agrees
to tender all of the Shares owned by the undersigned to Acquisition Sub pursuant
to the Offer and to vote the Shares owned by the undersigned in favor of the
Offer, the Merger, the Merger Agreement and each of the transactions
contemplated thereby at any meeting (whether special or annual, and whether or
not adjourned) or by written action of stockholders of the Company. Further, the
undersigned hereby confirms his intention to recommend the Merger to the
Company's stockholders, subject to the exercise of applicable fiduciary duties
as determined by the undersigned in good faith after consultation with, and
based upon the advice of, outside counsel. Capitalized terms used, but not
otherwise defined, herein shall have the meanings ascribed to them in the Merger
Agreement.
The term of this letter agreement shall be until the first to occur of (i)
the termination of the Merger Agreement, (ii) the closing of the Merger, or
(iii) February 28, 2000.
Very truly yours,
________________________________
Ian G.H. Ashken
<PAGE>
Worldwide Sports and Recreation, Inc.
November 24, 1999
Page 2
ACCEPTED AND AGREED:
Worldwide Sports and Recreation, Inc.
By:_______________________________
Title:____________________________
<PAGE>
EXHIBIT (C)(4)
SHADE ACQUISITION, INC.
c/o Wind Point Partner
One Towne Square, Suite 780
Southfield, Michigan 48076
November 24, 1999
Mr. Martin E. Franklin
Mr. Ian G.H. Ashken
Bolle Inc.
555 Theodore Fremd Avenue
Suite B-320
Rye, New York 10580
Dear Messrs. Franklin and Ashken:
This letter sets forth the terms and conditions upon which one of you will
continue to serve on the Board of Directors (the "Board") of Bolle Inc., a
Delaware corporation and the surviving corporation in a merger with Shade
Acquisition, Inc. ("Bolle"), following the consummation of the cash tender offer
to acquire Bolle's common stock (the "Offer") and related merger pursuant to the
Agreement and Plan of Merger, dated as of the date hereof, by and among
Worldwide Sports and Recreation, Inc., Shade Acquisition, Inc., and Bolle.
Martin E. Franklin hereby agrees, if requested by Bolle, to serve on the
Board for one year following the consummation of the Offer (the "Period");
provided, that he may resign from the Board upon the bankruptcy of Bolle or upon
another material adverse change in the business, assets, results of operation or
financial condition of Bolle and its subsidiaries, taken as a whole. In the
event that Martin E. Franklin is unable to serve on the Board during the Period
as a result of his death or permanent disability, Ian G.H. Ashken hereby agrees,
if requested by Bolle, to serve on the Board during the Period; provided, that
he may also resign from the Board upon any such bankruptcy, or other material
adverse change of Bolle, if requested by Bolle.
This letter agreement has been executed and delivered to you in duplicate.
If it accurately reflects our agreements, please so indicate by executing both
counterparts hereof in the space provided below, retaining one counterpart for
your records and returning the other counterpart to the undersigned. This letter
agreement will then constitute a binding agreement between us.
[Signature Page Follows]
<PAGE>
Mr. Martin E. Franklin
Mr. Ian G.H. Ashken
November 24, 1999
Page 2
Very truly yours,
SHADE ACQUISITION, INC.
By:__________________________________
Title:_______________________________
Acknowledged, accepted
and agreed this ______
day of November, 1999
BOLLE, INC.
By:_______________________
Its:______________________
__________________________
Martin E. Franklin
__________________________
Ian G.H. Ashken
<PAGE>
EXHIBIT (c)(5)
BOLLE INC.
555 Theodore Fremd Avenue
Suite B-320
Rye, New York 10580
November 24, 1999
Marlin Holdings, Inc. Wind Point Partners
555 Theodore Fremd Avenue One Towne Square
Suite B-320 Suite 700
Rye, New York 10580 Southfield, Michigan 48076
Ladies and Gentlemen:
Reference is hereby made to that certain Management Services Agreement,
dated March 11, 1998 between Bolle Inc. ("Bolle") and Marlin Holdings, Inc.
("Marlin"), as amended by that certain Amendment No. 1, dated September 23, 1998
and as in full force and effect as of the date hereof (the "Management Services
Agreement"). Bolle and Marlin, intending to amend such agreement, hereby agree
that, effective upon consummation of the tender offer (the "Offer") pursuant to
that certain Agreement and Plan of Merger, dated as of the date hereof, by and
among and Worldwide Sports and Recreation, Inc., Shade Acquisition, Inc. ("Shade
Acquisition"), and Bolle, (i) the difference, if any, between $3,300,000 and the
Transaction Fees (as defined in the Merger Agreement) actually paid or incurred
by Bolle shall be paid to Marlin in a lump sum payment in payment of amounts
otherwise payable to Marlin under the Management Services Agreement, provided
that such lump sum payment shall not exceed $600,000 in the aggregate (the "Lump
Sum Payment"), (ii) the remaining amounts payable to Marlin under the Management
Services Agreement (after taking into account the payment of the Lump Sum
Payment) shall be payable to Marlin in installments of $50,000 per month for the
number of months necessary in order to pay such remaining amounts in full,
provided that, notwithstanding the foregoing, the last month's payment shall be
equal to such lesser amount as may be necessary in order to pay such remaining
amounts in full (the "Scheduled Marlin Payments"), and (iii) the Scheduled
Marlin Payments shall be subordinated to any bank and other indebtedness for
borrowed money incurred or assumed by Bolle in connection with, or as a result
of, the consummation of the Offer or the related merger and any indebtedness
which may thereafter replace or succeed to such indebtedness ("Aggregate Funded
Debt"). Accordingly, the Scheduled Marlin Payments shall only be paid to Marlin
if there is no default or continuing event of default (a "Aggregate Funded Debt
Default") by Bolle under any of the documents, agreements or other instruments
relating to the Aggregate Funded Debt (the "Aggregate Funded Debt Documents").
If requested by Bolle or Shade Acquisition, Marlin hereby agrees to execute and
deliver a Subordination Agreement, in such form as may be reasonably requested
by the Aggregate Funded Debt lenders, in order to more fully effectuate the
terms and conditions of this letter agreement.
<PAGE>
Upon curing any Aggregate Funded Debt Default, Bolle shall pay any deferred
Scheduled Marlin Payments which have not already been repaid by Wind Point
Partners, to the extent permitted by the Aggregate Funded Debt Documents. In the
absence of an Aggregate Funded Debt Default, management fees payable to Wind
Point Partners (the "Wind Point Fees") shall rank pari passu with the Scheduled
Marlin Payments. In the event of an Aggregate Funded Debt Default, the Wind
Point Fees shall be subordinate to the Scheduled Marlin Payments until such time
as the Aggregate Funded Debt Default is cured and Scheduled Marlin Payments
which have been deferred as a result of such Aggregate Funded Debt Default are
repaid in full at which time the Scheduled Marlin Payments shall again rank pari
passu with the Wind Point Fees. Upon an Aggregate Funded Debt Default, the Wind
Point Fees that have been paid to Wind Point Partners since the date of
consummation of the Offer shall be paid over to Marlin to the extent that
Scheduled Marlin Payments have not been paid. In lieu thereof, Wind Point
Partners may elect to obtain a letter of credit or other comparable form of
credit enhancement acceptable to Marlin securing the Scheduled Marlin Payments
until such Scheduled Marlin Payments have been paid in full.
Furthermore, the parties hereto agree that, effective upon consummation of
the Offer, Bolle Inc. shall assign and transfer, and Marlin shall assume, that
certain Lease Agreement for the Bolle offices located at 555 Theodore Fremd
Avenue, Rye, New York. Marlin hereby agrees to indemnify Bolle for, and hold
Bolle harmless from any liabilities, debts or other obligations arising under
such lease.
The parties hereto expressly acknowledge and agree that Shade Acquisition
is a third party beneficiary of this letter agreement and that this letter
agreement may not be amended, terminated, revoked or modified without the prior
written consent of Shade Acquisition. If it accurately reflect our agreements,
please so indicate by executing both counterparts hereof in the space provided
below, retaining one counterpart for your records and returning the other
counterpart to the undersigned. This letter agreement will then constitute a
binding agreement between us.
Very truly yours,
BOLLE INC.
By:________________________________
Title:_____________________________
<PAGE>
Acknowledged, accepted
and agreed this _____
day of November, 1999.
MARLIN HOLDINGS, INC.
By:_____________________________
Title:__________________________
WIND POINT PARTNERS
By:_____________________________
Title:__________________________
