SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) June 16, 1997
CPI CORP.
________________________________________________________________
(exact name of registrant as specified in its charter)
Delaware 0-11227 43-1256674
________________________________________________________________
(State or other jurisdiction (Commission file (IRS Employer
of incorporation) Number) Identification No.)
1706 Washington Avenue, St. Louis, Missouri 63103-1790
________________________________________________________________
(Address of principal executive offices) (Zip code)
Registrants's telephone number, including area code (314)231-1575
_________________________________________________________________
_________________________________________________________________
(Former name or former address, if changes since last report.)
<PAGE>
ITEM 5. OTHER EVENTS
A.) On June 16, 1997, the Company prepaid the $55.0 million
balance of its existing $60.0 million Senior Notes and
privately placed new Senior Notes in the amount of
$60.0 million (the Note Agreement) with two insurance
companies. The notes, issued pursuant to the Note
Agreement, mature over a ten-year period with an
average maturity of seven-years and with the first
principal payment due on the fourth anniversary of the
agreement. Interest on the notes is payable
semi-annually at an average rate of 7.46%. The
Note Agreement requires the Company maintain certain
financial ratios and comply with certain restrictive
covenants.
B.) On June 16, 1997, the Company terminated its existing
$60.0 million revolving credit agreement and entered
into a new $40.0 million revolving credit agreement
(the "Credit Agreement") with three domestic banks.
The Credit Agreement, which will expire on June 16,
2000, has a variable interest rate charged at LIBOR
plus the applicable margin rate of 0.50% to 1.25%, or
federal funds rate plus applicable margin rate of 0.50%
to 1.25% or prime rate. A commitment fee of 0.125% to
0.25% per annum (which is based on the ratio of
consolidated debt to EBITDA), is payable on
the unused portion of the Credit Agreement. The
Company is not required to maintain compensating
balances in connection with the Credit Agreement and
has substantially the same financial covenants with
the Credit Agreement as those set forth in the
Company's $60.0 million Note Agreement.
<PAGE>
PART II. OTHER INFORMATION
Item 6(a) Exhibits
<TABLE>
Exhibit 10 - Material Contracts
<S> <C>
(10.5) $60 Million Note Purchase Agreement
with The Prudential Insurance Company of
America and The Guardian Life Insurance
Company of America
(10.6) $40 Million Revolving Credit Agreement
with Mercantile Bank of St. Louis National
Association, Harris Trust and Savings Bank
and the Sumitomo Bank, Limited
</TABLE>
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
CPI CORP.
(Registrant)
/s/ Barry Arthur
----------------------------
Barry Arthur
Authorized Officer and
Principal Financial Officer
Dated: October 22, 1997
<PAGE>
EXHIBIT INDEX
PART II. OTHER INFORMATION
Item 6(a) Exhibits
<TABLE>
Exhibit 10 - Material Contracts
<S> <C>
(10.5) $60 Million Note Purchase Agreement
with The Prudential Insurance Company of
America and The Guardian Life Insurance
Company of America
(10.6) $40 Million Revolving Credit Agreement
with Mercantile Bank of St. Louis National
Association, Harris Trust and Savings Bank
and the Sumitomo Bank, Limited
</TABLE>
EXHIBIT 10.5
CPI CORP.
7.46% Senior Notes due 2007
NOTE PURCHASE AGREEMENT
Dated as of June 16, 1997
<PAGE>
TABLE OF CONTENTS
PAGE
1. AUTHORIZATION OF NOTES 1
2. SALE AND PURCHASE OF NOTES 1
3. CLOSING 2
4. CONDITIONS TO CLOSING 2
4.1. Representations and Warranties 2
4.2. Performance; No Default 2
4.3. Compliance Certificates 3
4.4. Opinions of Counsel 3
4.5. Purchase Permitted by Applicable Law, etc. 3
4.6. Sale of Notes to Other Purchasers 3
4.7. Payment of Special Counsel Fees 4
4.8. Private Placement Number 4
4.9. Changes in Corporate Structure 4
4.10. Proceedings and Documents 4
5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
5.1. Organization; Power and Authority 4
5.2. Authorization, etc. 5
5.3. Disclosure 5
5.4. Organization and Ownership of Shares of
Subsidiaries;Affiliates 5
5.5. Financial Statements 6
5.6. Compliance with Laws, Other Instruments, etc. 6
5.7. Governmental Authorizations, etc. 7
5.8. Litigation; Observance of Agreements, Statutes
and Orders 7
5.9. Taxes 7
5.10. Title to Property; Leases 8
5.11. Licenses, Permits, etc. 8
5.12. Compliance with ERISA 9
5.13. Private Offering by the Company 10
5.14. Use of Proceeds; Margin Regulations 10
5.15. Existing Indebtedness; Future Liens 10
5.16. Foreign Assets Control Regulations, etc. 11
5.17. Status Under Certain Statutes 11
5.18. Environmental Matters 11
6. REPRESENTATIONS OF THE PURCHASER 12
6.1. Purchase of Notes 12
6.2. Source of Funds 12
7. INFORMATION AS TO COMPANY 13
7.1. Financial and Business Information 13
7.2. Officer's Certificate 16
7.3. Inspection 17
<PAGE>
8. PREPAYMENT OF THE NOTES 17
8.1. Required Prepayments 17
8.2. Optional Prepayments 18
8.3. Allocation of Partial Prepayments 18
8.4. Maturity; Surrender, etc. 18
8.5. Purchase of Notes 19
8.6. Make-Whole Amount 19
8.7. Prepayment Relating to Disposition Payment 20
9. AFFIRMATIVE COVENANTS 21
9.1. Compliance with Law 21
9.2. Insurance 21
9.3. Maintenance of Properties 22
9.4. Payment of Taxes and Claims 22
9.5. Corporate Existence, etc. 22
9.6. Covenant to Secure Notes Equally 23
10. NEGATIVE COVENANTS 23
10.1. Incurrence of Indebtedness and Subsidiary
Indebtedness 23
10.2. Liens 24
10.3. Limitation on Sale and Leaseback Transactions 26
10.4. Maintenance of EBITDA and Interest Expense
Coverage 26
10.5. Asset Sales 27
10.6. Merger, Consolidation, etc. 28
10.7. Transactions with Affiliates 28
11. EVENTS OF DEFAULT 29
12. REMEDIES ON DEFAULT, etc. 31
12.1. Acceleration 31
12.2. Other Remedies 32
12.3. Rescission 32
12.4. No Waivers or Election of Remedies, Expenses,
etc. 33
13. REGISTRATION; EXCHANGE; SUBSTITUTION OF NOTES 33
13.1. Registration of Notes 33
13.2. Transfer and Exchange of Notes 33
13.3. Replacement of Notes 34
14. PAYMENTS ON NOTES 35
14.1. Place of Payment 35
14.2. Home Office Payment 35
15. EXPENSES, ETC. 35
15.1. Transaction Expenses 35
15.2. Survival 36
16. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ENTIRE
AGREEMENT 36
<PAGE>
17. AMENDMENT AND WAIVER 37
17.1. Requirements 37
(ii)
17.2. Solicitation of Holders of Notes 37
17.3. Binding Effect, etc. 38
17.4. Notes held by Company, etc. 38
18. NOTICES 38
19. REPRODUCTION OF DOCUMENTS 39
20. CONFIDENTIAL INFORMATION 39
21. SUBSTITUTION OF PURCHASER 40
22. MISCELLANEOUS 41
22.1. Successors and Assigns 41
22.2. Construction 41
22.3. Jurisdiction and Process; Waiver of Jury Trial 41
22.4. Payments Due on Non-Business Days 42
22.5. Severability 42
22.6. Accounting Terms; Pro Forma Calculations 42
22.7. Counterparts 43
22.8. Governing Law 43
Exhibit 1 -- Form of 7.46% Senior Note due 2007
Exhibit 4.4(a)(1) -- Form of Opinion of Special Counsel for
the Company
Exhibit 4.4(a)(2) -- Form of Opinion of General Counsel of
the Company
Exhibit 4.4(b) -- Form of Opinion of Special Counsel for
the Purchasers
Schedule A -- Names and Addresses of Purchasers
Schedule B -- Defined Terms
Schedule 5.3 -- Disclosure Documents
Schedule 5.4 -- Subsidiaries
Schedule 5.5 -- Financial Statements
Schedule 5.8 -- Litigation
Schedule 5.11 -- Licenses, etc.
Schedule 5.15 -- Existing Indebtedness
(iii)
<PAGE>
CPI CORP.
1706 Washington Avenue
St. Louis, MO 63103-1790
7.46% Senior Notes due 2007
As of June 16, 1997
TO EACH OF THE PURCHASERS LISTED IN THE ATTACHED SCHEDULE A:
Ladies and Gentlemen:
CPI CORP., a Delaware corporation (the "COMPANY"),
agrees with you as follows:
1. AUTHORIZATION OF NOTES.
The Company has duly authorized the issue and sale of
$60,000,000 aggregate principal amount of its 7.46% Senior Notes
due 2007 (the "NOTES"), each such note to be substantially in the
form set out in Exhibit 1. As used herein, the term "NOTES"
shall mean all notes originally delivered pursuant to this
Agreement and the Other Agreements referred to below and all
notes delivered in substitution or exchange for any such note
and, where applicable, shall include the singular number as well
as the plural. Certain capitalized and other terms used in this
Agreement are defined in Schedule B; references to a "Schedule"
or an "Exhibit" are, unless otherwise specified, to a Schedule or
an Exhibit attached to this Agreement.
2. SALE AND PURCHASE OF NOTES.
Subject to the terms and conditions of this Agreement,
the Company will issue and sell to you and you will purchase from
the Company, at the Closing provided for in Section 3, Notes in
the principal amount specified opposite your name in Schedule A
at the purchase price of 100% of the principal amount thereof.
Contemporaneously with entering into this Agreement, the Company
is entering into separate Note Purchase Agreements (the "OTHER
AGREEMENTS") identical with this Agreement with each of the other
purchasers named in Schedule A (the "OTHER PURCHASERS"),
providing for the sale at such Closing to each of the Other
Purchasers of Notes in the principal amount specified opposite
its name in Schedule A. Your obligation hereunder and the
obligations of the Other Purchasers under the Other Agreements
are several and not joint obligations and you shall have no
obligation under any Other Agreement and no liability to any
Person for the performance or non-performance by any Other
Purchaser thereunder.
<PAGE>
2
3. CLOSING.
The sale and purchase of the Notes to be purchased by
you and the Other Purchasers shall occur at the offices of
Willkie Farr & Gallagher, One Citicorp Center, 153 East 53rd
Street, New York, NY 10022 at 10:00 a.m., New York time, at a
closing (the "CLOSING") on June 16, 1997 or on such other
Business Day thereafter on or prior to June 30, 1997 as may be
agreed upon by the Company and you and the Other Purchasers. At
the Closing the Company will deliver to you the Notes to be
purchased by you in the form of a single Note (or such greater
number of Notes in denominations of at least $100,000 as you may
request prior to the Closing) dated the date of the Closing and
registered in your name (or in the name of your nominee), against
delivery by you to the Company or its order of immediately
available funds in the amount of the purchase price therefor by
wire transfer of immediately available funds for the account of
the Company to account number 100-1665965 (Account Name: Consumer
Programs Incorporated) at Mercantile Bank, N.A., St. Louis, MO,
ABA number 081000210.
If at the Closing the Company shall fail to tender such
Notes to you as provided above in this Section 3, or any of the
conditions specified in Section 4 shall not have been fulfilled
to your satisfaction, you shall, at your election, be relieved of
all further obligations under this Agreement, without thereby
waiving any rights you may have by reason of such failure or such
nonfulfillment.
4. CONDITIONS TO CLOSING.
Your obligation to purchase and pay for the Notes to be
sold to you at the Closing is subject to the fulfillment to your
satisfaction, prior to or at the Closing, of the following
conditions:
4.1. REPRESENTATION AND WARRANTIES.
The representations and warranties of the Company in
this Agreement shall be correct when made and at the time of the
Closing.
4.2. PERFORMANCE; NO DEFAULT.
The Company shall have performed and complied with all
agreements and conditions contained in this Agreement required to
be performed or complied with by it prior to or at the Closing
and after giving effect to the issue and sale of the Notes (and
the application of the proceeds thereof as contemplated by
<PAGE>
Schedule 5.14) no Default or Event of Default shall have occurred
and be continuing. Neither the Company nor any Subsidiary shall
have entered into any transactions since May 31, 1997 that would
have been prohibited by Section 10.1, 10.2, 10.6 or 10.7 hereof
had such Sections applied since such date.
3
4.3. COMPLIANCE CERTIFICATES.
(a) OFFICER'S CERTIFICATE. The Company shall have
delivered to you an Officer's Certificate, dated the date of the
Closing, certifying that the conditions specified in Sections
4.1, 4.2 and 4.9 have been fulfilled.
(b) SECRETARY'S CERTIFICATE. The Company shall have
delivered to you a certificate of the Secretary or an Assistant
Secretary of the Company certifying as to the resolutions
attached thereto and other corporate proceedings relating to the
authorization, execution and delivery of the Notes and this
Agreement and the Other Agreements.
4.4. OPINIONS OF COUNSEL.
You shall have received opinions in form and substance
satisfactory to you, dated the date of the Closing (a) from White
& Case, special counsel for the Company, and Jane E. Nelson,
Esq., General Counsel of the Company, substantially in the
respective forms set forth in Exhibits 4.4(a)(1) and 4.4(a)(2)
and covering such other matters incident to the transactions
contemplated hereby as you or your counsel may reasonably request
(and the Company hereby instructs its counsel to deliver such
opinions to you), and (b) from Willkie Farr & Gallagher, your
special counsel in connection with such transactions,
substantially in the form set forth in Exhibit 4.4(b) and
covering such other matters incident to such transactions as you
may reasonably request.
4.5. PURCHASE PERMITTED BY APPLICABLE LAW, ETC.
On the date of the Closing your purchase of Notes shall (a) be
permitted by the laws and regulations of each jurisdiction to
which you are subject, without recourse to provisions (such as
Section 1405(a)(8) of the New York Insurance Law) permitting
limited investments by insurance companies without restriction as
to the character of the particular investment, (b) not violate
any applicable law or regulation (including without limitation
Regulation G, T or X of the Board of Governors of the Federal
Reserve System) and (c) not subject you to any tax, penalty or
liability under or pursuant to any applicable law or regulation,
which law or regulation was not in effect on the date hereof. If
requested by you, you shall have received an Officer's
Certificate certifying as to such matters of fact as you may
reasonably specify to enable you to determine whether such
purchase is so permitted.
<PAGE>
4.6. SALES OF NOTES TO OTHER PURCHASERS.
The Company shall sell to the Other Purchasers and the
Other Purchasers shall purchase the Notes to be purchased by them
at the Closing as specified in Schedule A.
4
4.7. PAYMENT OF SPECIAL COUNSEL FEES.
Without limiting the provisions of Section 15.1, the
Company shall have paid on or before the Closing the reasonable
fees, charges and disbursements of your special counsel referred
to in Section 4.4 to the extent reflected in a statement of such
counsel rendered to the Company at least one Business Day prior
to the Closing.
4.8. PRIVATE PLACEMENT NUMBER.
A Private Placement Number issued by Standard & Poor's
CUSIP Service Bureau (in cooperation with the Securities
Valuation Office of the National Association of Insurance
Commissioners) shall have been obtained for the Notes.
4.9. CHANGES IN CORPORATE STRUCTURE.
The Company shall not have changed its jurisdiction of
incorporation or been a party to any merger or consolidation and
shall not have succeeded to all or any substantial part of the
liabilities of any other entity at any time following the date of
the most recent financial statements referred to in Schedule 5.5.
4.10. PROCEEDINGS AND DOCUMENTS.
All corporate and other proceedings in connection with
the transactions contemplated by this Agreement and all documents
and instruments incident to such transactions shall be
satisfactory to you and your special counsel, and you and your
special counsel shall have received all such counterpart
originals or certified or other copies of such documents as you
or they may reasonably request.
5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company represents and warrants to you that:
5.1. ORGANIZATION; POWER ABD AUTHORITY.
The Company is a corporation duly organized, validly
existing and in good standing under the laws of its jurisdiction
of incorporation, and is duly qualified as a foreign corporation
and is in good standing in each jurisdiction in which such
qualification is required by law, other than those jurisdictions
as to which the failure to be so qualified or in good standing
<PAGE>
could not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect. The Company has the
corporate power and authority to own or hold under lease the
properties it purports to own or hold under lease, to transact
the business it transacts and proposes to transact, to execute
and deliver this Agreement and the Other Agreements and the Notes
and to perform the provisions hereof and thereof.
5
5.2. AUTHORIZATION, ETC.
This Agreement and the Other Agreements and the Notes
have been duly authorized by all necessary corporate action on
the part of the Company, and this Agreement constitutes, and upon
execution and delivery thereof each Note will constitute, a
legal, valid and binding obligation of the Company enforceable
against the Company in accordance with its terms, except as such
enforceability may be limited by (a) applicable bankruptcy,
insolvency, reorganization, moratorium or other similar laws
affecting the enforcement of creditors' rights generally and (b)
general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at
law).
5.3. DISCLOSURE.
The Company, through its agent, Credit Suisse First
Boston Corporation, has delivered to you a copy of a Direct
Placement Memorandum, dated May 1997 (the "MEMORANDUM"), relating
to the transactions contemplated hereby. The Memorandum fairly
describes, in all material respects, the general nature of the
business and principal properties of the Company and its
Subsidiaries. This Agreement, the Memorandum, the documents,
certificates or other writings delivered to you by or on behalf
of the Company in connection with the transactions contemplated
hereby and described in Schedule 5.3 (together with the
Memorandum, the "DISCLOSURE DOCUMENTS"), and the financial
statements listed in Schedule 5.5, taken as a whole, do not
contain any untrue statement of a material fact or omit to state
any material fact necessary to make the statements therein not
misleading in light of the circumstances under which they were
made. Since February 1, 1997, there has been no change in the
financial condition, operations, business, properties or
prospects of the Company or any Subsidiary except as disclosed in
the Disclosure Documents or in the financial statements listed in
Schedule 5.5 and other changes that individually or in the
aggregate could not reasonably be expected to have a Material
Adverse Effect. The Company has no reason to believe that Sears,
Roebuck & Co. will exercise its rights under its license
agreement with the Company to materially reduce the scope of the
Company's business with Sears, Roebuck & Co. There is no fact
<PAGE>
known to the Company that could reasonably be expected to have a
Material Adverse Effect that has not been set forth herein or in
the Disclosure Documents.
5.4. ORGANIZATION AND OWNERSHIP OF SHARES OF SUBSIDIARIES;
AFFILIATES.
(a) Schedule 5.4 contains (except as noted therein)
complete and correct lists of the Company's (i) Subsidiaries,
showing, as to each Subsidiary, the correct name thereof, the
jurisdiction of its organization, and the percentage of shares of
each class of its capital stock or similar equity interests
6
outstanding owned by the Company and each other Subsidiary, (ii)
Affiliates, other than Subsidiaries, and (iii) directors and
senior officers. Schedule 5.4 also identifies all Significant
Subsidiaries as of February 2, 1997.
(b) All of the outstanding shares of capital stock or
similar equity interests of each Subsidiary shown in Schedule 5.4
as being owned by the Company and its Subsidiaries have been
validly issued, are fully paid and nonassessable and are owned by
the Company or another Subsidiary free and clear of any Lien
(except as otherwise disclosed in Schedule 5.4).
(c) Each Subsidiary identified in Schedule 5.4 is a
corporation duly organized, validly existing and in good standing
under the laws of its jurisdiction of organization, and is duly
qualified as a foreign corporation and is in good standing in
each jurisdiction in which such qualification is required by law,
other than those jurisdictions as to which the failure to be so
qualified or in good standing could not, individually or in the
aggregate, reasonably be expected to have a Material Adverse
Effect. Each such Subsidiary has the corporate power and
authority to own or hold under lease the properties it purports
to own or hold under lease and to transact the business it
transacts and proposes to transact.
(d) No Subsidiary is a party to, or otherwise subject
to any legal restriction or any agreement (other than this
Agreement, the agreements listed in Schedule 5.4 and customary
limitations imposed by corporate law statutes) restricting the
ability of such Subsidiary to pay dividends out of profits or
make any other similar distributions of profits to the Company or
any of its Subsidiaries that owns outstanding shares of capital
stock or similar equity interests of such Subsidiary.
<PAGE>
5.5. FINANCIAL STATEMENTS.
The Company has delivered to you copies of the
financial statements of the Company and its Subsidiaries listed
in Schedule 5.5. All of said financial statements (including in
each case the related schedules and notes) fairly present in all
material respects the consolidated financial position of the
Company and its Subsidiaries as of the respective dates specified
in such Schedule and the consolidated results of their operations
and cash flows for the respective periods so specified and have
been prepared in accordance with GAAP consistently applied
throughout the periods involved except as set forth in the notes
thereto (subject, in the case of any interim financial
statements, to normal year-end adjustments).
5.6. COMPLIANCE WITH LAWS, OTHER INSTRUMENTS, ETC.
The execution, delivery and performance by the Company
of this Agreement and the Notes will not (i) contravene, result
in any breach of, or constitute a default under, or result in the
7
creation of any Lien in respect of any property of the Company or
any Subsidiary under, any indenture, mortgage, deed of trust,
loan, purchase or credit agreement, lease, corporate charter or
by-laws, or any other agreement or instrument to which the
Company or any Subsidiary is bound or by which the Company or any
Subsidiary or any of their respective properties may be bound or
affected, (ii) conflict with or result in a breach of any of the
terms, conditions or provisions of any order, judgment, decree,
or ruling of any court, arbitrator or Governmental Authority
applicable to the Company or any Subsidiary or (iii) violate any
provision of any statute or other rule or regulation of any
Governmental Authority applicable to the Company or any
Subsidiary.
5.7. GOVERNMENTAL AUTHORIZATIONS,ETC.
No consent, approval or authorization of, or
registration, filing or declaration with, any Governmental
Authority is required in connection with the execution, delivery
or performance by the Company of this Agreement or the Notes.
5.8. LITIGATION; OBSERVANCE OF AGREEMENTS, STATUTES AND ORDERS.
(a) Except as disclosed in Schedule 5.8, there are no
actions, suits or proceedings pending or, to the knowledge of the
Company, threatened against or affecting the Company or any
Subsidiary or any property of the Company or any Subsidiary in
any court or before any arbitrator of any kind or before or by
any Governmental Authority that, individually or in the
<PAGE>
aggregate, could reasonably be expected to have a Material
Adverse Effect.
(b) Neither the Company nor any Subsidiary is in
default under any term of any agreement or instrument to which it
is a party or by which it is bound, or any order, judgment,
decree or ruling of any court, arbitrator or Governmental
Authority or is in violation of any applicable law, ordinance,
rule or regulation (including without limitation Environmental
Laws) of any Governmental Authority, which default or violation,
individually or in the aggregate, could reasonably be expected to
have a Material Adverse Effect.
5.9. TAXES.
The Company and its Subsidiaries have filed all Federal
income tax returns and all other material tax returns that are
required to have been filed in any jurisdiction, and have paid
all taxes shown to be due and payable on such returns and all
other taxes and assessments levied upon them or their properties,
assets, income or franchises, to the extent such taxes and
assessments have become due and payable and before they have
become delinquent, except for any taxes and assessments (a)
currently payable without penalty or interest, (b) the amount of
which is not individually or in the aggregate Material or
8
(c) the amount, applicability or validity of which is currently
being contested in good faith by appropriate proceedings and with
respect to which the Company or a Subsidiary, as the case may be,
has established adequate reserves in accordance with GAAP. The
Company knows of no basis for any other tax or assessment that
could reasonably be expected to have a Material Adverse Effect.
The charges, accruals and reserves on the books of the Company
and its Subsidiaries in respect of Federal, state or other taxes
for all fiscal periods are adequate. The Federal income tax
liabilities of the Company and its Subsidiaries have been
determined by the Internal Revenue Service and paid for all
fiscal years up to and including the fiscal year ended February
6, 1988.
5.10. TITLE OF PROPERTY; LEASE.
The Company and its Subsidiaries have good and
sufficient title to their respective properties that individually
or in the aggregate are Material, including all such properties
reflected in the most recent audited balance sheet listed on
Schedule 5.5 or purported to have been acquired by the Company or
any Subsidiary after said date (except as sold or otherwise
disposed of in the ordinary course of business), in each case
free and clear of Liens prohibited by this Agreement. All leases
<PAGE>
that individually or in the aggregate are Material are valid and
subsisting and are in full force and effect in all material
respects.
5.11. LICENSES, PERMITS, ETC.
Except as disclosed in Schedule 5.11,
(a)the Company and its Subsidiaries own or possess all
licenses, permits, franchises, authorizations, patents,
proprietary software, copyrights, service marks, trademarks and
trade names, or rights thereto, that individually or in the
aggregate are Material, without known conflict with the rights of
others;
(b)to the best knowledge of the Company, no product of
the Company infringes in any material respect any license,
permit, franchise, authorization, patent, proprietary software,
copyright, service mark, trademark, trade name or other right
owned by any other Person; and
(c)to the best knowledge of the Company, there is no
Material violation by any Person of any right of the Company or
any of its Subsidiaries with respect to any patent, proprietary
software, copyright, service mark, trademark, trade name or other
right owned or used by the Company or any of its Subsidiaries.
5.12. COMPLIANCE WITH ERISA.
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(a) The Company and each ERISA Affiliate have operated
and administered each Plan in compliance with all applicable laws
except for such instances of noncompliance as have not resulted
in and could not reasonably be expected to result in a Material
Adverse Effect. Neither the Company nor any ERISA Affiliate has
incurred any liability pursuant to Title I or IV of ERISA or the
penalty or excise tax provisions of the Code relating to employee
benefit plans (as defined in Section 3 of ERISA), and no event,
transaction or condition has occurred or exists that could
reasonably be expected to result in the incurrence of any such
liability by the Company or any ERISA Affiliate, or in the
imposition of any Lien on any of the rights, properties or assets
of the Company or any ERISA Affiliate, in either case pursuant to
Title I or IV of ERISA or to such penalty or excise tax
provisions or to section 401(a)(29) or 412 of the Code, other
than such liabilities or Liens as would not be individually or in
the aggregate Material.
(b)The present value of the aggregate benefit
liabilities under each of the Plans (other than Multiemployer
Plans) currently maintained or contributed to by the Company and
its ERISA Affiliates, determined as of the end of such Plan's
<PAGE>
most recently ended plan year on the basis of the actuarial
assumptions specified for funding purposes in such Plan's most
recent actuarial valuation report, did not exceed the aggregate
current value of the assets of such Plan allocable to such
benefit liabilities. The term "benefit liabilities" has the
meaning specified in section 4001 of ERISA and the terms "CURRENT
VALUE" and "PRESENT VALUE" have the meaning specified in section
3 of ERISA.
(c) The Company and its ERISA Affiliates have not
incurred withdrawal liabilities (and are not subject to
contingent withdrawal liabilities) under section 4201 or 4204 of
ERISA in respect of Multiemployer Plans that individually or in
the aggregate are Material.
(d) The execution and delivery of this Agreement and
the issuance and sale of the Notes at the Closing hereunder will
not involve any transaction prohibited by section 406(a)(i) of
ERISA or described in section 4975 (c) (1) (A) - (D) of the Code,
that could subject the Company or any holder of a Note to any tax
or penalty on prohibited transactions imposed under said section
4975 of the Code or by section 502(i) of ERISA. The
representation by the Company in the preceding sentence of this
Section 5.12(d) is made in reliance upon and subject to the
accuracy of your representation in Section 6.2 as to the sources
of the funds used to pay the purchase price of the Notes to be
purchased by you.
10
5.13. PRIVATE OFFERING BY THE COMPANY.
Neither the Company nor anyone acting on its behalf has
offered the Notes or any similar securities for sale to, or
solicited any offer to buy any of the same from, or otherwise
approached or negotiated in respect thereof with, any person
other than you, the Other Purchasers and not more than 12 other
Institutional Investors, each of which has been offered the Notes
at a private sale for investment. Neither the Company nor anyone
acting on its behalf has taken, or will take, any action that
would subject the issuance or sale of the Notes to the
registration requirements of Section 5 of the Securities Act.
5.14. USE OF PROCEEDS; MARGIN REGULATIONS.
The Company will apply the net proceeds of the sale of
the Notes to prepay its outstanding Senior Notes Due August 31,
2000, and the balance of such proceeds will be used for general
corporate purposes, including repurchases of shares of the
Company's Common Stock. Except for such repurchases and other
repurchases for the treasury, no part of the proceeds from the
sale of the Notes hereunder will be used, and no part of the
proceeds from the sale of such outstanding Senior Notes was used,
<PAGE>
directly or indirectly, for the purpose of buying or carrying any
margin stock within the meaning of Regulation G of the Board of
Governors of the Federal Reserve System (12 CFR 207), or for the
purpose of buying or carrying or trading in any securities under
such circumstances as to involve the Company in a violation of
Regulation X of said Board (12 CFR 224) or to involve any broker
or dealer in a violation of Regulation T of said Board (12 CFR
220). Margin stock (excluding treasury stock) does not
constitute more than 5% of the value of the consolidated assets
of the Company and its Subsidiaries and the Company does not have
any present intention that margin stock (excluding treasury
stock) will constitute more than 5% of the value of such assets.
As used in this Section, the terms "MARGIN STOCK" and "PURPOSE OF
BUYING OF CARRYING" shall have the meanings assigned to them in
said Regulation G.
5.15. EXISTING INDEBTEDNESS; FUTURE LIENS.
(a) Schedule 5.15 sets forth a complete and correct
list of all outstanding Indebtedness of the Company and its
Subsidiaries as of June 16, 1997, since which date there has been
no Material change in the amounts, interest rates, sinking funds,
installment payments or maturities of the Indebtedness of the
Company or its Subsidiaries. Neither the Company nor any
Subsidiary is in default, and no waiver of default is currently
in effect, in the payment of any principal or interest on any
Indebtedness of the Company or such Subsidiary, and no event or
condition exists with respect to any such Indebtedness of the
Company or any Subsidiary that would permit (or that with the
giving of notice or the lapse of time, or both, would permit) one
or more Persons to cause such Indebtedness to become due and
11
payable before its stated maturity or before its regularly
scheduled dates of payment.
(b) Except as disclosed in Schedule 5.15, neither the
Company nor any Subsidiary has agreed or consented to cause or
permit in the future (upon the happening of a contingency or
otherwise) any of its property, whether now owned or hereafter
acquired, to be subject to a Lien not permitted by Section 10.2.
5.16. FOREIGN ASSETS CONTROL REGULATIONS, ETC.
Neither the sale of the Notes by the Company hereunder
nor its use of the proceeds thereof will violate the Trading with
the Enemy Act, as amended, or any of the foreign assets control
regulations of the United States Treasury Department (31 CFR,
Subtitle B, Chapter V, as amended) or any enabling legislation or
executive order relating thereto.
<PAGE>
5.17. STATUS UNDER CERTAIN STATUTES.
Neither the Company nor any Subsidiary is subject to
regulation under the Investment Company Act of 1940, as amended,
the Public Utility Holding Company Act of 1935, as amended, the
Interstate Commerce Act, as amended, or the Federal Power Act, as
amended.
5.18. ENVIRONMENTAL MATTERS.
Neither the Company nor any Subsidiary has knowledge of
any claim or has received any notice of any claim, and no
proceeding has been instituted raising any claim against the
Company or any of its Subsidiaries or any of their respective
real properties now or formerly owned, leased or operated by any
of them or other assets, alleging any damage to the environment
or violation of any Environmental Laws, except, in each case,
such as could not reasonably be expected to result in a Material
Adverse Effect. Except as otherwise disclosed to you in writing
prior to your execution and delivery of this Agreement,
(a) neither the Company nor any Subsidiary has
knowledge of any facts which would give rise to any claim, public
or private, of violation of Environmental Laws or damage to the
environment emanating from, occurring on or in any way related
to real properties now or formerly owned, leased or operated
by any of them except, in each case, such as could not
reasonably be expected to result in a Material Adverse Effect;
(b) neither the Company nor any of its Subsidiaries has
stored any Hazardous Materials on real properties now or
formerly owned, leased or operated by any of them and has not
disposed of any Hazardous Materials in violation of any
Environmental Laws in each case in any manner that could
12
reasonably be expected to result in a Material Adverse Effect;
and
(c) all buildings on all real properties now owned,
leased or operated by the Company or any of its Subsidiaries
are in compliance with applicable Environmental Laws, except
where failure to comply could not reasonably be expected to
result in a Material Adverse Effect.
6. REPRESENTATIONS OF THE PURCHASER.
You represent to the Company that:
<PAGE>
6.1. PURCHASE OF NOTES.
You are purchasing the Notes for your own account or
for one or more separate accounts maintained by you or for the
account of one or more pension or trust funds and not with a view
to the distribution thereof, provided that the disposition of
your or their property shall at all times be within your or their
control. You understand that the Notes have not been registered
under the Securities Act and may be resold only if registered
pursuant to the provisions of the Securities Act or if an
exemption from registration is available, except under
circumstances where neither such registration nor such an
exemption is required by law, and that the Company is not
required to register the Notes.
6.2. SOURCE OF FUNDS.
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:
(a)the Source is an "insurance company general
account", as such term is defined in Prohibited Transaction
Exemption ("PTE") 95-60 (issued July 12, 1995), and the purchase
of the Notes by you is eligible for, and satisfies the
requirements of, the exemption provided in Section I of PTE 95-60
as in effect as of the date of this Agreement; or
(b) the Source is either (i) an insurance company
pooled separate account, within the meaning of Prohibited
Transaction Exemption ("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
(b), 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.
13
7. INFORMATION AS TO COMPANY.
7.1. FINANCIAL INFORMATION.
The Company shall deliver to each holder of Notes that
is an Institutional Investor:
(a) QUARTERLY STATEMENTS -- within 60 days after the
end of each quarterly fiscal period in each fiscal year of the
Company (other than the last quarterly fiscal period of each
such fiscal year), duplicate copies of,
<PAGE>
(i) a consolidated balance sheet of the Company
and its Subsidiaries as at the end of such quarter, and
(ii) consolidated statements of earnings and cash
flows and changes in stockholders' equity of the
Company and its Subsidiaries, for such quarter and (in the case
of the second and third quarters) for the portion of the
fiscal year ending with such quarter,
setting forth in each case in comparative form the consolidated
figures for the corresponding periods in the previous fiscal
year, all in reasonable detail, prepared in accordance with GAAP
applicable to quarterly financial statements generally, and
certified by a Senior Financial Officer as fairly presenting, in
all material respects, the financial position of the companies
being reported on and their results of operations and cash flows,
subject to changes resulting from year-end adjustments, provided
that delivery within the time period specified above of copies of
the Company's Quarterly Report on Form 10-Q prepared in
compliance with the requirements therefor and filed with the
Securities and Exchange Commission shall be deemed to satisfy the
requirements of this Section 7.1(a);
(b) ANNUAL STATEMENTS -- within 105 days after the end
of each fiscal year of the Company, duplicate copies of,
(i) a consolidated balance sheet of the Company
and its Subsidiaries as at the end of such year, and
(ii) consolidated statements of earnings and cash
flows and a consolidated statement of changes in stockholders'
equity, in each case of the Company and its Subsidiaries for such
year,
setting forth in each case in comparative form the figures for
the previous fiscal year, all in reasonable detail, prepared in
accordance with GAAP, and accompanied by
14
(A) an opinion thereon of independent public
accountants of recognized national standing, which opinion shall
state that such financial statements present fairly, in all
material respects, the financial position of the companies being
reported upon and their results of operations and cash flows and
have been prepared in conformity with GAAP, and that the
examination of such accountants in connection with such
financial statements has been made in accordance with generally
accepted auditing standards, and that such audit provides a
reasonable basis for such opinion in the circumstances, and
(B) a certificate of such accountants stating that
they have reviewed this Agreement and stating further whether, in
<PAGE>
making their audit, they have become aware of any condition or
event that then constitutes a Default or an Event of Default,
and, if they are aware that any such condition or event then
exists, specifying the nature and period of the existence thereof
(it being understood that such accountants shall not be liable,
directly or indirectly, for any failure to obtain knowledge of
any Default or Event of Default unless such accountants should
have obtained knowledge thereof in making an audit in accordance
with generally accepted auditing standards or did not make such
an audit),
(C) industry segment information prepared in the
same amount of detail as set forth in the Company's annual report
to shareholders for the fiscal year ended February 1, 1997,
certified by a Senior Financial Officer as fairly presenting the
information therein,
provided that the delivery within the time period specified
above of the Company's Annual Report on Form 10-K for such
fiscal year (together with the Company's annual report to
shareholders, if any, prepared pursuant to Rule 14a-3 under
the Exchange Act) prepared in accordance with the requirements
therefor and filed with the Securities and Exchange Commission,
together with the accountant's certificate described in clause
(B) above, shall be deemed to satisfy the requirements of this
Section 7.1(b) as to the delivery of the audited consolidated
statements referred to above and, so long as the annual report to
shareholders accompanying such Annual Report on Form 10-K is
prepared as to business segment information in the same amount of
detail as set forth in the annual report to shareholders for the
fiscal year ended February 1, 1997, the industry segment
information referred to above;
(c) SEC AND OTHER REPORTS -- promptly upon their
becoming available, one copy of (i) each financial statement,
report, notice or proxy statement sent by the
15
Company or any Subsidiary generally to its stockholders or to
its creditors (other than the Company or another Subsidiary),
and (ii) each regular or periodic report, each registration
statement (without exhibits except as expressly requested by
such holder), and each prospectus and all amendments thereto
filed by the Company or any Subsidiary with the Securities and
Exchange Commission and of each press release and other
statement made available generally by the Company or any
Subsidiary to the public concerning developments that are
Material;
(d) NOTICE OF DEFAULT OF EVENT OF DEFAULT -- promptly,
and in any event within five days after a Responsible Officer
becoming aware of the existence of any Default or Event of
<PAGE>
Default or that any Person has given any notice or taken any
action with respect to a claimed default hereunder or that any
Person has given any notice or taken any action with respect
to a claimed default of the type referred to in Section 11(f),
a written notice specifying the nature and period of existence
thereof and what action the Company is taking or proposes to
take with respect thereto;
(e) ERISA MATTERS -- promptly, and in any event within
five days after a Responsible Officer becoming aware of any of
the following, a written notice setting forth the nature
thereof and the action, if any, that the Company or an ERISA
Affiliate proposes to take with respect thereto:
(i) with respect to any Plan, any reportable
event, as defined in section 4043(b) of ERISA and the
regulations thereunder, for which notice thereof has not
been waived pursuant to such regulations as in effect on
the date hereof; or
(ii) the taking by the PBGC of steps to institute,
or the threatening by the PBGC of the institution of, proceedings
under section 4042 of ERISA for the termination of, or the
appointment of a trustee to administer, any Plan, or the receipt
by the Company or any ERISA Affiliate of a notice from a
Multiemployer Plan that such action has been taken by the PBGC
with respect to such Multiemployer Plan; or
(iii) any event, transaction or condition that
could result in the incurrence of any liability by the Company or
any ERISA Affiliate pursuant to Title I or IV of ERISA or the
penalty or excise tax provisions of the Code relating to employee
benefit plans, or in the imposition of any Lien on any of the
rights, properties or assets of the Company or any ERISA
Affiliate pursuant to Title I or IV of ERISA or such penalty or
excise tax provisions, if such liability or Lien, taken together
with any other such liabilities or Liens then
16
existing, could reasonably be expected to have a Material Adverse
Effect;
(f) NOTICES FROM GOVERNMENTAL AUTHORITY -- promptly,
and in any event within 30 days of receipt thereof, copies of any
notice to the Company or any Subsidiary from any Federal or
state Governmental Authority relating to any order, ruling,
statute or other law or regulation that could reasonably be
expected to have a Material Adverse Effect; and
(g) REQUESTED INFORMATION -- with reasonable
promptness, such other data and information relating to the
business, operations, affairs, financial condition, assets or
<PAGE>
properties of the Company or any of its Subsidiaries or relating
to the ability of the Company to perform its obligations
hereunder and under the Notes as from time to time may be
reasonably requested by any such holder of Notes.
7.2. OFFICER'S CERTIFICATE.
Each set of financial statements delivered to a holder
of Notes pursuant to Section 7.1(a) or Section 7.1(b) shall be
accompanied by a certificate of a Senior Financial Officer
setting forth:
(a) COVENANT COMPLIANCE -- the information (including
detailed calculations) required in order to establish whether
the Company was in compliance with the requirements of
Sections 10.1 through 10.6, inclusive, during the quarterly or
annual period covered by the statements then being furnished
(including with respect to each such Section, where
applicable, the calculations of the maximum or minimum amount,
ratio or percentage, as the case may be, permissible under the
terms of such Sections, and the calculation of the amount,
ratio or percentage then in existence) and a detailed
description of any Related Party Agreements entered into
during the period covered by such statements; and
(b) DEFAULT -- a statement that such Senior Financial
Officer has reviewed the relevant terms hereof and has made, or
caused to be made, under his or her supervision, a review of the
transactions and conditions of the Company and its Subsidiaries
from the beginning of the quarterly or annual period covered by
the statements then being furnished to the date of the
certificate and that such review shall not have disclosed the
existence during such period of any condition or event that
constitutes a Default or an Event of Default or, if any such
condition or event existed or exists (including, without
limitation, any such event or condition resulting from the
failure of the Company or any Subsidiary to comply with any
Environmental Law), specifying the nature
17
and period of existence thereof and what action the Company
shall have taken or proposes to take with respect thereto.
7.3. INSPECTION.
The Company shall permit the representatives of each
holder of Notes that is an Institutional Investor:
(a) NO DEFAULT -- if no Default or Event of Default
then exists, at the expense of such holder and upon reasonable
prior notice to the Company, to visit the principal executive
office of the Company, to discuss the affairs, finances and
<PAGE>
accounts of the Company and its Subsidiaries with the
Company's officers, and (with the consent of the Company,
which consent will not be unreasonably withheld) its
independent public accountants, and (with the consent of the
Company, which consent will not be unreasonably withheld) to
visit the other offices and properties of the Company and each
Subsidiary, all at such reasonable times and as often as may
be reasonably requested in writing; and
(b) DEFAULT -- if a Default or Event of Default then
exists, at the expense of the Company, to visit and inspect
any of the offices or properties of the Company or any
Subsidiary, to examine all their respective 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 the affairs,
finances and accounts of the Company and its Subsidiaries),
all at such times and as often as may be requested.
8. PREPAYMENT OF THE NOTES.
In addition to the payment of the entire unpaid
principal amount of the Notes at the final maturity thereof, the
Company will make required, and may make optional, prepayments in
respect of the Notes as hereinafter provided.
8.1. REQUIRED PREPAYMENTS.
On June 16, 2001 and on each June 16 thereafter to and
including June 16, 2006 the Company will prepay $8,580,000
principal amount (or such lesser principal amount as shall then
be outstanding) of the Notes, such prepayment to be made at the
principal amount to be prepaid, together with accrued interest
thereon to the date of such prepayment, without premium and
allocated as provided in Section 8.3, provided that upon any
partial prepayment of the Notes pursuant to Section 8.2 or 8.7,
the principal amount of each required prepayment of the Notes
becoming due under this Section 8.1 on and after the date of such
18
prepayment or purchase shall be reduced in the same proportion as
the aggregate unpaid principal amount of the Notes is reduced as
a result of such prepayment or purchase.
8.2. OPTIONAL PREPAYMENTS.
The Company may, at its option and upon notice as
provided below, prepay at any time all, or from time to time any
part of, the Notes (in a minimum amount of $1,000,000 and
otherwise in multiples of $100,000) at the principal amount so
<PAGE>
prepaid, together with interest accrued thereon to the date of
such prepayment, plus the Make-Whole Amount determined for the
prepayment date with respect to such principal amount. The
Company will give each holder of Notes written notice of each
optional prepayment under this Section 8.2 not less than 30 days
and not more than 60 days prior to the date fixed for such
prepayment. Each such notice shall specify the date fixed for
such prepayment (which shall be a Business Day), the aggregate
principal amount of the Notes to be prepaid on such date, the
principal amount of Notes (if any) held by such holder to be
prepaid (determined in accordance with Section 8.3) and the
interest to be paid on the prepayment date with respect to such
principal amount being prepaid.
Each such notice of prepayment shall be accompanied by
a certificate of a Senior Financial Officer as to the estimated
Make-Whole Amount due in connection with such prepayment
(calculated as if the date of such notice were the date of the
prepayment), setting forth the details of such computation. Two
Business Days prior to such prepayment of Notes, the Company
shall deliver to each holder of the Notes a certificate of a
Senior Financial Officer specifying the calculation of such Make-
Whole Amount as of the specified prepayment date.
8.3. ALLOCATION OF PARTIAL PAYMENTS.
In the case of each partial prepayment of the Notes,
the principal amount of the Notes to be prepaid shall be
allocated among all the Notes at the time outstanding in
proportion, as nearly as practicable, to the respective unpaid
principal amounts thereof.
8.4. MATURITY, SURRENDER, ETC.
In the case of each prepayment of Notes pursuant to
this Section 8, the principal amount of each Note to be prepaid
shall mature and become due and payable on the date fixed for
such prepayment, together with interest on such principal amount
accrued to such date and the applicable Make-Whole Amount, if
any, but subject to the provisions of Section 8.7. From and
after such date, unless the Company shall fail to pay such
principal amount when so due and payable, together with the
interest and Make-Whole Amount, if any, as aforesaid, interest on
such principal amount shall cease to accrue. Any Note paid or
19
prepaid in full shall be surrendered to the Company and cancelled
and shall not be reissued, and no Note shall be issued in lieu of
any prepaid principal amount of any Note.
8.5. PURCHASE OF NOTES.
<PAGE>
The Company will not and will not permit any Affiliate
to purchase, redeem, prepay or otherwise acquire, directly or
indirectly, any of the outstanding Notes except upon the payment
or prepayment of the Notes in accordance with the terms of this
Agreement and the Notes.
8.6. MAKE-WHOLE AMOUNT.
The term "MAKE-WHOLE AMOUNT" means, with respect to any
Note, an amount equal to the excess, if any, of the Discounted
Value of the Remaining Scheduled Payments with respect to the
Called Principal of such Note over the amount of such Called
Principal, provided that the Make-Whole Amount may in no event be
less than zero. For the purposes of determining the Make-Whole
Amount, the following terms have the following meanings:
"CALLED PRINCIPAL" means, with respect to any Note, the
principal of such Note that is to be prepaid pursuant to Section
8.2 or 8.7 or has become or is declared to be immediately due and
payable pursuant to Section 12.1, as the context requires.
"DISCOUNTED VALUE" means, with respect to the Called
Principal of any Note, the amount obtained by discounting all
Remaining Scheduled Payments with respect to such Called
Principal from their respective scheduled due dates to the
Settlement Date with respect to such Called Principal, in
accordance with accepted financial practice and at a discount
factor (applied on the same periodic basis as that on which
interest on the Notes is payable) equal to the Reinvestment
Yield with respect to such Called Principal.
"REINVESTMENT YIELD" means, with respect to the Called
Principal of any Note, 0.50% (0.85% in the case of a prepayment
under Section 8.7) over the yield to maturity implied by (i) the
yields reported, as of 10:00 A.M. (New York City time) on the
second Business Day preceding the Settlement Date with respect to
such Called Principal, on the display designated as "Page 500" on
the Telerate Access Service (or such other display as may replace
Page 500 on Telerate Access Service) for actively traded U.S.
Treasury securities having a maturity equal to the Remaining
Average Life of such Called Principal as of such Settlement Date,
or (ii) if such yields are not reported as of such time or the
yields reported as of such time are not ascertainable, the
Treasury Constant Maturity Series Yields reported, for the latest
day for which such yields have been so reported as of the second
Business Day preceding the Settlement Date with
20
respect to such Called Principal, in Federal Reserve Statistical
Release H.15 (519) (or any comparable successor publication) for
actively traded U.S. Treasury securities having a constant
maturity equal to the Remaining Average Life of such Called
<PAGE>
Principal as of such Settlement Date. Such implied yield will be
determined, if necessary, by (a) converting U.S. Treasury bill
quotations to bond-equivalent yields in accordance with accepted
financial practice and (b) interpolating linearly between (1) the
actively traded U.S. Treasury security with a maturity closest
to and greater than the Remaining Average Life and (2) the
actively traded U.S. Treasury security with a maturity closest
to and less than the Remaining Average Life.
"REMAINING AVERAGE LIFE" means, with respect to any
Called Principal, the number of years (calculated to the
nearest one-twelfth year) obtained by dividing (i) such Called
Principal into (ii) the sum of the products obtained by
multiplying (a) the principal component of each Remaining
Scheduled Payment with respect to such Called Principal by (b)
the number of years (calculated to the nearest one-twelfth
year) that will elapse between the Settlement Date with
respect to such Called Principal and the scheduled due date of
such Remaining Scheduled Payment.
"REMAINING SCHEDULED PAYMENTS" means, with respect to
the Called Principal of any Note, all payments of such Called
Principal and interest thereon that would be due after the
Settlement Date with respect to such Called Principal if no
payment of such Called Principal were made prior to its
scheduled due date, provided that if such Settlement Date is
not a date on which interest payments are due to be made under
the terms of the Notes, then the amount of the next succeeding
scheduled interest payment will be reduced by the amount of
interest accrued to such Settlement Date and required to be
paid on such Settlement Date pursuant to Section 8.2, 8.7 or
12.1.
"SETTLEMENT DATE" means, with respect to the Called
Principal of any Note, the date on which such Called Principal
is to be prepaid pursuant to Section 8.2 or 8.7 or has become
or is declared to be immediately due and payable pursuant to
Section 12.1, as the context requires.
8.7. PREPAYMENT RELATING TO DISPOSITION PAYMENT.
In connection with any Disposition Payment of
unsubordinated Indebtedness as contemplated by Section 10.5(d)
the Company will prepay a portion of the Notes which is the same
proportion as the amount of the Disposition Payment represents to
the aggregate principal amount of all unsubordinated Indebtedness
at the time outstanding (other than that owing by the Company or
a Subsidiary to another Subsidiary or the Company, as the case
21
<PAGE>
may be), in each case at the principal amount thereof, together
with interest accrued thereon to the date of such prepayment,
plus the Make-Whole Amount determined for the prepayment date
with respect to such principal amount. Such prepayment shall be
made in the same manner (as to notice and all other provisions)
as a prepayment made under Section 8.2, provided that the holder
of any Note so to be prepaid may, by notice given to the Company
at least two Business Days prior to the prepayment date, elect
that the Notes of such holder to be prepaid (or any portion
thereof) shall not be prepaid and the Company shall not prepay
the Notes of such holder. Any notice of prepayment given under
this Section 8.7 shall clearly and prominently make reference to
the provisions of this Section 8.7 permitting the holder of the
Notes to elect that their Notes not be prepaid. For purposes of
Section 10.5(d) any Notes the holders of which elect that they
not be prepaid shall be deemed to have been repaid as part of a
Disposition Payment.
9. AFFIRMATIVE COVENANTS.
The Company covenants that so long as any of the Notes
are outstanding:
9.1. COMPLIANCE WITH LAW.
The Company will and will cause each of its
Subsidiaries to comply with all laws, ordinances or governmental
rules or regulations to which each of them is subject, including
without limitation Environmental Laws, and will obtain and
maintain in effect all licenses, certificates, permits,
franchises and other governmental authorizations necessary to the
ownership of their respective properties or to the conduct of
their respective businesses, in each case to the extent necessary
to ensure that non-compliance with such laws, ordinances or
governmental rules or regulations or failures to obtain or
maintain in effect such licenses, certificates, permits,
franchises and other governmental authorizations could not,
individually or in the aggregate, reasonably be expected to have
a Material Adverse Effect.
9.2. INSURANCE.
The Company will and will cause each of its
Subsidiaries to maintain, with financially sound and reputable
insurers, insurance with respect to their respective properties
and businesses against such casualties and contingencies, of such
types, on such terms and in such amounts (including deductibles,
co-insurance and self-insurance, if adequate reserves are
maintained with respect thereto) as is customary in the case of
entities of established reputations engaged in the same or a
similar business and similarly situated.
<PAGE>
9.3. MAINTENANCE OF PROPERTIES.
22
The Company will and will cause each of its
Subsidiaries to maintain and keep, or cause to be maintained and
kept, their respective properties in good repair, working order
and condition (other than ordinary wear and tear), so that the
business carried on in connection therewith may be properly
conducted at all times, provided that this Section shall not
prevent the Company or any Subsidiary from discontinuing the
operation and the maintenance of any of its properties if such
discontinuance is desirable in the conduct of its business and
the Company has concluded that such discontinuance could not,
individually or in the aggregate, reasonably be expected to have
a Material Adverse Effect.
9.4. PAYMENT OF TAXES AND CLAIMS.
The Company will and will cause each of its
Subsidiaries to file all income or similar tax returns required
to be filed in any jurisdiction and to pay and discharge all
taxes shown to be due and payable on such returns and all other
taxes, assessments, governmental charges, or levies imposed on
them or any of their properties, assets, income or franchises, to
the extent such taxes and assessments have become due and payable
and before they have become delinquent and all claims for which
sums have become due and payable that have or might become a Lien
on properties or assets of the Company or any Subsidiary,
provided that neither the Company nor any Subsidiary need pay any
such tax or assessment or claim if (i) the amount, applicability
or validity thereof is contested by the Company or such
Subsidiary on a timely basis in good faith and in appropriate
proceedings, and the Company or a Subsidiary has established
adequate reserves therefor in accordance with GAAP on the books
of the Company or such Subsidiary or (ii) the nonpayment of all
such taxes and assessments in the aggregate could not reasonably
be expected to have a Material Adverse Effect.
9.5. CORPORATE EXISTENCE, ETC.
The Company will at all times preserve and keep in full
force and effect its corporate existence. Subject to Sections
10.5 and 10.6, the Company will at all times preserve and keep in
full force and effect the corporate existence of each of its
Subsidiaries (unless merged into the Company or a Subsidiary) and
all rights and franchises (as franchisee) of the Company and its
Subsidiaries unless, in the good faith judgment of the Company,
the termination of or failure to preserve and keep in full force
and effect such corporate existence, right or franchise could
not, individually or in the aggregate, have a Material Adverse
Effect.
<PAGE>
9.6. COVENANT TO SECURE NOTES EQUALLY.
The Company covenants that if it or any of its
Subsidiaries shall create or assume any Lien upon any of its
respective properties or assets, whether now owned or hereafter
23
acquired, other than Liens permitted by the provisions of Section
10.2 (unless prior written consent to the creation or assumption
thereof shall have been obtained pursuant to Section 17), it will
make or cause to be made effective provision satisfactory in form
and substance to the Required Holders whereby the Notes will be
secured by such Lien equally and ratably with any and all other
Indebtedness thereby secured so long as any such other
Indebtedness shall be so secured. Securing the Notes as provided
in this Section 9.6 shall not permit the existence of any Lien
not permitted by Section 10.2.
10. NEGATIVE COVENANTS.
The Company covenants that so long as any of the Notes
are outstanding:
10.1. INCURRENCE OF INDEBTEDNESS AND SUBSIDIARY INDEBTEDNESS.
(a) The Company will not and will not permit any
Subsidiary to create, assume, incur, guarantee or otherwise
become liable in respect of any Indebtedness (by way of merger,
consolidation or otherwise) unless immediately after giving
effect thereto and to the application of the proceeds thereof
Consolidated Indebtedness does not exceed 55% of Consolidated
Capitalization.
(b) The Company will not permit any Subsidiary to
create, assume, incur, guarantee or otherwise become liable in
respect of any Indebtedness except
(i) Indebtedness existing on the date of the Closing
and described in Schedule 5.15,
(ii) Indebtedness secured by Liens permitted by clause
(b) of Section 10.2,
(iii) Indebtedness owing to the Company or a Wholly-
Owned Subsidiary,
(iv) Indebtedness of any Person outstanding at the
time such Person becomes a Subsidiary (not incurred in
anticipation thereof), and
(v) other Indebtedness, provided that immediately
<PAGE>
after giving effect to the incurrence of such other
Indebtedness the sum (without duplication) of (A) the
aggregate unpaid amount of Indebtedness (including
Capitalized Lease Obligations) of the Company secured by
Liens permitted by Section 10.2(e) plus (B) the aggregate
unpaid amount of Indebtedness of all Subsidiaries (other than
Indebtedness permitted by clause (iii) above) plus (C) the
aggregate Attributable Debt in connection with all sale and
leaseback transactions of the Company and its Subsidiaries
entered into after the date of the Closing in
24
accordance with the provisions of Section 10.3(c), does not
exceed 15% of Consolidated Assets.
For purposes of this Section 10.1(b), a Subsidiary shall be
deemed to have incurred Indebtedness in respect of any obligation
previously owed to the Company or to a Wholly-Owned Subsidiary on
the date the obligee ceases for any reason to be the Company or
a Wholly-Owned Subsidiary.
10.2. LIENS.
The Company will not and will not permit any Subsidiary
to create, assume, incur or suffer to exist any Lien upon or with
respect to any property (other than treasury stock), whether now
owned or hereafter acquired and without regard to whether or not
provision is made for equally and ratably securing the Notes as
provided in Section 9.6, provided that nothing in this Section
10.2 shall prohibit
(a) Liens in respect of property of the Company or a
Subsidiary existing on the date of the Closing and described
in Schedule 5.15;
(b)Liens in respect of property acquired by the Company
or a Subsidiary after the date of the Closing, existing on
such property at the time of acquisition thereof (and not
created in anticipation thereof), or in the case of any Person
that after the date of the Closing becomes a Subsidiary or is
consolidated with or merged with or into the Company or a
Subsidiary or sells, leases or otherwise disposes of all or
substantially all of its property to the Company or a
Subsidiary, Liens existing at the time such Person becomes a
Subsidiary or is so consolidated or merged or effects such
sale, lease or other disposition of property (and not created
in anticipation thereof), provided that in any such case no
such Lien shall extend to or cover any other property of the
Company or such Subsidiary, as the case may be;
(c) Liens securing Indebtedness owed by a Subsidiary to
the Company or to a Wholly-Owned Subsidiary;
<PAGE>
(d) Liens not involving the borrowing of money, the
obtaining of advances or credit or the payment of the deferred
purchase price of property, as follows:
(i) Liens for taxes, assessments or other
governmental charges which are not yet due and payable
or the payment of which is not at the time required by
Section 9.4,
(ii) statutory Liens of landlords and Liens of
carriers, warehousemen, mechanics, materialmen and other
similar Liens, in each case incurred in the
25
ordinary course of business for sums not yet due and
payable or the payment of which is not at the time
required or is being contested in good faith,
(iii) Liens incurred or deposits made in the
ordinary course of business (x) in connection with
workers' compensation, unemployment insurance and other
types of social security or retirement benefits (other
than Liens imposed under ERISA), (y) to secure (or to
obtain letters of credit that secure) the performance of
tenders, statutory obligations, surety bonds, appeal
bonds (not in excess of $10,000,000) bids, leases (other
than Capital Leases), performance bonds, purchase,
construction or sales contracts and other similar
obligations or (z) which do not materially detract from
the value of the property to which they pertain,
(iv) any attachment or judgment Lien, unless the
judgment it secures (x) shall not, within 120 days after
the entry thereof, have been discharged or execution
thereof stayed pending appeal, or shall not have been
discharged within 120 days after the expiration of any
such stay or (y) exceeds $1,000,000 in the aggregate for
all of such judgments, and
(v) Liens arising in favor of a Governmental
Authority to secure partial, progress, advance or other
payments pursuant to any contract or statute; and
(e) Liens which would otherwise not be permitted by
clauses (a) through (c) above, securing additional
Indebtedness of the Company or a Subsidiary, provided that
after giving effect thereto the sum (without duplication) of
<PAGE>
(i) the aggregate unpaid amount of Indebtedness (including
Capitalized Lease Obligations) of the Company secured by such
Liens permitted by this Section 10.2(e) plus (ii) the
aggregate unpaid principal amount of Indebtedness of
Subsidiaries (other than Indebtedness permitted by clause
(iii) of Section 10.1(b)) plus (iii) the aggregate
Attributable Debt in connection with all sale and leaseback
transactions of the Company and its Subsidiaries entered into
after the date of the Closing in accordance with the
provisions of Section 10.3(c), does not exceed 15% of
Consolidated Assets.
For purposes of this Section 10.2 any Lien existing in respect of
property at the time such property is acquired or in respect of
property of a Person at the time such Person is acquired,
consolidated or merged with or into the Company or a Subsidiary
shall be deemed to have been created at that time.
10.3. LIMITATION ON SALE AND LEASEBACK TRANSACTIONS.
26
The Company will not, and will not permit any
Subsidiary to sell, lease, transfer or otherwise dispose of
(collectively, a "TRANSFER") any asset on terms whereby the asset
or a substantially similar asset is or may be leased or
reacquired by the Company or any Subsidiary over a period in
excess of three years, unless
(a) the lease is between the Company and a Wholly-Owned
Subsidiary or between Wholly-Owned Subsidiaries;
(b) the Company or a Subsidiary could create a Lien
under clause (b) of Section 10.2 on such property to secure
Indebtedness in an amount at least equal to the Attributable
Debt in respect of such transaction;
(c) after giving effect to such transaction and the
incurrence of Attributable Debt in respect thereof, the sum
(without duplication) of (i) the aggregate unpaid principal
amount of Indebtedness (including Capitalized Lease
Obligations) of the Company secured by such Liens permitted by
Section 10.2(e) plus (ii) the aggregate unpaid principal
amount of Indebtedness of Subsidiaries (other than
Indebtedness permitted by clause (iii) of Section 10.1(b))
plus (iii) the aggregate Attributable Debt in connection with
all sale and leaseback transactions of the Company and its
Subsidiaries entered into after the date of the Closing in
accordance with the provisions of this clause (c), does not
exceed 15% of Consolidated Assets; or
<PAGE>
(d) the net proceeds realized from the transfer are
applied within 180 days after the receipt thereof (i) to the
repayment of unsubordinated Indebtedness (other than that
owing by the Company or a Subsidiary to another Subsidiary or
the Company, as the case may be) (which may but need not
include prepayment of the Notes pursuant to Section 8.2) or
(ii) to the purchase of non-current assets for use in the
business of the Company and its Subsidiaries.
10.4. MAINTENANCE OF EBITDA AND INTEREST EXPENSE COVERAGE.
The Company will not at any time permit
(a) the sum of Consolidated EBITDA and Consolidated
Lease Rental Expense for any period of four consecutive fiscal
quarters (beginning with the four fiscal quarters ending on
July 19, 1997) to be less than 200% of Consolidated Fixed
Charges for such period, or
(b) Consolidated Indebtedness on any date to exceed
300% of pro forma EBITDA for the period of four consecutive
fiscal quarters ending on or immediately before such date.
Pro forma EBITDA shall be determined in accordance with
Section 22.6.
27
10.5. ASSET SALES.
The Company will not and will not permit any Subsidiary
to, directly or indirectly, make any sale, transfer, lease (as
lessor), loan or other disposition (an "ASSET SALE") of any
property or assets other than treasury stock and
(a) Asset Sales in the ordinary course of business;
(b) Sale of the Company's interest in Fox Photo, Inc.,
pursuant to the provisions of section 8 or 9 of that certain
Stockholder's Agreement among Eastman Kodak Company, CPI
Corp., Consumer Programs Holding, Inc. and Fox Photo, Inc.
(the "Fox Shareholders), dated as of October 4, 1996, or as
otherwise agreed by the Fox Shareholders; or
(c) Asset Sales of property or assets by a Subsidiary
to the Company or a Wholly-Owned Subsidiary; or
(d) other Asset Sales, provided that in each case
(i) immediately before and after giving effect
thereto, no Default or Event of Default shall have occurred and
be continuing, and
<PAGE>
(ii) the aggregate net book value of property or
assets disposed of in such Asset Sale and all other
Asset Sales by the Company and its Subsidiaries during
the immediately preceding twelve months does not exceed
20% of Consolidated Assets (as of the last day of the
quarterly accounting period ending on or most recently
prior to the last day of such twelve month period),
and provided further that for purposes of clause (ii) above
there shall be excluded the net book value of property or
assets disposed of in an Asset Sale if and to the extent such
Asset Sale is made for cash, payable in full upon the
completion of such Asset Sale, and an amount equal to the net
proceeds realized upon such Asset Sale is applied by the
Company or such Subsidiary, as the case may be, within 180
days after the effective date of such Asset Sale (x) to
reinvest in the business of the Company and its Subsidiaries
(either through capital expenditures or acquisitions) or (y)
to repay (a "Disposition Payment") unsubordinated Indebtedness
(other than that owing by the Company or a Subsidiary to
another Subsidiary or the Company, as the case may be) (which
may but need not include prepayment of the Notes pursuant to
Section 8.2, but in respect of which the Company shall in any
event offer to prepay a PRO RATA portion of the Notes pursuant
to Section 8.7).
For purposes of this Section 10.5 any shares of Voting
Stock of a Subsidiary that are the subject of an Asset Sale shall
28
be valued at the greater of (1) the fair market value of such
shares as determined in good faith by the Board of Directors of
the Company and (2) the aggregate net book value of the assets of
such Subsidiary multiplied by a fraction of which the numerator
is the aggregate number of shares of Voting Stock of such
Subsidiary disposed of in such Asset Sale and the denominator is
the aggregate number of shares of Voting Stock of such Subsidiary
outstanding immediately prior to such Asset Sale.
10.6. MERGER, CONSOLIDATION, ETC.
The Company will not consolidate with or merge with any
other corporation or convey, transfer or lease all or
substantially all of its assets in a single transaction or series
of transactions to any Person unless:
(a) the continuing, surviving or acquiring corporation
(the "SURVIVING CORPORATION") shall be a solvent corporation
organized and existing under the laws of the United States or
any State thereof (including the District of Columbia) and, if
the Company is not the surviving corporation, shall have (i)
executed and delivered to each holder of a Note its assumption
<PAGE>
of the due and punctual performance and observance of all
obligations of the Company under this Agreement, the Other
Agreements and the Notes and (ii) caused to be delivered to
each holder of a Note an opinion of counsel (which may be
internal counsel) reasonably satisfactory to the Required
Holders to the effect that all agreements or instruments
effecting such assumption are enforceable in accordance with
their terms and comply with the terms hereof; and
(b) immediately after giving effect to such
transaction, no Default or Event of Default shall have occurred
and be continuing.
No such conveyance, transfer or lease of substantially all of the
assets of the Company shall have the effect of releasing the
Company or any successor corporation that shall theretofore have
become such in the manner prescribed in this Section 10.6 from
its liability under this Agreement or the Notes.
10.7. TRANSACTIONS WITH AFFILIATES.
The Company will not and will not permit any Subsidiary
to enter into directly or indirectly any transaction or Material
group of related transactions (including without limitation the
purchase, lease, sale or exchange of properties of any kind or
the rendering of any service) with any Affiliate (other than the
Company or another Subsidiary), except in the ordinary course 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 be
obtainable in a comparable arm's-length transaction with a Person
29
not an Affiliate. The provisions of this Section shall not apply
to transactions between the Company or any of its Subsidiaries
and Fox Photo, Inc. The provisions of this Section shall not
apply to any arrangements between the Company or any of its
subsidiaries and any entity subsequently created to continue
development and licensing of certain of the Company's software
and related intellectual property, provided that the terms of
such arrangements are determined to be fair and reasonable from
the Company's point of view by the Company's Board of Directors
(any such arrangement being herein referred to as a "Related
Party Arrangement").
11. EVENTS OF DEFAULT.
An "EVENT OF DEFAULT" shall exist if any of the
following conditions or events shall occur and be continuing:
<PAGE>
(a) the Company defaults in the payment of any
principal or Make-Whole Amount, if any, on any Note when the same
becomes due and payable, whether at maturity or at a date
fixed for prepayment or by declaration or otherwise; or
(b) the Company defaults in the payment of any interest
on any Note for more than five Business Days after the same
becomes due and payable; or
(c) the Company defaults in the performance of or
compliance with any term contained in Section 7.1(d) or
Sections 10.1 to 10.7, inclusive (and, in the case of any such
default under Section 10.4(b), such default shall have
continued for a period of 30 days after a Responsible Officer
obtains knowledge thereof if and so long as the Company is
proceeding diligently and in good faith, by issuing equity
securities or otherwise, to remedy such default during such
30-day period); or
(d) the Company defaults in the performance of or
compliance with any term contained herein (other than those
referred to in paragraphs (a), (b) and (c) of this Section 11)
and such default is not remedied within 30 days after a
Responsible Officer obtaining knowledge of such default; or
(e) any representation or warranty made in writing by
or on behalf of the Company or by any officer of the Company in
this Agreement or in any writing furnished in connection with
the transactions contemplated hereby proves to have been false
or incorrect in any material respect on the date as of which
made; or
(f) (i) the Company or any Subsidiary is in default (as
principal or as guarantor or other surety) in the payment of
any principal of or premium or make-whole amount or interest
on any Indebtedness (other than the Notes) that
30
is outstanding in an aggregate principal amount of at least
$5,000,000 beyond any period of grace provided with respect
thereto, or (ii) the Company or any Subsidiary is in default
in the performance of or compliance with any term of any
evidence of any Indebtedness in an aggregate amount of at
least $5,000,000 or of any mortgage, indenture or other
agreement relating thereto or any other condition exists, and
as a consequence of such default or condition such
Indebtedness has become, or has been declared (or one or more
Persons are entitled to declare such Indebtedness to be), due
and payable before its stated maturity or before its regularly
scheduled dates of payment, or (iii) as a consequence of the
occurrence or continuation of any event or condition (other
than the passage of time or the right of the holder of
<PAGE>
Indebtedness to convert such Indebtedness into equity
interests or a sale of assets or other transaction that is
permitted if made in connection with a repayment of
Indebtedness), the Company or any Subsidiary has become
obligated to purchase or repay (or one or more Persons are
entitled to cause the Company or any Subsidiary to purchase or
repay) Indebtedness in an aggregate principal amount of at l
east $5,000,000 before its regular maturity or before its
regularly scheduled dates of payment; or
(g) the Company or any Subsidiary (i) is generally not
paying, or admits in writing its inability to pay, its debts
as they become due, (ii) files, or consents by answer or
otherwise to the filing against it of, a petition for relief
or reorganization or arrangement or any other petition in
bankruptcy, for liquidation or to take advantage of any
bankruptcy, insolvency, reorganization, moratorium or other
similar law of any jurisdiction, (iii) makes an assignment for
the benefit of its creditors, (iv) consents to the appointment
of a custodian, receiver, trustee or other officer with
similar powers with respect to it or with respect to any
substantial part of its property, (v) is adjudicated as insolvent
or to be liquidated, or (vi) takes corporate action for the
purpose of any of the foregoing; or
(h) a court or governmental authority of competent
jurisdiction enters an order appointing, without consent by
the Company or any Subsidiary, a custodian, receiver, trustee
or other officer with similar powers with respect to it or
with respect to any substantial part of its property, or
constituting an order for relief or approving a petition for
relief or reorganization or any other petition in bankruptcy
or for liquidation or to take advantage of any bankruptcy or
insolvency law of any jurisdiction, or ordering the
dissolution, winding-up or liquidation of the Company or any
such Subsidiary, or any such petition shall be filed against
the Company or any such Subsidiary and such petition shall not
be dismissed within 60 days; or
31
(i) a final judgment or judgments for the payment of
money aggregating in excess of $1,000,000 are rendered against
one or more of the Company and its Subsidiaries which
judgments are not, within 120 days after entry thereof,
bonded, paid, discharged or stayed pending appeal, or are not
discharged within 120 days after the expiration of such stay;
or
(j) if (i) any Plan shall fail to satisfy the minimum
funding standards of ERISA or the Code for any plan year or part
thereof or a waiver of such standards or extension of any
amortization period is sought or granted under section 412 of
<PAGE>
the Code, (ii) a notice of intent to terminate any Plan shall
have been or is reasonably expected to be filed with the PBGC
or the PBGC shall have instituted proceedings under ERISA
section 4042 to terminate or appoint a trustee to administer
any Plan or the PBGC shall have notified the Company or any
ERISA Affiliate that a Plan may become a subject of any such
proceedings, (iii) the aggregate "amount of unfunded benefit
liabilities" (within the meaning of section 4001(a)(18) of
ERISA) under all Plans, determined in accordance with Title IV
of ERISA, shall exceed $1,000,000, (iv) the Company or any
ERISA Affiliate shall have incurred or is reasonably expected
to incur any liability pursuant to Title I or IV of ERISA or
the penalty or excise tax provisions of the Code relating to
employee benefit plans, (v) the Company or any ERISA Affiliate
withdraws from any Multiemployer Plan, or (vi) the Company or
any Subsidiary establishes or amends any employee welfare
benefit plan that provides post-employment welfare benefits in
a manner that would increase the liability of the Company or
any Subsidiary thereunder; and any such event or events
described in clauses (i) through (vi) above, either
individually or together with any other such event or events,
could have a Material Adverse Effect.
As used in Section 11(j), the terms "EMPLOYEE BENEFIT PLAN" and
"EMPLOYEE WELFARE BENEFIT PLAN" shall have the respective
meanings assigned to such terms in section 3 of ERISA.
12. REMEDIES ON DEFAULT, ETC.
12.1. ACCELERATION.
(a) If an Event of Default with respect to the Company
described in paragraph (g) or (h) of Section 11 has occurred, all
the Notes then outstanding shall automatically become immediately
due and payable.
(b) If any other Event of Default has occurred and is
continuing, the Required Holders may at any time at its or their
option, by notice or notices to the Company, declare all the
Notes at the time outstanding to be immediately due and payable.
32
(c) If any Event of Default described in paragraph (a)
or (b) of Section 11 has occurred and is continuing, any holder
or holders of Notes at the time outstanding affected by such
Event of Default may at any time, at its or their option, by
notice or notices to the Company, declare all the Notes held by
it or them to be immediately due and payable.
Upon any Notes becoming due and payable under this
Section 12.1, whether automatically or by declaration, such Notes
will forthwith mature and the entire unpaid principal amount of
<PAGE>
such Notes, plus (x) all accrued and unpaid interest thereon and
(y) the Make-Whole Amount determined in respect of such principal
amount (to the full extent permitted by applicable law), shall
all be immediately due and payable, in each and every case
without presentment, demand, protest or further notice, all of
which are hereby waived. The Company acknowledges, and the
parties hereto agree, that each holder of a Note has the right to
maintain its investment in the Notes free from repayment by the
Company (except as herein specifically provided) and that the
provision for payment of a Make-Whole Amount by the Company in
the event that the Notes are prepaid or are accelerated as a
result of an Event of Default, is intended to provide
compensation for the deprivation of such right under such
circumstances.
12.2. OTHER REMEDIES.
If any Default or Event of Default has occurred and is
continuing, and irrespective of whether any Notes have become or
have been declared immediately due and payable under Section
12.1, the holder of any Note at the time outstanding may proceed
to protect and enforce the rights of such holder by an action at
law, suit in equity or other appropriate proceeding, whether for
the specific performance of any agreement contained herein or in
any Note, or for an injunction against a violation of any of the
terms hereof or thereof, or in aid of the exercise of any power
granted hereby or thereby or by law or otherwise.
12.3. RESCISSION.
At any time after any Notes have been declared due and
payable pursuant to clause (b) or (c) of Section 12.1, the
Required Holders, by written notice to the Company, may rescind
and annul any such declaration and its consequences if (a) the
Company has paid all overdue interest on the Notes, all principal
of and Make-Whole Amount, if any, on any Notes that are due and
payable and are unpaid other than by reason of such declaration,
and all interest on such overdue principal and Make-Whole Amount,
if any, and (to the extent permitted by applicable law) any
overdue interest in respect of the Notes, at the Default Rate,
(b) all Events of Default and Defaults, other than the non-
payment of amounts that have become due solely by reason of such
declaration, have been cured or have been waived pursuant to
Section 17, and (c) no judgment or decree has been entered for
33
the payment of any monies due pursuant hereto or to the Notes.
No rescission and annulment under this Section 12.3 will extend
to or affect any subsequent Event of Default or Default or impair
any right consequent thereon.
<PAGE>
12.4. NO WAIVERS OR ELECTION OF REMEDIES, EXPENSES, ETC.
No course of dealing and no delay on the part of any
holder of any Note in exercising any right, power or remedy shall
operate as a waiver thereof or otherwise prejudice such holder's
rights, powers or remedies. No right, power or remedy conferred
by this Agreement or by any Note upon any holder thereof shall be
exclusive of any other right, power or remedy referred to herein
or therein or now or hereafter available at law, in equity, by
statute or otherwise. Without limiting the obligations of the
Company under Section 15, the Company will pay to the holder of
each Note on demand such further amount as shall be sufficient to
cover all costs and expenses of such holder incurred in any
enforcement or collection under this Section 12, including
without limitation reasonable attorneys' fees, expenses and
disbursements.
13. REGISTRATION; EXCHANGE; SUBSTITUTION OF NOTES.
13.1. REGISTRATION OF NOTES.
The Company shall keep at its principal executive
office a register for the registration and registration of
transfers of Notes. The name and address of each holder of one
or more Notes, each transfer thereof and the name and address of
each transferee of one or more Notes shall be registered in such
register. Prior to due presentment for registration of transfer,
the Person in whose name any Note shall be registered shall be
deemed and treated as the owner and holder thereof for all
purposes hereof, and the Company shall not be affected by any
notice or knowledge to the contrary. The Company shall give to
any holder of a Note that is an Institutional Investor promptly
upon request therefor, a complete and correct copy of the names
and addresses of all registered holders of Notes.
13.2. TRANSFER AND EXCHANGE OF NOTES.
Upon surrender of any Note at the principal executive
office of the Company for registration of transfer or exchange
(and in the case of a surrender for registration of transfer,
duly endorsed or accompanied by a written instrument of transfer
duly executed by the registered holder of such Note or his
attorney duly authorized in writing and accompanied by the
address for notices of each transferee of such Note or part
thereof), within five Business Days thereafter the Company shall
execute and deliver, at the Company's expense (except as provided
below), one or more new Notes (as requested by the holder
thereof) in exchange therefor, in an aggregate principal amount
equal to the unpaid principal amount of the surrendered Note.
<PAGE>
34
Each such new Note shall be payable to such Person as such holder
may request. Each such new Note shall be dated and bear interest
from the date to which interest shall have been paid on the
surrendered Note or dated the date of the surrendered Note if no
interest shall have been paid thereon. The Company may require
payment of a sum sufficient to cover any stamp tax or other
similar governmental charge imposed in respect of any such
transfer of Notes. Notes shall not be transferred in
denominations of less than $500,000, provided that if necessary
to enable the registration of transfer by a holder of its entire
holding of Notes, one Note may be in a denomination of less than
$500,000.
The Company shall not be required to register the
transfer of any Note to any Person (other than your nominee) or
to any separate account maintained by you unless the Company
receives from the transferee a representation to the Company (and
appropriate information as to any separate accounts or other
matters, including disclosure pursuant to Section 6.2(b) at least
3 Business Days prior to any such proposed transfer) to the same
or, in the reasonable opinion of the Company, similar effect with
respect to the transferee as is contained in Section 6.2,
together with such other assurances reasonably satisfactory to
the Company that such transfer does not involve a prohibited
transaction (as such term is used in Section 5.12(d). No
transferor shall be liable for any damages in connection with any
such representations or assurances provided to the Company by any
transferee.
13.3.REPLACEMENT OF NOTES.
Upon receipt by the Company of evidence reasonably
satisfactory to it of the ownership of and the loss, theft,
destruction or mutilation of any Note (which evidence shall be,
in the case of an Institutional Investor, notice from such
Institutional Investor of such ownership and such loss, theft,
destruction or mutilation), and
(a) in the case of loss, theft or destruction, of
indemnity reasonably satisfactory to it (provided that if the
holder of such Note is, or is a nominee for, an original
Purchaser or any other Institutional Investor, such Person's
own unsecured agreement of indemnity shall be deemed to be
satisfactory), or
(b) in the case of mutilation, upon surrender and
cancellation thereof,
within five Business Days thereafter the Company at its own
expense shall execute and deliver, in lieu thereof, a new Note,
<PAGE>
dated and bearing interest from the date to which interest shall
have been paid on such lost, stolen, destroyed or mutilated Note
or dated the date of such lost, stolen, destroyed or mutilated
Note if no interest shall have been paid thereon.
35
14. PAYMENTS ON NOTES.
14.1. PLACE OF PAYMENT.
Subject to Section 14.2, payments of principal,
premium, if any, and interest becoming due and payable on the
Notes shall be made at the principal office of The Bank of New
York in New York City. The Company may at any time, by notice to
each holder of a Note, change the place of payment of the Notes
so long as such place of payment shall be either the principal
office of the Company in New York City or the principal office of
a bank or trust company in New York City.
14.2. HOME OFFICE PAYMENT.
So long as you or your nominee shall be the holder of
any Note, and notwithstanding anything contained in Section 14.1
or in such Note to the contrary, the Company will pay all sums
becoming due on such Note for principal, Make-Whole Amount, if
any, and interest by the method and at the address specified for
such purpose below your name in Schedule A, or by such other
method or at such other address as you shall have from time to
time specified to the Company in writing for such purpose,
without the presentation or surrender of such Note or the making
of any notation thereon, except that upon written request of the
Company made concurrently with or reasonably promptly after
payment or prepayment in full of any Note, you shall surrender
such Note for cancellation, reasonably promptly after any such
request, to the Company at its principal executive office or at
the place of payment most recently designated by the Company
pursuant to Section 14.1. Prior to any sale or other disposition
of any Note held by you or your nominee you will, at your
election, either endorse thereon the amount of principal paid
thereon and the last date to which interest has been paid thereon
or surrender such Note to the Company in exchange for a new Note
or Notes pursuant to Section 13.2. The Company will afford the
benefits of this Section 14.2 to any Institutional Investor that
is the direct or indirect transferee of any Note purchased by you
under this Agreement and that has made the same agreement
relating to such Note as you have made in this Section 14.2.
15. EXPENSES, ETC.
<PAGE>
15.1. TRANSACTION EXPENSES.
Whether or not the transactions contemplated hereby are
consummated, the Company will pay all reasonable costs and
expenses (including reasonable attorneys' fees of your special
counsel and, if reasonably required, local or other counsel)
incurred by you and each Other Purchaser or holder of a Note in
connection with such transactions and in connection with any
amendments, waivers or consents under or in respect of this
Agreement or the Notes (whether or not such amendment, waiver or
consent becomes effective), including without limitation: (a) the
36
costs and expenses incurred in enforcing or defending (or
determining whether or how to enforce or defend) any rights under
this Agreement or the Notes or in responding to any subpoena or
other legal process or informal investigative demand issued in
connection with this Agreement or the Notes, or by reason of
being a holder of any Note, and (b) the costs and expenses,
including financial advisors' fees, incurred in connection with
the insolvency or bankruptcy of the Company or any Subsidiary or
in connection with any work-out or restructuring of the
transactions contemplated hereby and by the Notes. The Company
will pay, and will save you and each other holder of a Note
harmless from, all claims in respect of any fees, costs or
expenses if any, of brokers and finders (other than those
retained by you).
In furtherance of the foregoing, on the date of the Closing the
Company will pay or cause to be paid the reasonable fees,
disbursements and other charges (including estimated unposted
disbursements and other charges as of the date of the Closing) of
your special counsel which are reflected in the statement of such
special counsel submitted to the Company on or prior to the date
of the Closing. The Company will also pay, promptly upon receipt
of supplemental statements therefor, reasonable additional fees,
if any, and disbursements and other charges of such special
counsel in connection with the transactions hereby contemplated
(including disbursements and other charges unposted as of the
date of the Closing to the extent such amounts exceed estimated
amounts paid as aforesaid).
15.2. SURVIVAL.
The obligations of the Company under this Section 15
will survive the payment or transfer of any Note, the
enforcement, amendment or waiver of any provision of this
Agreement or the Notes, and the termination of this Agreement.
<PAGE>
16. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ENTIRE
AGREEMENT.
All representations and warranties contained herein
shall survive the execution and delivery of this Agreement and
the Notes, the purchase or transfer by you of any Note or portion
thereof or interest therein and the payment of any Note, and may
be relied upon by any subsequent holder of a Note, regardless of
any investigation made at any time by or on behalf of you or any
other holder of a Note. All statements contained in any
certificate or other instrument delivered by or on behalf of the
Company pursuant to this Agreement shall be deemed
representations and warranties of the Company under this
Agreement. Subject to the preceding sentence, this Agreement and
the Notes embody the entire agreement and understanding between
you and the Company and supersede all prior agreements and
understandings relating to the subject matter hereof.
37
17. AMENDMENT AND WAIVER.
17.1. REQUIREMENTS.
This Agreement and the Notes may be amended, and the
observance of any term hereof or of the Notes may be waived
(either retroactively or prospectively), with (and only with) the
written consent of the Company and the Required Holders, except
that (a) no amendment or waiver of any of the provisions of
Section 1, 2, 3, 4, 5, 6 or 21, or any defined term (as it is
used therein), will be effective as to you unless consented to by
you in writing, and (b) no such amendment or waiver may, without
the written consent of the holder of each Note at the time
outstanding affected thereby, (i) subject to the provisions of
Section 12 relating to acceleration or rescission, change the
amount or time of any prepayment or payment of principal of, or
change the rate or the time of payment or method of computation
of interest or of the Make-Whole Amount on, the Notes, (ii)
change the percentage of the principal amount of the Notes the
holders of which are required to consent to any such amendment or
waiver, or (iii) amend any of Sections 8, 11(a), 11(b), 12, 17
or 20.
17.2. SOLICITATION OF HOLDERS OF NOTES.
(a) SOLICITATION. The Company will provide each holder
of the Notes (irrespective of the amount of Notes then owned by
it) with sufficient information, sufficiently far in advance of
the date a decision is required, to enable such holder to make an
informed and considered decision with respect to any proposed
amendment, waiver or consent in respect of any of the provisions
hereof or of the Notes. The Company will deliver executed or
true and correct copies of each amendment, waiver or consent
<PAGE>
effected pursuant to the provisions of this Section 17 to each
holder of outstanding Notes promptly following the date on which
it is executed and delivered by, or receives the consent or
approval of, the requisite holders of Notes.
(b) PAYMENT. 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, or
grant any security, to any holder of Notes as consideration for
or as an inducement to the entering into by any holder of Notes
of any waiver or amendment of any of the terms and provisions
hereof unless such remuneration is concurrently paid, or security
is concurrently granted, on the same terms, ratably to each
holder of Notes then outstanding even if such holder did not
consent to such waiver or amendment.
17.3. BINDING EFFECT, ETC.
Any amendment or waiver consented to as provided in
this Section 17 applies equally to all holders of Notes and is
binding upon them and upon each future holder of any Note and
38
upon the Company without regard to whether such Note has been
marked to indicate such amendment or waiver. No such amendment
or waiver will extend to or affect any obligation, covenant,
agreement, Default or Event of Default not expressly amended or
waived or impair any right consequent thereon. No course of
dealing between the Company and the holder of any Note nor any
delay in exercising any rights hereunder or under any Note shall
operate as a waiver of any rights of any holder of such Note. As
used herein, the term "THIS AGREEMENT" and references thereto
shall mean this Agreement as it may from time to time be amended
or supplemented.
17.4. NOTES HELD BY COMPANY, ETC.
Solely for the purpose of determining whether the
holders of the requisite percentage of the aggregate principal
amount of Notes then outstanding approved or consented to any
amendment, waiver or consent to be given under this Agreement or
the Notes, or have directed the taking of any action provided
herein or in the Notes to be taken upon the direction of the
holders of a specified percentage of the aggregate principal
amount of Notes then outstanding, Notes directly or indirectly
owned by the Company or any of its Affiliates shall be deemed not
to be outstanding.
18. NOTICES.
All notices and communications provided for hereunder
shall be in writing and sent (a) by telecopy if the sender on the
<PAGE>
same day sends a confirming copy of such notice by a recognized
overnight delivery service (charges prepaid), or (b) by
registered or certified mail with return receipt requested
(postage prepaid), or (c) by a recognized overnight delivery
service (with charges prepaid). Any such notice must be sent:
(i) if to you or your nominee, to you or it at the
address specified for such communications in Schedule A, or at
such other address as you or it shall have specified to the
Company in writing,
(ii) if to any other holder of any Note, to such
holder at such address as such other holder shall have specified
to the Company in writing, or
(iii) if to the Company, to the Company at its
address set forth at the beginning hereof to the attention of the
Chief Financial Officer, or at such other address as the Company
shall have specified to the holder of each Note in writing.
Notices under this Section 18 will be deemed given only when
actually received.
39
19. REPRODUCTION OF DOCUMENTS.
This Agreement and all documents relating thereto,
including, without limitation, (a) consents, waivers and
modifications that may hereafter be executed, (b) documents
received by you at the Closing (except the Notes themselves), and
(c) financial statements, certificates and other information
previously or hereafter furnished to you, may be reproduced by
you by any photographic, photostatic, microfilm, microcard,
miniature photographic or other similar process and you may
destroy any original document so reproduced. The Company agrees
and stipulates that, to the extent permitted by applicable law,
any such reproduction shall be admissible in evidence as the
original itself in any judicial or administrative proceeding
(whether or not the original is in existence and whether or not
such reproduction was made by you in the regular course of
business) and any enlargement, facsimile or further reproduction
of such reproduction shall likewise be admissible in evidence.
This Section 19 shall not prohibit the Company or any other
holder of Notes from contesting any such reproduction to the same
extent that it could contest the original, or from introducing
evidence to demonstrate the inaccuracy of any such reproduction.
20. CONFIDENTIAL INFORMATION.
For the purposes of this Section 20, "CONFIDENTIAL
INFORMATION" means information delivered to you by or on behalf
of the Company or any Subsidiary in connection with the
<PAGE>
transactions contemplated by or otherwise pursuant to this
Agreement that is proprietary in nature and that was clearly
marked or labeled or otherwise adequately identified when
received by you as being confidential information of the Company
or such Subsidiary, provided that such term does not include
information that (a) was publicly known or otherwise known to you
prior to the time of such disclosure, (b) subsequently becomes
publicly known through no act or omission by you or any person
acting on your behalf, (c) otherwise becomes known to you other
than through disclosure by the Company or any Subsidiary or (d)
constitutes financial statements delivered to you under Section
7.1 that are otherwise publicly available. You will maintain the
confidentiality of such Confidential Information in accordance
with procedures adopted by you in good faith to protect
confidential information of third parties delivered to you,
provided that you may deliver or disclose Confidential
Information to (i) your directors, officers, trustees, employees,
agents, attorneys and affiliates (to the extent such disclosure
reasonably relates to the administration of the investment
represented by your Notes), (ii) your financial advisors and
other professional advisors whose duties require them to hold
confidential the Confidential Information substantially in
accordance with the terms of this Section 20, (iii) any other
holder of any Note, (iv) any Institutional Investor to which you
sell or offer to sell such Note or any part thereof or any
participation therein (if such Person has agreed in writing prior
40
to its receipt of such Confidential Information to be bound by
the provisions of this Section 20), (v) any Person from which you
offer to purchase any security of the Company (if such Person has
agreed in writing prior to its receipt of such Confidential
Information to be bound by the provisions of this Section 20),
(vi) any federal or state regulatory authority having
jurisdiction over you, (vii) the National Association of
Insurance Commissioners or any similar organization, or any
nationally recognized rating agency that requires access to
information about your investment portfolio or (viii) any other
Person to which such delivery or disclosure may be necessary or
appropriate (w) to effect compliance with any law, rule,
regulation or order applicable to you, (x) in response to any
subpoena or other legal process, (y) in connection with any
litigation to which you are a party or (z) if an Event of Default
has occurred and is continuing, to the extent you may reasonably
determine such delivery and disclosure to be necessary or
appropriate in the enforcement or for the protection of the
rights and remedies under your Notes and this Agreement. Each
holder of a Note, by its acceptance of a Note, will be deemed to
have agreed to be bound by and to be entitled to the benefits of
this Section 20 as though it were a party to this Agreement. On
reasonable request by the Company in connection with the delivery
to any holder of a Note of information required to be delivered
<PAGE>
to such holder under this Agreement or requested by such holder
(other than a holder that is a party to this Agreement or its
nominee), such holder will enter into an agreement with the
Company embodying the provisions of this Section 20.
21. SUBSTITUTION OF PURCHASER.
You shall have the right to substitute any one of your
Affiliates as the purchaser of the Notes that you have agreed to
purchase hereunder, by written notice to the Company, which
notice shall be signed by both you and such Affiliate, shall
contain such Affiliate's agreement to be bound by this Agreement
and shall contain a confirmation by such Affiliate of the
accuracy with respect to it of the representations set forth in
Section 6. Upon receipt of such notice, wherever the word "you"
is used in this Agreement (other than in this Section 21), such
word shall be deemed to refer to such Affiliate in lieu of you.
In the event that such Affiliate is so substituted as a purchaser
hereunder and such Affiliate thereafter transfers to you all of
the Notes then held by such Affiliate, upon receipt by the
Company of notice of such transfer, wherever the word "you" is
used in this Agreement, such word shall no longer be deemed to
refer to such Affiliate, but shall refer to you, and you shall
have all the rights of an original holder of the Notes under this
Agreement.
41
22. MISCELLANEOUS.
22.1. SUCCESSORS AND ASSIGNS.
All covenants and other agreements contained in this
Agreement by or on behalf of any of the parties hereto bind and
inure to the benefit of their respective successors and assigns
(including without limitation any subsequent holder of a Note)
whether so expressed or not.
22.2. CONSTRUCTION.
Each covenant contained herein shall be construed
(absent express provision to the contrary) as being independent
of each other covenant contained herein, so that compliance with
any one covenant shall not (absent such an express contrary
provision) be deemed to excuse compliance with any other
covenant. Where any provision herein refers to action to be
taken by any Person, or which such Person is prohibited from
taking, such provision shall be applicable whether such action is
taken directly or indirectly by such Person.
<PAGE>
22.3. JURISDICTION AND PROCESS; WAIVER OF JURY TRIAL.
(a) The Company irrevocably submits to the
non-exclusive IN PERSONAM jurisdiction of any New York State or
federal court sitting in the Borough of Manhattan, The City of
New York, over any suit, action or proceeding arising out of or
relating to this Agreement or the Notes. To the fullest
extent permitted by applicable law, the Company irrevocably
waives and agrees not to assert, by way of motion, as a
defense or otherwise, any claim that it is not subject to the IN
PERSONAM jurisdiction of any such court, any objection that it
may now or hereafter have to the laying of the venue of any such
suit, action or proceeding brought in any such court and any
claim that any such suit, action or proceeding brought in any
such court has been brought in an inconvenient forum.
(b) The Company agrees, to the fullest extent permitted
by applicable law, that a final judgment in any suit, action or
proceeding of the nature referred to in Section 22.3 (a) brought
in any such court shall be conclusive and binding upon the
Company subject to rights of appeal, as the case may be, and may
be enforced in the courts of the United States of America or the
State of New York (or any other courts to the jurisdiction of
which the Company is or may be subject) by a suit upon such
judgment.
(c) The Company consents to process being served in any
suit, action or proceeding of the nature referred to in Section
22.3 (a) by mailing a copy thereof by registered or certified
mail, postage prepaid, return receipt requested, to the Company
at its address specified in Section 18 or at such other address
of which you shall then have been notified pursuant to
42
said Section. The Company agrees that such service upon receipt
(i) shall be deemed in every respect effective service of process
upon it in any such suit, action or proceeding and (ii) shall, to
the fullest extent permitted by applicable law, be taken and held
to be valid personal service upon and personal delivery to the
Company. Notices hereunder shall be conclusively presumed
received as evidenced by a delivery receipt furnished by the
United States Postal Service or any reputable commercial delivery
service.
(d) Nothing in this Section 22.3 shall affect the right
of any holder of a Note to serve process in any manner permitted
by law, or limit any right that the holders of any of the Notes
may have to bring proceedings against the Company in the courts
of any appropriate jurisdiction or to enforce in any lawful
manner a judgment obtained in one jurisdiction in any other
jurisdiction.
<PAGE>
(e) THE COMPANY WAIVES TRIAL BY JURY IN ANY ACTION
BROUGHT ON OR WITH RESPECT TO THIS AGREEMENT, THE OTHER
AGREEMENTS, THE NOTES OR ANY OTHER DOCUMENT EXECUTED IN
CONNECTION HEREWITH OR THEREWITH.
22.4. PAYMENTS DUE ON NON-BUSINESS DAYS.
Anything in this Agreement or the Notes to the contrary
notwithstanding (but without limiting the requirement in Section
8.2 that notice of any optional prepayment specify a Business Day
as the date fixed for such prepayment), any payment of principal
of or Make-Whole Amount (if any) or interest on any Note that is
due on a date other than a Business Day shall be made on the next
succeeding Business Day without including the additional days
elapsed in the computation of the interest payable on such next
succeeding Business Day.
22.5. SEVERABILITY.
Any provision of this Agreement that is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions
hereof, and any such prohibition or unenforceability in any
jurisdiction shall (to the extent permitted by applicable law)
not invalidate or render unenforceable such provision in any
other jurisdiction.
22.6. ACCOUNTING TERMS; PRO FORMA CALCULATIONS.
All accounting terms used herein which are not
expressly defined in this Agreement have the meanings
respectively given to them in accordance with GAAP. Except as
otherwise specifically provided herein, all computations made
pursuant to this Agreement shall be made in accordance with GAAP
and all balance sheets and other financial statements with
43
respect thereto shall be prepared in accordance with GAAP.
Except as otherwise specifically provided herein, any
consolidated financial statement or financial computation shall
be done in accordance with GAAP; and, if at the time that any
such statement or computation is required to be made the Company
shall not have any Subsidiary, such terms shall mean a financial
statement or a financial computation, as the case may be, with
respect to the Company only.
Any pro forma computation required to be made hereby
shall include adjustments (without limitation as to other
appropriate pro forma adjustments in accordance with generally
accepted financial practice) giving effect to all acquisitions
and dispositions made during the period with respect to which
<PAGE>
such computation is being made as if such acquisitions and
dispositions were made on the first day of such period.
22.7. COUNTERPARTS.
This Agreement may be executed in any number of
counterparts, each of which shall be an original but all of which
together shall constitute one instrument. Each counterpart may
consist of a number of copies hereof, each signed by less than
all, but together signed by all, of the parties hereto.
22.8. GOVERNING LAW.
This Agreement and the Notes shall be construed and
enforced in accordance with, and the rights of the parties shall
be governed by, the laws of the State of New York excluding
choice-of-law principles of the law of such State that would
require the application of the laws of a jurisdiction other than
such State.
<PAGE>
44
If you are in agreement with the foregoing, please sign
the form of agreement in the space below provided on a
counterpart of this Agreement and return it to the Company,
whereupon the foregoing shall become a binding agreement between
you and the Company.
Very truly yours,
CPI CORP.
/s/ Alyn V. Essman
-----------------------------
Alyn V. Essman
Title: Chairman of the Board
The foregoing is hereby agreed
to as of the date thereof.
THE PRUDENTIAL INSURANCE COMPANY
OF AMERICA
/s/ Jay Squiers
----------------------------
Jay Squiers
Title: Vice President
THE GUARDIAN LIFE INSURANCE COMPANY
OF AMERICA
/s/ Wendell Fuller
-----------------------------------
Wendell Fuller
Title: Second Vice President
<PAGE>
SCHEDULE A
This Schedule A shows the names and addresses of the Purchasers
under the foregoing Note Purchase Agreement and the Other
Agreements referred to therein and the respective principal
amounts of Notes to be purchased by each.
NAME AND ADDRESS OF PURCHASER:
The Prudential Insurance Company of America
PRINCIPAL AMOUNT OF NOTES TO BE PURCHASED:
$40,000,000
(1) All payments on account of Notes held by such Purchaser
shall be made by wire transfer of immediately available funds for
credit to:
Account No. 890-0304-391
The Bank of New York
New York, New York
(ABA No.: 021-000-018)
Each such wire transfer shall set forth reference to "CPI Corp.
7.46% Senior Notes due June 16, 2007, Security No. !INV5641!" in
respect of which such payment is being made, and the due date and
application (as among principal, interest and Yield-Maintenance
Amount) of the payment being made.
(2) Address for all notices relating to payments and written
confirmation of such wire transfers.
The Prudential Insurance Company of America
c/o Prudential Capital Group
Four Gateway Center
100 Mulberry Street
Newark, New Jersey 07102-4069
Attention: Investment Operations Group
(Attention: Manager)
(3) Address for all other communications and notices:
The Prudential Insurance Company of America
c/o Prudential Capital Group
200 Ross Avenue
Suite 4200E
Dallas, Texas 75201
Attention: Managing Director
<PAGE>
(4) Recipient of telephonic or facsimile prepayment notices:
Manager, Investment Structure and Pricing
(201) 802-7398
(201) 624-6432 (facsimile)
(5) Tax Identification No. 22-1211670
NAME AND ADDRESS OF PURCHASER:
The Guardian Life Insurance Company of America
PRINCIPAL AMOUNT OF NOTES TO BE PURCHASED:
$20,000,000
(1) Notes to be registered in the name of:
CUDD & CO.
Tax ID No. 13-6022143
(2) All payments on account of Notes held by such Purchaser
shall be made by wire transfer of immediately available funds for
credit to:
The Chase Manhattan Bank
FED ABA #021000021
CHASE/NYC/CTR/BNF
A/C 900-9-000200
Each such wire transfer shall set forth reference to "CPI Corp.
7.46% Senior Notes due June 16, 2007, PPN 12617# AC O," in
respect of which such payment is being made, and the due date and
application (as among principal, interest and Yield-Maintenance
Amount) of the payment being made.
(3) Address for all notices relating to payments and written
confirmation of such wire transfers:
The Guardian Life Insurance Company of America
Attn: Investment Accounting M-IA
201 Park Avenue South
New York, NY 10003
FAX (212) 677-9023
(4) Address for all other communications and notices:
The Guardian Life Insurance Company of America
201 Park Avenue South
New York, NY 10003
Attn: Raymond J. Henry
Investment Department 7B
FAX (212) 777-6715
<PAGE>
SCHEDULE B
DEFINED TERMS
As used herein, the following terms have the respective
meanings set forth below or set forth in the Section hereof
following such term:
"AFFILIATE" means, at any time, (a) with respect to any
Person, any other Person that at such time directly or indirectly
through one or more intermediaries Controls, or is Controlled by,
or is under common Control with, such first Person, and (b) with
respect to the Company, any Person beneficially owning or
holding, directly or indirectly, 10% or more of any class of
voting or equity interests of the Company or any Subsidiary or
any corporation of which the Company and its Subsidiaries
beneficially own or hold, in the aggregate, directly or
indirectly, 10% or more of any class of voting or equity
interests. As used in this definition, "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 securities, by contract
or otherwise. Unless the context otherwise clearly requires, any
reference to an "Affiliate" is a reference to an Affiliate of the
Company.
"ATTRIBUTABLE DEBT" means, as to any particular lease
relating to a sale and leaseback transaction, the total amount of
rent (discounted semiannually from the respective due dates
thereof at the interest rate implicit in such lease) required to
be paid by the lessee under such lease during the remaining term
thereof. The amount of rent required to be paid under any such
lease for any such period shall be (a) the total amount of the
rent payable by the lessee with respect to such period after
excluding amounts required to be paid on account of maintenance
and repairs, insurance, taxes, assessments, utilities, operating
and labor costs and similar charges plus (b) without duplication,
any guaranteed residual value in respect of such lease to the
extent such guarantee would be included in indebtedness in
accordance with GAAP.
"BUSINESS DAY" means (a) for the purposes of Section
8.6 only, any day other than a Saturday, a Sunday or a day on
which commercial banks in New York City are required or
authorized to be closed, and (b) for the purposes of any other
provision of this Agreement, any day other than a Saturday, a
Sunday or a day on which commercial banks in New York City or St.
Louis, Missouri are required or authorized to be closed.
"CAPITAL LEASE" means, at any time, a lease with
respect to which the lessee is required concurrently to recognize
the acquisition of an asset and the incurrence of a liability in
accordance with GAAP.
Schedule B
<PAGE>
-2-
"CAPITALIZED LEASE OBLIGATIONS" means with respect to
any Person, all outstanding obligations of such Person in respect
of Capital Leases, taken at the capitalized amount thereof
accounted for as a liability on a balance sheet of such Person in
accordance with GAAP.
"CLOSING" is defined in Section 3.
"CODE" means the Internal Revenue Code of 1986, as
amended from time to time, and the rules and regulations
promulgated thereunder from time to time.
"COMPANY" means CPI Corp., a Delaware corporation.
"CONFIDENTIAL INFORMATION" is defined in Section 20.
"CONSOLIDATED ASSETS" means, at any date, the total
assets of the Company and its Subsidiaries determined on a
consolidated basis in accordance with GAAP.
"CONSOLIDATED CAPITALIZATION" means, at any date, the
sum of (a) Consolidated Indebtedness plus (b) Consolidated Net
Worth, all as determined on a consolidated basis for the Company
and its Subsidiaries in accordance with GAAP.
"CONSOLIDATED FIXED CHARGES" shall mean for the period
in question, without duplication, the sum of (i) all Consolidated
Interest Expense and (ii) all Consolidated Lease Rental Expense,
for such period.
"CONSOLIDATED INDEBTEDNESS" means, at any date, all
Indebtedness of the Company and its Subsidiaries determined on a
consolidated basis in accordance with GAAP.
"CONSOLIDATED INTEREST EXPENSE" for any period means
the sum for the Company and its Subsidiaries, determined on a
consolidated basis in accordance with GAAP, of all amounts which
would be deducted in computing Consolidated Net Income on account
of interest on Indebtedness (including imputed interest in
respect of Capitalized Lease Obligations and amortization of debt
discount and expense).
"CONSOLIDATED LEASE RENTAL EXPENSE" shall mean, for the
period in question, the aggregate amount of operating lease
expense (i.e., all minimum rental payments plus all additional
rentals payable under percentage operating leases) during such
period under all operating leases of the Company and its
Subsidiaries, all determined on a consolidated basis for the
Company and its Subsidiaries, but excluding any amounts required
to be paid by the Company or a Subsidiary (whether or not
<PAGE>
designated as rent or additional rent) on account of maintenance,
repairs, insurance, taxes, assessments, amortization and similar
charges.
Schedule B
-3-
"CONSOLIDATED NET INCOME" for any period means the net
income (or loss) of the Company and its Subsidiaries for such
period, determined on a consolidated basis in accordance with
GAAP, excluding
(a) the proceeds of any life insurance policy,
(b) any gains arising from (i) the sale or other
disposition of any assets (other than current assets) to the
extent that the aggregate amount of the gains during such period
exceeds the aggregate amount of the losses during such period
from the sale, abandonment or other disposition of assets (other
than current assets), (ii) any write-up of assets or (iii) the
acquisition of outstanding securities of the Company or any
Subsidiary,
(c) any amount representing any interest in the
undistributed earnings of any other Person (other than a
Subsidiary),
(d) any earnings, prior to the date of acquisition, of
any Person acquired in any manner, and any earnings of any
Subsidiary prior to its becoming a Subsidiary,
(e) any earnings of a successor to or transferee of the
assets of the Company prior to its becoming such successor or
transferee,
(f) any deferred credit (or amortization of a deferred
credit) arising from the acquisition of any Person, and
(g) any extraordinary gains not covered by clause (b)
above.
"CONSOLIDATED NET WORTH" means, at any date, on a
consolidated basis for the Company and its Subsidiaries, (a) the
sum of (i) capital stock taken at par or stated value plus (ii)
capital in excess of par or stated value relating to capital
stock plus (iii) retained earnings (or minus any retained earning
deficit) minus (b) the sum of treasury stock, capital stock
subscribed for and unissued and other contra-equity accounts, all
determined in accordance with GAAP.
<PAGE>
"DEFAULT" means an event or condition the occurrence or
existence of which would, with the giving of notice or the lapse
of time, or both, become an Event of Default.
"Default Rate" means that rate of interest that is the
greater of (i) 8.46% and (ii) 2% above the rate of interest
publicly announced by The Bank of New York from time to time at
its principal office in New York City as its prime rate.
"DISPOSITION PAYMENT" is defined in Section 10.5(d).
Schedule B
-4-
"EBITDA" for any period means Consolidated Net Income
plus all amounts deducted in the computation thereof on account
of (a) Consolidated Interest Expense, (b) depreciation and
amortization expenses and (c) income and profits taxes.
"ENVIRONMENTAL LAWS" means any and all Federal, state,
local, and foreign statutes, laws, regulations, ordinances,
rules, judgments, orders, decrees, permits, concessions, grants,
franchises, licenses, agreements or governmental restrictions
relating to pollution and the protection of the environment or
the release of any materials into the environment, including but
not limited to those related to hazardous substances or wastes,
air emissions and discharges to waste or public systems.
"ERISA" means the Employee Retirement Income Security
Act of 1974, as amended from time to time, and the rules and
regulations promulgated thereunder from time to time.
"ERISA AFFILIATE" means any trade or business (whether
or not incorporated) that is treated as a single employer
together with the Company under section 414 of the Code.
"EVENT OF DEFAULT" is defined in Section 11.
"EXCHANGE ACT" means the Securities Exchange Act of
1934, as amended from time to time.
"GAAP" means generally accepted accounting principles
as in effect from time to time in the United States of America.
"GOVERNMENTAL AUTHORITY" means
(a) the government of
(i) the United States of America or any State or
other political subdivision thereof, or
<PAGE>
(ii) any jurisdiction in which the Company or any
Subsidiary conducts all or any part of its business,
or which asserts jurisdiction over any properties of
the Company or any Subsidiary, or
(b) any entity exercising executive, legislative,
judicial, regulatory or administrative functions of, or
pertaining to, any such government.
"GUARANTY" means, with respect to any Person, any
obligation (except the endorsement 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 in
any manner, whether directly or indirectly, including without
limitation obligations incurred through an agreement, contingent
or otherwise, by such Person:
Schedule B
-5-
(a) to purchase such Indebtedness or obligation or any
property constituting security therefor;
(b) to advance or supply funds (i) for the purchase or
payment of such Indebtedness or obligation, or (ii) to
maintain any working capital or other balance sheet
condition or any income statement condition of any other
Person or otherwise to advance or make available funds for
the purchase or payment of such Indebtedness or obligation;
(c) to lease properties or to purchase properties or
services primarily for the purpose of assuring the owner of
such Indebtedness or obligation of the ability of any other
Person to make payment of the Indebtedness or obligation; or
(d) otherwise to assure the owner of such Indebtedness
or obligation against loss in respect thereof.
In any computation of the Indebtedness or other liabilities of
the obligor under any Guaranty, the Indebtedness or other
obligations that are the subject of such Guaranty shall be
assumed to be direct obligations of such obligor.
"HAZARDOUS MATERIAL" means any and all pollutants,
toxic or hazardous wastes or any other substances that might pose
a hazard to health or safety, the removal of which may be
required or the generation, manufacture, refining, production,
processing, treatment, storage, handling, transportation,
transfer, use, disposal, release, discharge, spillage, seepage,
or filtration of which is or shall be restricted, prohibited or
<PAGE>
penalized by any applicable law (including without limitation
asbestos, urea formaldehyde foam insulation and polychlorinated
biphenyls).
"HOLDER" means, with respect to any Note, the Person in
whose name such Note is registered in the register maintained by
the Company pursuant to Section 13.1.
"INDEBTEDNESS" with respect to any Person means, at any
time, without duplication,
(a) its liabilities for borrowed money or its mandatory
purchase, redemption or other retirement obligations in
respect of mandatorily redeemable Preferred Stock,
(b) its liabilities for the deferred purchase price of
property acquired by such Person (excluding accounts payable
arising in the ordinary course of business and not overdue
but including all liabilities created or arising under any
conditional sale or other title retention agreement with
respect to any such property),
(c) its Capitalized Lease Obligations,
Schedule B
-6-
(d) all liabilities for borrowed money secured by any
Lien with respect to any property owned by such Person
(whether or not it has assumed or otherwise become liable
for such liabilities),
(e) all its liabilities in respect of letters of credit
or instruments serving a similar function issued or accepted
for its account by banks and other financial institutions
(whether or not representing obligations for borrowed
money),
(f) Swaps of such Person, and
(g) any Guaranty of such Person with respect to
liabilities of a type described in any of clauses (a)
through (f) above.
Indebtedness of any Person shall include all obligations of such
Person of the character described in clauses (a) through (g)
above to the extent such Person remains legally liable in respect
thereof notwithstanding that any such obligation is deemed to be
extinguished under GAAP.
<PAGE>
"INSTITUTIONAL INVESTORS" means (a) any original
purchaser of a Note, (b) any holder of a Note holding (together
with one or more of its Affiliates) more than 2% of the aggregate
principal amount of the Notes then outstanding, and (c) any bank,
trust company, savings and loan association or other financial
institution, any pension plan, any investment company, any
insurance company, any broker or dealer, or any other similar
financial institution or entity, regardless of legal form.
"LIEN" means, with respect to any Person, any mortgage,
lien, pledge, charge, security interest or other encumbrance, or
any interest or title of any vendor, lessor, lender or other
secured party to or of such Person under any conditional sale or
other title retention agreement or Capital Lease, upon or with
respect to any property or asset of such Person (including in the
case of stock, stockholder agreements, voting trust agreements
and all similar arrangements).
"MAKE-WHOLE AMOUNT" is defined in Section 8.6.
"MATERIAL" means material in relation to the business,
operations, affairs, financial condition, assets, properties, or
prospects of the Company and its Subsidiaries taken as a whole.
"MATERIAL ADVERSE EFFECT" means a material adverse
effect on (a) the business, operations, affairs, financial
condition, assets or properties of the Company and its
Subsidiaries taken as a whole, (b) the ability of the Company to
perform its obligations under this Agreement and the Notes or (c)
the validity or enforceability of this Agreement or the Notes.
Schedule B
-7-
"MEMORANDUM" is defined in Section 5.3.
"MUTLIEMPLOYER PLAN" means any Plan that is a
"multiemployer plan" (as such term is defined in section
4001(a)(3) of ERISA).
"NOTES" is defined in Section 1.
"OFFICER'S CERTIFICATE" means a certificate of a Senior
Financial Officer or of any other officer of the Company whose
responsibilities extend to the subject matter of such
certificate.
"OTHER AGREEMENTS" is defined in Section 2.
"OTHER PURCHASERS" is defined in Section 2.
<PAGE>
"PBGC" means the Pension Benefit Guaranty Corporation
referred to and defined in ERISA or any successor thereto.
"PERSON" means an individual, partnership, corporation,
limited liability company, association, trust, unincorporated
organization, or a government or agency or political subdivision
thereof.
"PLAN" means an "employee benefit plan" (as defined in
section 3(3) of ERISA) that is or, within the preceding five
years, has been established or maintained, or to which
contributions are or, within the preceding five years, have been
made or required to be made, by the Company or any ERISA
Affiliate or with respect to which the Company or any ERISA
Affiliate may have any liability.
"PREFERRED STOCK", as applied to any corporation, means
shares of such corporation that shall be entitled to preference
or priority over any other shares of such corporation in respect
of either the payment of dividends or the distribution of assets
upon liquidation, or both.
"PROPERTY" or "PROPERTIES" means, unless otherwise
specifically limited, real or personal property of any kind,
tangible or intangible, inchoate or otherwise.
"PTE" is defined in Section 6.2.
"QPAM EXEMPTION" means Prohibited Transaction Class
Exemption 84-14 issued on March 13, 1984 by the United States
Department of Labor.
"RELATED PARTY ARRANGEMENT" is defined in Section 10.7
"REQUIRED HOLDERS" means, at any time, (x) the holders
of at least a majority in unpaid principal amount of the Notes at
the time outstanding and (y), so long as any of the original
Schedule B
-8-
purchasers shall hold any Note, such purchasers as holders of the
Notes.
"RESPONSIBLE OFFICER" means any Senior Financial
Officer and any other officer of the Company with responsibility
for the administration of the relevant portion of this Agreement.
"SECURITIES ACT" means the Securities Act of 1933, as
amended from time to time.
<PAGE>
"SENIOR FINANCIAL OFFICER" means the chief financial
officer, principal accounting officer, treasurer or comptroller
of the Company.
"SUBSIDIARY" means, as to any Person, any corporation
or other business entity a majority of the combined voting power
of all Voting Stock of which is owned by such Person or one or
more of its Subsidiaries or such Person and one or more of its
Subsidiaries. Unless the context otherwise clearly requires, any
reference to a "Subsidiary" is a reference to a Subsidiary of the
Company.
"SWAPS" means, with respect to any Person, payment
obligations with respect to interest rate swaps, currency swaps
and similar obligations obligating such Person to make payments,
whether periodically or upon the happening of a contingency. For
the purposes of this Agreement, the amount of the obligation
under any Swap shall be the amount determined in respect thereof
as of the end of the then most recently ended fiscal quarter of
such Person, based on the assumption that such Swap had
terminated at the end of such fiscal quarter, and in making such
determination, if any agreement relating to such Swap provides
for the netting of amounts payable by and to such Person
thereunder or if any such agreement provides for the simultaneous
payment of amounts by and to such Person, then in each such case,
the amount of such obligation shall be the net amount so
determined.
"VOTING STOCK" means, with respect to any Person, any
shares of stock or other equity interests of any class or classes
of such Person whose holders are entitled under ordinary
circumstances (irrespective of whether at the time stock or other
equity interests of any other class or classes shall have or
might have voting power by reason of the happening of any
contingency) to vote for the election of a majority of the
directors, managers, trustees or other governing body of such
Person.
"WHOLLY-OWNED SUBSIDIARY" means, at any time, any
Subsidiary all of the equity interests (except directors'
qualifying shares) and voting interests of which are owned by any
one or more of the Company and the Company's other Wholly-Owned
Subsidiaries at such time.
Schedule B
<PAGE>
EXHIBIT 1
[FORM OF NOTE]
CPI CORP.
7.46% SENIOR NOTE DUE 2007
No. [_____] New York, New York
$[_______] [Date]
PPN: 12617# AC O
FOR VALUE RECEIVED, the undersigned, CPI CORP. (the
"COMPANY"), a Delaware corporation, hereby promises to pay to
[______________], or registered assigns, the principal sum of
[______________] DOLLARS on June 16, 2007, with interest
(computed on the basis of a 360-day year of twelve 30-day months)
(a) from the date hereof on the unpaid balance thereof at the
rate of 7.46% per annum, payable semiannually on June 16 and
December 16 in each year, until the principal hereof shall have
become due and payable, and (b) on any overdue payment of
principal, any overdue payment of interest (to the extent
permitted by applicable law) and any overdue payment of any
premium or Make-Whole Amount (as defined in the Note Purchase
Agreements referred to below), payable semiannually as aforesaid
(or, at the option of the holder hereof, on demand) at a rate per
annum from time to time equal to the greater of (i) 8.46% and
(ii) 2% above the rate of interest publicly announced by The Bank
of New York from time to time at its principal office in New York
City as its prime rate.
Payments of principal of, interest on and any Make-
Whole Amount with respect to this Note are to be made in lawful
money of the United States of America at said principal office of
The Bank of New York in New York City or at such other place as
the Company shall have designated by written notice to the holder
of this Note as provided in the Note Purchase Agreements referred
to below.
This Note is one of an issue of Senior Notes issued
pursuant to separate Note Purchase Agreements dated as of June
16, 1997 (as from time to time amended, the "NOTE PURCHASE
AGREEMENTS") between the Company and the respective Purchasers
named therein and is entitled to the benefits thereof. Each
holder of this Note will be deemed, by its acceptance hereof, to
have agreed to the confidentiality provisions set forth in
Section 20 of the Note Purchase Agreements.
This Note is a registered Note and, as provided in the
Note Purchase Agreements, upon surrender of this Note for
registration of transfer, duly endorsed, or accompanied by a
written instrument of transfer duly executed, by the registered
holder hereof or such holder's attorney duly authorized in
<PAGE>
writing, a new Note for a like principal amount will be issued
-2-
to, and registered in the name of, the transferee. Prior to due
presentment for registration of transfer, the Company may treat
the person in whose name this Note is registered as the owner
hereof for the purpose of receiving payment and for all other
purposes, and the Company will not be affected by any notice to
the contrary.
The Company will make required prepayments of principal
on the dates and in the amounts specified in the Note Purchase
Agreements. This Note is also subject to optional prepayment, in
whole or from time to time in part, at the times and on the terms
specified in the Note Purchase Agreements, but not otherwise.
If an Event of Default, as defined in the Note Purchase
Agreements, occurs and is continuing, the principal of this Note
may be declared or otherwise become due and payable in the
manner, at the price (including any applicable premium or Make-
Whole Amount) and with the effect provided in the Note Purchase
Agreements.
This Note shall be construed and enforced in accordance
with, and the rights of the Company and the holder hereof shall
be governed by, the laws of the State of New York, excluding
choice-of-law principles of the law of such State that would
require the application of the laws of a jurisdiction other than
such State.
CPI CORP.
By_________________________
Title:
<PAGE>
EXHIBITS 4.4(a)(1) and 4.4(a)(2)
OPINIONS OF COUNSEL FOR THE COMPANY
(These Exhibits contain opinions received from White & Case,
special counsel for the Company and Jane E. Nelson, Esq., General
Counsel of the Company.)
<PAGE>
EXHIBIT 4.4(b)
FORM OF OPINION OF SPECIAL COUNSEL FOR THE PURCHASERS
(This Exhibit contains an opinion received from Willkie Farr &
Gallagher, special counsel for the purchasers.)
<PAGE>
SCHEDULE 5.3
DISCLOSURE DOCUMENTS
1. CPI Corp. Due Diligence Book, dated June 9, 1997.
2. CPI Corp. Officer's Certificate dated June 16, 1997.
3. CPI Corp. Secretary's Certificate dated June 16, 1997.
<PAGE>
SCHEDULE 5.4
SUBSIDIARIES
(This Exhibit lists the Company's (i) Subsidiaries, showing, as to
each Subsidiary, the correct name thereof, the jurisdiction of
its organization, and the percentage of shares of each class of
its capital stock or similar equity interests outstanding owned
by the Company and each other Subsidiary, (ii) Affiliates, other
than Subsidiaries, and (iii) directors and senior officers.)
<PAGE>
SCHEDULE 5.5
FINANCIAL STATEMENTS
1. Consolidated balance sheets and statements of income, cash
flows and changes in stockholders' equity of Borrower and
its Subsidiaries as of February 1, 1997, as published in
the Company's Form 10-K Annual Report filed with the
Securities and Exchange Commission.
2. Unaudited consolidated balance sheets and statements of
income, cash flows and changes in stockholders' equity of
Borrower and its Subsidiaries as of April 26, 1997, as
published in the Company's Form 10-Q Quarterly Report
filed with the Securities and Exchange Commission.
<PAGE>
SCHEDULE 5.8
LITIGATION
None
<PAGE>
SCHEDULE 5.11
LICENSES, ETC.
None
<PAGE>
SCHEDULE 5.15
<TABLE>
EXISTING INDEBTEDNESS
<CAPTION>
NAME AMOUNT DESCRIPTION
<S> <C> <C>
Principal/Prudential $ 55,000,000 Senior long-term-debt--
Senior Notes see further disclosure in
Note A
CPI Corp. Revolving - CPI Corp. revolving credit
Credit Agreement agreement with Mercantile
Bank of St.Louis, Harris
Trust and Savings Bank,
and The Sumitomo Bank,
Limited--maximum borrowing
limit: $60,000,000--
covenants similar to Senior
Notes-see Note A
St. Louis Equity Fund 40,799 Investment in St. Louis
------------- Equity Fund 1990 Limited
Partnership
45,040,799
Insurance Costs (145,129) Senior long-term debt--see
------------- further disclosure in
Note A
Total as of May 24, $ 44,895,670
1997 financial =============
statements
</TABLE>
<PAGE>
SCHEDULE 5.15 (...continued)
EXISTING INDEBTEDNESS (...continued)
NOTE A
On August 31, 1993, CPI Corp. privately placed senior notes
in the amount of $60,000,000 (the "Note Agreement") with
two insurance companies. The notes, issued pursuant to the
Note Agreement, mature over a seven-year period with an
average maturity of 5.42 years and with the first principal
payment due at the end of the third year. Interest on the
notes is payable semi-annually at an average effective
fixed rate of 6.44%. The Note Agreement requires the
Company maintain certain financial ratios and comply with
certain restrictive covenants including a limitation on
dividend payment, purchase of treasury stock and certain
restricted investments are not to exceed $25,000,000 plus
50% of net earnings (or less 100% of net losses) credited
at the end of each fiscal year. The Company incurred
$459,000 in issuance costs associated with the private
placement of the notes. These costs are being amortized
ratably over the seven-year life of the notes.
The Company's performance of the conditions of the Note
Agreement and the underlying notes issued under the
agreement was originally secured by a pledge of the stock
of the Company's direct subsidiaries. As the Company
achieved the stipulated financial ratios required by the
agreement to release the pledge of stock and pursuant to the
direction of the lenders, on June 5, 1995, the lien on the
pledged shares of the Company's direct, wholly owned
subsidiaries was released.
The Note Agreement has been amended on the following dates:
February 24, 1994, June 14, 1994, September 18, 1995,
October 2,1 996 and April 11, 1997.
CPI Corp. guarantees all lines of credits to its subsidiaries
and routinely guarantees leases entered into by subsidiaries.
There are numerous intercompany accounts payable and notes
arising in the ordinary course of the business of the Company
and its subsidiaries.
The above information represents both short- and long-term debt
agreements of CPI Corp. as of its most recent fiscal period
close, May 24, 1997. No additional short- or long-term debt,
loan or guarantees agreements have been entered into as of
June 16, 1995.
EXHIBIT 10.6
REVOLVING CREDIT AGREEMENT
THIS REVOLVING CREDIT AGREEMENT (this "Agreement") is
made and entered into this 16th day of June, 1997, by and among
CPI CORP., a Delaware corporation ("Borrower"), and the
undersigned Banks, including Mercantile Bank National Association
in its capacity as a Bank and as agent for the Banks under this
Agreement.
WITNESSETH:
WHEREAS, Borrower has applied for a revolving credit
facility from the Banks consisting of revolving credit loans and
letters of credit in an aggregate amount of up to $40,000,000.00;
and
WHEREAS, the Banks are willing to extend said revolving
credit facility to Borrower upon, and subject to, the terms,
provisions and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and
for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Borrower, the Banks
and the Agent hereby covenant and agree as follows:
SECTION 1. DEFINITIONS.
1.01 DEFINITIONS. In addition to the terms defined
elsewhere in this Agreement or in any Exhibit or Schedule hereto,
when used in this Agreement, the following terms shall have the
following meanings (such meanings shall be equally applicable to
the singular and plural forms of the terms used, as the context
requires):
ACCEPTABLE ACQUISITION shall mean any Acquisition which
has been (a) in the event a corporation is the subject of such
Acquisition, either (i) approved by the Board of Directors of the
corporation which is the subject of such Acquisition or (ii)
recommended by such Board of Directors to the shareholders of
such corporation, (b) in the event a partnership is the subject
of such Acquisition, approved by a majority (by percentage of
voting power) of the partners of the partnership which is the
subject of such Acquisition, (c) in the event an organization or
entity other than a corporation or partnership is the subject of
such Acquisition, approved by a majority (by percentage of voting
power) of the governing body, if any, or by a majority (by
percentage of ownership interest) of the owners of the
organization or entity which is the subject of such Acquisition
<PAGE>
or (d) in the event the corporation, partnership or other
organization or entity which is the subject of such Acquisition
is in bankruptcy, approved by the bankruptcy court or another
court of competent jurisdiction.
ACQUISITION shall mean any transaction or series of
related transactions, consummated on or after the date of this
Agreement, by which Borrower and/or any of its Subsidiaries
(a) acquires any going business or all or substantially all of
the
assets of any corporation, partnership or other organization or
entity, whether through purchase of assets, merger or otherwise
or (b) directly or indirectly acquires (in one transaction or as
the most recent transaction in a series of transactions) at least
(i) a majority (in number of votes) of the stock and/or other
securities of a corporation having ordinary voting power for the
election of directors (other than stock and/or other securities
having such power only by reason of the happening of a
contingency), (ii) a majority (by percentage of voting power) of
the outstanding partnership interests of a partnership or (iii)
a majority of the ownership interests in any organization or
entity other than a corporation or partnership.
AFFILIATE shall mean, at any time, (a) with respect to
any Person, any other Person that at such time directly or
indirectly through one or more intermediaries Controls, or is
Controlled by, or is under common Control with, such first
Person, and (b) with respect to Borrower, any Person beneficially
owning or holding, directly or indirectly, Ten Percent (10%) or
more of any class of voting or equity interests of Borrower or
any Subsidiary or any corporation or other entity of which
Borrower and its Subsidiaries beneficially own or hold, in the
aggregate, directly or indirectly, Ten Percent (10%) or more of
any class of voting or equity interests. As used in this
definition, "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 securities, by contract or otherwise. Unless
the context otherwise clearly requires, any reference to an
"Affiliate" is a reference to an Affiliate of Borrower.
AGENT shall mean Mercantile Bank National Association
in its capacity as agent for the Banks hereunder and its
successors in such capacity.
APPLICABLE COMMITMENT FEE RATE shall mean: (a) .125%
per annum if the Consolidated Debt to Consolidated EBITDA Ratio
was less than .75 to 1.0 as of the end of the most recently ended
<PAGE>
fiscal quarter of Borrower for which consolidated financial
statements of Borrower and its Subsidiaries have been delivered
to the Agent and the Banks pursuant to Section 6.01(a); (ii) .15%
per annum if the Consolidated Debt to Consolidated EBITDA Ratio
was equal to or greater than .75 to 1.0 but less than 1.25 to 1.0
as of the end of the most recently ended fiscal quarter of
Borrower for which consolidated financial statements of Borrower
and its Subsidiaries have been delivered to the Agent and the
Banks pursuant to Section 6.01(a); (iii) .1875% per annum if the
Consolidated Debt to Consolidated EBITDA Ratio was equal to or
greater than 1.25 to 1.0 but less than 2.75 to 1.0 as of the end
of the most recently ended fiscal quarter of Borrower for which
consolidated financial statements of Borrower and its
Subsidiaries have been delivered to the Agent and the Banks
pursuant to Section 6.01(a); and (iv) .25% per annum if the
Consolidated Debt to Consolidated EBITDA Ratio was equal to or
greater than 2.75 to 1.0 as of the end of the most recently ended
fiscal quarter of Borrower
2
for which consolidated financial statements of Borrower and its
Subsidiaries have been delivered to the Agent and the Banks
pursuant to Section 6.01(a). The determination of the Applicable
Commitment Fee Rate as of any date shall be based on the
Consolidated Debt to Consolidated EBITDA Ratio as of the end of
the most recently ended fiscal quarter of Borrower for which
consolidated financial statements of Borrower and its
Subsidiaries have been delivered to the Agent and the Banks
pursuant to Section 6.01(a), and shall be effective for purposes
of determining the Applicable Commitment Fee Rate from and after
the first day of the first month immediately following the date
on which such delivery of financial statements is required until
the first day of the first month immediately following the next
such date on which delivery of consolidated financial statements
of Borrower and its Subsidiaries is so required. For example,
the Consolidated Debt to Consolidated EBITDA Ratio as of the end
of the fiscal quarter of Borrower ended April 26, 1997, will be
determined from the consolidated financial statements of Borrower
and its Subsidiaries as of and for fiscal quarter ended April 26,
1997 (which are required to be delivered to the Agent and the
Banks on or before June 10, 1997), and will be used in
determining the Applicable Commitment Fee Rate from and after
July 1, 1997. Notwithstanding the foregoing, during the period
commencing on the date of this Agreement and ending June 30,
1997, Applicable Commitment Fee Rate shall mean .15% per annum.
APPLICABLE MARGIN shall mean: (a) .50% per annum if the
Consolidated Debt to Consolidated EBITDA Ratio was less than .75
to 1.0 as of the end of the most recently ended fiscal quarter of
<PAGE>
Borrower for which consolidated financial statements of Borrower
and its Subsidiaries have been delivered to the Agent and the
Banks pursuant to Section 6.01(a); (b) .625% per annum if the
Consolidated Debt to Consolidated EBITDA Ratio was equal to or
greater than .75 to 1.0 but less than 1.25 to 1.0 as of the end
of the most recently ended fiscal quarter of Borrower for which
consolidated financial statements of Borrower and its
Subsidiaries have been delivered to the Agent and the Banks
pursuant to Section 6.01(a); (c) .75% per annum if the
Consolidated Debt to Consolidated EBITDA Ratio was equal to or
greater than 1.25 to 1.0 but less than 2.0 to 1.0 as of the end
of the most recently ended fiscal quarter of Borrower for which
consolidated financial statements of Borrower and its
Subsidiaries have been delivered to the Agent and the Banks
pursuant to Section 6.01(a); (d) 1.00% per annum if the
Consolidated Debt to Consolidated EBITDA Ratio was equal to or
greater than 2.0 to 1.0 but less than 2.75 to 1.0 as of the end
of the most recently ended fiscal quarter of Borrower for which
consolidated financial statements of Borrower and its
Subsidiaries have been delivered to the Agent and the Banks
pursuant to Section 6.01(a); and (e) 1.25% per annum if the
Consolidated Debt to Consolidated EBITDA Ratio was equal to or
greater than 2.75 to 1.0 as of the end of the most recently ended
fiscal quarter of Borrower for which consolidated financial
statements of Borrower and its Subsidiaries have been delivered
to the Agent and the Banks pursuant to Section 6.01(a). The
determination of the Applicable Margin as of any date shall be
3
based on the Consolidated Debt to Consolidated EBITDA Ratio as of
the end of the most recently ended fiscal quarter of Borrower for
which consolidated financial statements of Borrower and its
Subsidiaries have been delivered to the Agent and the Banks
pursuant to Section 6.01(a), and shall be effective for purposes
of determining the Applicable Margin from and after the first day
of the first month immediately following the date on which such
delivery of financial statements is required until the first day
of the first month immediately following the next such date on
which delivery of consolidated financial statements of Borrower
and its Subsidiaries is so required. For example, the
Consolidated Debt to Consolidated EBITDA Ratio as of the end of
the fiscal quarter of Borrower ended April 26, 1997, will be
determined from the consolidated financial statements of Borrower
and its Subsidiaries as of and for the fiscal quarter ended April
26, 1997 (which are required to be delivered to the Agent and the
Banks on or before June 10, 1997), and will be used in
determining the Applicable Margin from and after July 1, 1997.
Notwithstanding the foregoing, during the period commencing on
the date of this Agreement and ending June 30, 1997, Applicable
Margin shall mean .625% per annum.
<PAGE>
APPLICABLE STANDBY LETTER OF CREDIT COMMITMENT FEE RATE
shall mean: (a) .425% per annum if the Consolidated Debt to
Consolidated EBITDA Ratio was less than .75 to 1.0 as of the end
of the most recently ended fiscal quarter of Borrower for which
consolidated financial statements of Borrower and its
Subsidiaries have been delivered to the Agent and the Banks
pursuant to Section 6.01(a); (b) .50% per annum if the
Consolidated Debt to Consolidated EBITDA Ratio was equal to or
greater than .75 to 1.0 but less than 1.25 to 1.0 as of the end
of the most recently ended fiscal quarter of Borrower for which
consolidated financial statements of Borrower and its
Subsidiaries have been delivered to the Agent and the Banks
pursuant to Section 6.01(a); (c) .625% per annum if the
Consolidated Debt to Consolidated EBITDA Ratio was equal to or
greater than 1.25 to 1.0 but less than 2.0 to 1.0 as of the end
of the most recently ended fiscal quarter of Borrower for which
consolidated financial statements of Borrower and its
Subsidiaries have been delivered to the Agent and the Banks
pursuant to Section 6.01(a); (d) .875% per annum if the
Consolidated Debt to Consolidated EBITDA Ratio was equal to or
greater than 2.0 to 1.0 but less than 2.75 to 1.0 as of the end
of the most recently ended fiscal quarter of Borrower for which
consolidated financial statements of Borrower and its
Subsidiaries have been delivered to the Agent and the Banks
pursuant to Section 6.01(a); and (e) 1.125% per annum if the
Consolidated Debt to Consolidated EBITDA Ratio was equal to or
greater than 2.75 to 1.0 as of the end of the most recently ended
fiscal quarter of Borrower for which consolidated financial
statements of Borrower and its Subsidiaries have been delivered
to the Agent and the Banks pursuant to Section 6.01(a). The
determination of the Applicable Standby Letter of Credit
Commitment Fee Rate as of any date shall be based on the
Consolidated Debt to Consolidated EBITDA Ratio as of the end of
the most recently ended fiscal quarter of Borrower for which
consolidated financial statements of Borrower and its
Subsidiaries have been delivered to the Agent and the Banks
4
pursuant to Section 6.01(a), and shall be effective for purposes
of determining the Applicable Standby Letter of Credit Commitment
Fee Rate from and after the first day of the first month
immediately following the date on which such delivery of
financial statements is required until the first day of the first
month immediately following the next such date on which delivery
of consolidated financial statements of Borrower and its
Subsidiaries is so required. For example, the Consolidated Debt
to Consolidated EBITDA Ratio as of the end of the fiscal quarter
of Borrower ended April 26, 1997, will be determined from the
<PAGE>
consolidated financial statements of Borrower and its
Subsidiaries as of and for the fiscal quarter ended April 26,
1997 (which are required to be delivered to the Agent and the
Banks on or before June 10, 1997), and will be used in
determining the Applicable Standby Letter of Credit Commitment
Fee Rate from and after July 1, 1997. Notwithstanding the
foregoing, during the period commencing on the date of this
Agreement and ending June 10, 1997, Applicable Standby Letter of
Credit Commitment Fee Rate shall mean .50% per annum.
ASSET SALE shall have the meaning ascribed thereto in
Section 6.02(e).
ATTORNEYS' FEES shall mean the reasonable value of the
services (and costs, charges and expenses related thereto) of the
attorneys (and all paralegals, accountants and other staff
employed by such attorneys) employed by the Agent or any of the
Banks (including, without limitation, attorneys and paralegals
who are employees of the Agent or any of the Banks or of any
direct or indirect parent corporation, subsidiary or affiliate of
the Agent or any of the Banks) from time to time (a) in
connection with the negotiation, preparation, execution,
delivery, amendment, modification, extension, renewal,
administration and/or enforcement of this Agreement and/or any of
the other Transaction Documents, (b) in connection with the
preparation, negotiation or execution of any waiver or consent
with respect to this Agreement or any of the other Transaction
Documents, (c) in connection with any Default or Event of Default
under this Agreement, (d) to represent the Agent or any of the
Banks in any litigation, contest, dispute, suit or proceeding, or
to commence, defend or intervene in any litigation, contest,
dispute, suit or proceeding, or to file any petition, complaint,
answer, motion or other pleading or to take any other action in
or with respect to any litigation, contest, dispute, suit or
proceeding (whether instituted by the Agent, any of the Banks,
Borrower or any other Person and whether in bankruptcy or
otherwise) in any way or respect relating to this Agreement or
any of the other Transaction Documents, Borrower, any Subsidiary
or any other Obligor and/or (e) to enforce any of the rights
and/or remedies of the Agent or any of the Banks to collect any
of Borrower's Obligations.
ATTRIBUTABLE DEBT shall mean, as to any particular
lease relating to a sale and leaseback transaction, the total
amount of rent (discounted semiannually from the respective due
dates thereof at the interest rate implicit in such lease)
required to be paid by the lessee under such lease during the
remaining term thereof. The
5
<PAGE>
amount of rent required to be paid under any such lease for any
such period shall be the sum of (a) the total amount of the rent
payable by the lessee with respect to such period after excluding
amounts required to be paid on account of maintenance and
repairs, insurance, taxes, assessments, utilities, operating and
labor costs and similar charges PLUS (b) without duplication, any
guaranteed residual value in respect of such lease to the extent
such guarantee would be included in indebtedness in accordance
with GAAP.
BANK(S) shall mean each bank or other financial
institution listed on the signature pages hereof, and its
successors and assigns.
BORROWER'S OBLIGATIONS shall mean any and all present
and future indebtedness (principal, interest, fees and other
amounts), liabilities and obligations (including, without
limitation, reimbursement obligations with respect to Letters of
Credit issued by Mercantile for the account of, or which have
been guaranteed by, Borrower, funding losses and indemnities) of
Borrower to the Agent or any one or more of the Banks evidenced
by or arising under this Agreement, the Notes, the Letter of
Credit Applications or any of the other Transaction Documents,
and any and all costs of collection and/or Attorneys' Fees
incurred or to be incurred in connection therewith.
CAPITAL STOCK shall mean any and all shares of any
class of capital stock of Borrower or any Subsidiary and any
warrant, right or option to purchase or acquire any shares of any
such capital stock.
CAPITAL LEASE shall mean, at any time, a lease with
respect to which the lessee is required concurrently to recognize
the acquisition of an asset and the incurrence of a liability in
accordance with GAAP.
CAPITALIZED LEASE OBLIGATIONS of any Person shall mean,
as of the date of any determination thereof, all outstanding
obligations of such Person in respect of Capital Leases as of
such date, taken at the capitalized amount thereof accounted for
as a liability on a balance sheet of such Person in accordance
with GAAP.
CERCLA shall mean the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended by
the Superfund Amendments and Reauthorization Act of 1986, 42
U.S.C. Sections 9601 ET SEQ., and as the same may from time to
time be further amended, modified, extended or renewed.
<PAGE>
CHANGE OF CONTROL EVENT means the beneficial ownership
or acquisition by any Person or group of Persons who are
Affiliates (in any transaction or series of related transactions)
of (i) more than Fifty Percent (50%) of the Voting Stock of
Borrower, (ii) the power to elect, appoint or cause the election
or appointment of at least a majority of the members of the Board
of Directors of
6
Borrower or (iii) all or substantially all of the assets and
Properties of Borrower.
CODE shall mean the Internal Revenue Code of 1986, 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 the Code shall be
construed to also refer to any successor sections.
COMMITMENT shall mean, subject to termination or
reduction as set forth in Section 2.07 and subject to any
assignment of the Commitments by any of the Banks: with respect
to Mercantile, $17,000,000.00; with respect to Harris Trust and
Savings Bank, $13,000,000.00; and with respect to The Sumitomo
Bank, Limited, $10,000,000.00.
CONSOLIDATED ASSETS shall mean, as of the date of any
determination thereof, the total assets of Borrower and its
Subsidiaries which would be shown as assets on a consolidated
balance sheet of Borrower and its Subsidiaries as of such date
prepared in accordance with GAAP, after eliminating all amounts
properly attributable to minority interests, if any, in the stock
and surplus of Subsidiaries.
CONSOLIDATED CAPITALIZATION shall mean, as of the date
of any determination thereof, the sum of (a) Consolidated Debt as
of such date PLUS (b) Consolidated Net Worth as of such date, all
as determined on a consolidated basis for Borrower and its
Subsidiaries and in accordance with GAAP.
CONSOLIDATED DEBT shall mean, as of the date of any
determination thereof, all Debt of Borrower and its Subsidiaries
as of such date, determined on a consolidated basis and in
accordance with GAAP.
CONSOLIDATED DEBT TO CONSOLIDATED EBITDA RATIO shall
mean, as of the last day of any fiscal quarter of Borrower, the
ratio of (a) Consolidated Debt as of such day to (b) Consolidated
EBITDA for the four (4) consecutive fiscal quarter period of
Borrower ending on such day.
<PAGE>
CONSOLIDATED EBITDA shall mean, for the period in
question, the sum of (a) Consolidated Net Income during such
period PLUS (b) all amounts deducted in the computation thereof
on account of (i) Consolidated Interest Expense, (ii)
depreciation and amortization expenses and (iii) income and
profits taxes.
CONSOLIDATED FIXED CHARGES shall mean, for the period
in question, without duplication, the sum of (a) Consolidated
Interest Expense during such period PLUS (b) Consolidated Lease
Rental Expense during such period, all determined on a
consolidated basis for Borrower and its Subsidiaries and in
accordance with GAAP.
7
CONSOLIDATED INTEREST EXPENSE shall mean, for the
period in question, the sum for Borrower and its Subsidiaries,
determined on a consolidated basis and in accordance with GAAP,
of all amounts which would be deducted in computing Consolidated
Net Income on account of interest on Debt during such period
(including imputed interest in respect of Capitalized Lease
Obligations and amortization of debt discount and expense).
CONSOLIDATED LEASE RENTAL EXPENSE shall mean, for the
period in question, the aggregate amount of operating lease
expense (i.e. all minimum rental payments plus all additional
rentals payable under percentage Operating Leases) during such
period under all Operating Leases, all determined on a
consolidated basis for Borrower and its Subsidiaries and in
accordance with GAAP but excluding any amounts required to be
paid by Borrower or a Subsidiary (whether or not designated as
rent or additional rent) on account of maintenance, repairs,
insurance, taxes, assessments, amortization and/or similar
charges.
CONSOLIDATED NET INCOME shall mean, for the period in
question, the net income (or loss) of Borrower and its
Subsidiaries for such period, determined on a consolidated basis
and in accordance with GAAP, but excluding in any event:
(a) the proceeds of any life insurance policy;
(b) any gains arising from (i) the sale or other
disposition of any assets (other than current
assets) to the extent that the aggregate amount of
the gains during such period exceeds the aggregate
amount of the losses during such period from the sale,
abandonment or other disposition of assets (other than
<PAGE>
current assets), (ii) any write-up of assets or (iii)
the acquisition of outstanding securities of Borrower
or any Subsidiary;
(c) any amount representing any interest in the
undistributed earnings of any other Person (other than
a Subsidiary), for the period in question;
(d) any earnings, prior to the date of
acquisition, of any Person acquired in any manner, and
any earnings of any Subsidiary prior to its becoming a
Subsidiary;
(e) any earnings of a successor to or transferee
of the assets of Borrower prior to its becoming such
successor or transferee;
(f) any deferred credit (or amortization of a
deferred credit) arising from the acquisition of any
Person; and
(g) any extraordinary gains not covered by clause
(b) above.
8
CONSOLIDATED NET WORTH shall mean, as of the date of
any determination thereof, on a consolidated basis for Borrower
and its Subsidiaries, (a) the sum of (i) capital stock taken at
par or stated value PLUS (ii) capital in excess of par or stated
value relating to capital stock PLUS (iii) retained earnings (or
minus any retained earning deficit) MINUS (b) the sum of treasury
stock, capital stock subscribed for and unissued and other
contra-equity accounts, all determined in accordance with GAAP.
DEBT shall mean, with respect to any Person, at any
time, without duplication:
(a) its liabilities for borrowed money or its
mandatory purchase, redemption or other retirement
obligations in respect of mandatorily redeemable
Preferred Stock;
(b) its liabilities for the deferred purchase
price of Property acquired by such Person (excluding
accounts payable arising in the ordinary course of
business and not overdue but including all liabilities
created or arising under any conditional sale or other
title retention agreement with respect to any such
Property);
<PAGE>
(c) its Capitalized Lease Obligations;
(d) all liabilities for borrowed money secured by
any Lien with respect to any Property owned by such
Person (whether or not it has assumed or otherwise
become liable for such liabilities);
(e) all its liabilities in respect of letters of
credit or instruments serving a similar function issued
or accepted for its account by banks and other
financial institutions (whether or not representing
obligations for borrowed money);
(f) Swaps of such Person; and
(g) any Guaranty of such Person with respect to
liabilities of a type described in any of clauses
(a) through (f) above.
Debt of any Person shall include all obligations of such Person
of the character described in clauses (a) through (g) above to
the extent such Person remains legally liable in respect thereof
notwithstanding that any such obligation is deemed to be
extinguished under GAAP.
DEFAULT shall mean any event or condition the
occurrence of which would, with the lapse of time or the giving
of notice or both, become an Event of Default as defined in
Section 7 hereof.
9
DOMESTIC BUSINESS DAY shall mean any day except a
Saturday, Sunday or legal holiday observed by the Agent or by
commercial banks located in St. Louis, Missouri or Chicago,
Illinois.
ENVIRONMENTAL CLAIM shall mean any administrative,
regulatory or judicial action, judgment, order, consent decree,
suit, demand, demand letter, claim, Lien, notice of noncompliance
or violation, investigation or other proceeding arising (a)
pursuant to any Environmental Law or governmental or regulatory
approval issued under any such Environmental Law, (b) from the
presence, use, generation, storage, treatment, Release,
threatened Release, disposal, remediation or other existence of
any Hazardous Substance, (c) from any removal, remedial,
corrective or other response action pursuant to an Environmental
Law or the order of any governmental or regulatory authority or
agency, (d) from any third party seeking damages, contribution,
indemnification, cost recovery, compensation, injunctive or other
<PAGE>
relief in connection with a Hazardous Substance or arising from
alleged injury or threat of injury to health, safety, natural
resources or the environment or (e) from any Lien against any
Property owned, leased or operated by Borrower or any Subsidiary
in favor of any governmental or regulatory authority or agency in
connection with a Release, threatened Release or disposal of a
Hazardous Substance.
ENVIRONMENTAL LAW shall mean any international,
Federal, state or local statute, law, rule, 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,
Hazardous Substances or crude oil, or any fraction thereof, to
exposure to toxic or hazardous materials, to the handling,
transportation, discharge or release of gaseous or liquid
Hazardous Substances and any rule, regulation, order, notice or
demand issued pursuant to such law, statute or ordinance, in each
case applicable to any of the Property owned, leased or operated
by Borrower or any Subsidiary or the operation, construction or
modification of any such Property, including, without limitation,
the following: CERCLA, 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, the Clean Air Act of 1966,
as amended, the Toxic Substances Control Act of 1976, the
Occupational Safety and Health Act of 1970, as amended, 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
10
state or local law, and any state or local 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 publication 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
<PAGE>
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 Borrower or any Subsidiary, a member
of a controlled group of corporations or a controlled group of
trades or businesses, as described in Sections 414(b) and 414(c),
respectively, of the Code or Section 4001 of ERISA.
EURODOLLAR BUSINESS DAY shall mean any Domestic
Business Day on which commercial banks are open for international
business (including dealings in dollar deposits) in London.
EVENT OF DEFAULT shall have the meaning ascribed
thereto in Section 7.
EXCHANGE ACT shall mean the Securities Exchange Act of
1934, as amended.
EXISTING LETTERS OF CREDIT shall have the meaning
ascribed thereto in Section 3.02.
EXISTING REVOLVING CREDIT AGREEMENT shall mean that
certain Revolving Credit Agreement dated July 13, 1995, by and
among Borrower, the banks party thereto and Mercantile Bank
National Association as agent for the banks, as amended by that
certain First Amendment to Revolving Credit Agreement dated
October 3, 1996, and that certain Second Amendment to Revolving
Credit Agreement dated April 14, 1997.
FED FUNDS BASE RATE shall mean a rate per annum equal
to Mercantile's quoted rate as of the opening of business by
Mercantile on each Domestic Business Day for purchasing overnight
federal funds in the national market, which rate shall fluctuate
as and when said quoted rate shall change.
FED FUNDS LOAN shall mean any Revolving Credit Loan
bearing interest at the Fed Funds Rate.
FED FUNDS RATE shall mean the Fed Funds Base Rate PLUS
the Applicable Margin. The Fed Funds Rate shall be adjusted
automatically on and as of the effective date of any change in
the Fed Funds Base Rate or the Applicable Margin.
11
<PAGE>
FINANCIAL COVENANT shall mean, with respect to any
agreement, document or instrument representing or governing Debt,
any covenant (whether expressed as a covenant, an event of
default or a condition to a borrowing) contained therein
expressed in terms of (a) a minimum or maximum amount in or
derived from Borrower's financial statements or (b) a minimum or
maximum ratio between any such amounts described in clause (a)
above or (c) any other financial or finance-related test as the
same may relate to the assets, liabilities, revenues or expenses
of Borrower and/or its Subsidiaries; PROVIDED that the above
shall not include a negative pledge covenant.
FLOATING RATE shall mean the lesser of (determined as
of the opening of business by Mercantile on each Business Day)
(a) the Prime Rate or (b) the Fed Funds Rate. The Floating Rate
shall be determined daily on each Domestic Business Day as of the
opening of business by Mercantile on such Domestic Business Day.
FLOATING RATE LOAN shall mean any Revolving Credit Loan
bearing interest at the Floating Rate.
GAAP shall mean generally accepted accounting
principles at the time in the United States.
GUARANTY shall mean, with respect to any Person, any
obligation (except the endorsement in the ordinary course of
business of negotiable instruments for deposit or collection) of
such Person guaranteeing or in effect guaranteeing any Debt,
dividend or other obligation of any other Person in any manner,
whether directly or indirectly, including, without limitation,
obligations incurred through an agreement, contingent or
otherwise, by such Person:
(a) to purchase such Debt or obligation or any
property constituting security therefor;
(b) to advance or supply funds (i) for the
purchase or payment of such Debt or obligation, or (ii)
to maintain any working capital or other balance sheet
condition or any income statement condition of any
other Person or otherwise to advance or make available
funds for the purchase or payment of such Debt or
obligation;
(c) to lease properties or to purchase properties
or services primarily for the purpose of assuring the
owner of such Debt or obligation of the ability of any
other Person to make payment of the Debt or obligation;
or
<PAGE>
(d) otherwise to assure the owner of such Debt or
obligation against loss in respect thereof.
12
In any computation of the Debt or other liabilities of the
obliger under any Guaranty, the Debt or other obligations that
are the subject of such Guaranty shall be assumed to be direct
obligations of such obliger.
HAZARDOUS SUBSTANCE shall mean any hazardous or toxic
material, substance or waste, pollutant or contaminant which is
regulated under any Environmental Law or any other statute, law,
ordinance, rule or regulation of any local, state, regional,
Federal or international authority having jurisdiction over any
of the Property owned, leased or operated by Borrower or any
Subsidiary or its use, including, without limitation, 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. Sections 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. Sections 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. Sections 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.
INDEBTEDNESS shall mean, with respect to any Person,
without duplication, all indebtedness, liabilities and
obligations of such Person (other than contingency reserves and
reserves for deferred income taxes) which in accordance with GAAP
should be classified upon a balance sheet of such Person as
liabilities of such Person, and in any event shall include (a)
all obligations of such Person for borrowed money or which have
been incurred in connection with the acquisition of Property or
assets, (b) all obligations secured by any Lien on, or payable
out of the proceeds of or production from, any Property or assets
owned by such Person, whether or not such Person has assumed or
become liable for the payment of such obligations, (c) all
indebtedness, liabilities and obligations of third parties,
including joint ventures and partnerships of which such Person is
a venturer or general partner, recourse to which may be had
against such Person, (d) all obligations created or arising under
any conditional sale or other title retention agreement with
respect to Property acquired by such Person, notwithstanding the
fact that the rights and remedies of the seller, lender or lessor
<PAGE>
under such agreement in the event of default are limited to
repossession or sale of such Property, (e) all Capitalized Lease
Obligations of such Person, (f) all indebtedness, liabilities and
obligations of such Person under Guarantees and (g) all
reimbursement obligations of such Person with respect to letters
of credit.
INTEREST PERIOD shall mean with respect to each LIBOR
Loan:
(a) initially, the period commencing on the date
of such Loan and ending 1, 2, 3 or 6 months thereafter
(or such other period agreed upon in writing by
Borrower
13
and all of the Banks), as the Borrower may
elect in the applicable Notice of Borrowing; and
(b) thereafter, each period commencing on the
last day of the next preceding Interest Period
applicable to such Loan and ending 1, 2, 3 or 6 months
thereafter (or such other period agreed upon in writing
by Borrower and all of the Banks), as Borrower may
elect pursuant to Section 2.04;
provided that:
(c) subject to clauses (d) and (e) below, any
Interest Period which would otherwise end on a day
which is not a Eurodollar Business Day shall be
extended to the next succeeding Eurodollar Business Day
unless such Eurodollar Business Day falls in another
calendar month, in which case such Interest Period
shall end on the next preceding Eurodollar Business
Day;
(d) subject to clause (e) below, any Interest
Period which begins on the last Eurodollar Business Day
of a calendar month (or on a day for which there is no
numerically corresponding day in the calendar month at
the end of such Interest Period) shall end on the last
Eurodollar Business Day of a calendar month; and
(e) no Interest Period shall extend beyond the
last day of the Revolving Credit Period.
INVESTMENT shall mean any investment by the Borrower
or any Subsidiary in any Person, whether payment therefor is made
in cash or Capital Stock of Borrower or any Subsidiary, and
<PAGE>
whether such investment is by acquisition of stock or
Indebtedness, or by loan, advance, transfer of property out of
the ordinary course of business, capital contribution, equity or
profit sharing interest, extension of credit on terms other than
those normal in the ordinary course of business or otherwise.
LETTER OF CREDIT and LETTERS OF CREDIT shall have the
meanings ascribed thereto in Section 3.01(a), and shall include,
in any event, the Existing Letters of Credit, as the same may
from time to time be amended, modified, extended or renewed.
LETTER OF CREDIT APPLICATION shall mean an application
and agreement for irrevocable standby letter of credit in the
form of EXHIBIT C attached hereto and incorporated herein by
reference (or such other form as may then be Mercantile's
standard form of application and agreement for irrevocable
standby letter of credit) or an application and agreement for
irrevocable commercial letter of credit in the form of EXHIBIT D
attached hereto and incorporated herein by reference (or such
other form as may then be Mercantile's standard form of
application and agreement for irrevocable commercial letter of
credit), as the case may be, in either case executed by Borrower,
as account party, and delivered to Mercantile
14
pursuant to Section 3.01(a), as the same may from time to time be
amended, modified, extended or renewed, and shall include, in any
event, the Letter of Credit Applications executed by Borrower, as
account party, with respect to the Existing Letters of Credit, as
the same may from time to time be amended, modified, extended or
renewed.
LETTER OF CREDIT COMMITMENT FEE shall have the meaning
ascribed thereto in Section 3.01(d).
LETTER OF CREDIT ISSUANCE FEE shall have the meaning
ascribed thereto in Section 3.01(d).
LETTER OF CREDIT LOAN shall have the meaning ascribed
thereto in Section 3.01(c).
LETTER OF CREDIT NEGOTIATION FEE shall have the meaning
ascribed thereto in Section 3.01(d).
LETTER OF CREDIT PERIOD shall mean the period
commencing on the date of this Agreement and ending June 16,
2000.
<PAGE>
LETTER OF CREDIT REQUEST shall have the meaning
ascribed thereto in Section 3.01(a).
LIBOR BASE RATE shall mean, with respect to the
applicable Interest Period, (a) the LIBOR Index Rate for such
Interest Period, if such rate is available or (b) if the LIBOR
Index Rate cannot be determined, the average (rounded upward, if
necessary, to the next higher 1/100 of 1%) of the respective
rates per annum of interest at which deposits in dollars are
offered to Mercantile in the London interbank market by two (2)
Eurodollar dealers of recognized standing, selected by Mercantile
in its sole discretion, at such time on the date two (2)
Eurodollar Business Days before the first day of such Interest
Period as Mercantile in its sole discretion elects, for delivery
on the first day of the applicable Interest Period for a number
of days comparable to the number of days in such Interest Period
and in an amount approximately equal to the principal amount of
the LIBOR Loan to which such Interest Period is to apply.
LIBOR INDEX RATE shall mean, with respect to the
applicable Interest Period, the rate per annum (rounded upwards,
if necessary, to the next higher 1/100 of 1%) for deposits in
U.S. Dollars for a period equal to such Interest Period, which
appears on the Telerate Page 3750 as of 9:00 a.m. (St. Louis
time) on the day two (2) Eurodollar Business Days before the
first day of such Interest Period.
LIBOR LOAN shall mean any Revolving Credit Loan bearing
interest at the LIBOR Rate.
LIBOR RATE shall mean (a) the quotient of the (i) LIBOR
Base Rate divided by (ii) one minus the applicable LIBOR Reserve
Percentage PLUS (b) the Applicable Margin. The LIBOR Rate shall
be
15
adjusted automatically on and as of the effective date of any
change in the LIBOR Reserve Percentage and/or the Applicable
Margin.
LIBOR RESERVE PERCENTAGE shall mean for any day that
percentage (expressed as a decimal) which is in effect on such
day, as prescribed by the Board of Governors of the Federal
Reserve System (or any successor), for determining the maximum
reserve requirement for a member bank of the Federal Reserve
System with respect to "Eurocurrency liabilities" (or in respect
of any other category of liabilities which includes deposits by
reference to which the interest rate on LIBOR Loans is determined
or any category of extensions of credit or other assets which
<PAGE>
include loans by a non-United States office of any Bank to United
States residents). The LIBOR Rate shall be adjusted
automatically on and as of the effective date of any change in
the LIBOR Reserve Percentage.
LIEN shall mean, with respect to any Person, any
mortgage, lien, pledge, charge, security interest or other
encumbrance, or any interest or title of any vendor, lessor,
lender or other secured party to or of such Person under any
conditional sale or other title retention agreement or Capital
Lease, upon or with respect to any Property or asset of such
Person (including in the case of stock, stockholder agreements,
voting trust agreements and all similar arrangements).
LOAN shall mean each Revolving Credit Loan (whether a
Floating Rate Loan or a LIBOR Loan) and each Letter of Credit
Loan and LOANS shall mean any or all of the foregoing.
MATERIAL ADVERSE EFFECT shall mean (a) a material
adverse effect on the Properties, assets, liabilities, business,
operations, prospects, income or condition (financial or
otherwise) of Borrower and its Subsidiaries taken as a whole, (b)
material impairment of Borrower's ability to perform any of its
obligations under this Agreement, any of the Notes, any of the
Letter of Credit Applications or any of the other Transaction
Documents or (c) material impairment of the enforceability of the
rights of, or benefits available to, the Agent or any of the
Banks under this Agreement, any of the Notes, any of the Letter
of Credit Applications or any of the other Transaction Documents.
MERCANTILE shall mean Mercantile Bank National
Association, a national banking association, in its individual
corporate capacity as a Bank hereunder and not as Agent
hereunder.
MULTI-EMPLOYER PLAN shall mean a "multi-employer plan"
as defined in Section 4001(a)(3) of ERISA which is maintained for
employees of Borrower, any Subsidiary or any ERISA Affiliate or
to which Borrower, any Subsidiary or any ERISA Affiliate has
contributed in the past or currently contributes.
NOTES shall have the meaning ascribed thereto in
Section 2.03(a).
16
NOTE AGREEMENTS shall mean those certain Note
Agreements dated June 16, 1997, by and between Borrower and each
of The Prudential Insurance Company of America and The Guardian
Life Insurance Company of America, as the same may from time to
time be amended, modified, extended or renewed.
<PAGE>
NOTICE OF BORROWING shall have the meaning ascribed
thereto in Section 2.02.
OBLIGOR shall mean Borrower and each other Person who
is or shall at any time hereafter become primarily or secondarily
liable on any of the Borrower's Obligations or who grants the
Agent or any of the Banks a Lien upon any of the Property or
assets of such Person as security for any of the Borrower's
Obligations.
OCCUPATIONAL SAFETY AND HEALTH LAWS shall mean the
Occupational Safety and Health Act of 1970, as amended, and any
other Federal, state or local statute, law, ordinance, code,
rule, regulation, order or decree regulating, relating to or
imposing liability or standards of conduct concerning employee
health and/or safety, as now or at any time hereafter in effect.
OPERATING LEASE shall mean any lease of real and/or
personal property under which Borrower or a Subsidiary is lessee
other than Capital Leases.
PBGC shall mean the Pension Benefit Guaranty
Corporation and any entity succeeding to any or all of its
functions under ERISA.
PENSION PLAN shall mean a "pension plan," as such term
is defined in Section 3(2) of ERISA, which is established or
maintained by Borrower, any Subsidiary or any ERISA Affiliate,
other than a Multi-Employer Plan.
PERMITTED LIENS shall mean any of the following:
(a) Liens in respect of Property of Borrower or
a Subsidiary existing on the date of this Agreement and
described on SCHEDULE 5.12;
(b) Liens in respect of Property acquired by
Borrower or a Subsidiary after the date of this
Agreement, existing on such Property at the time of
acquisition thereof (and not created in anticipation
thereof), or in the case of any Person that after the
date of this Agreement becomes a Subsidiary or is
consolidated with or merged with or into Borrower or a
Subsidiary or sells, leases or otherwise disposes of
all or substantially all of its Property to Borrower or
a Subsidiary, Liens existing at the time such Person
becomes a Subsidiary or is so consolidated or merged or
effects such sale, lease or other disposition of
<PAGE>
Property (and not created in anticipation thereof),
provided that in any such case no such Lien shall
extend to or cover
17
any other property of Borrower or such Subsidiary, as
the case may be;
(c) Liens not involving the borrowing of money,
the obtaining of advances or credit or the payment of
the deferred purchase price of Property, as follows:
(i) Liens for taxes, assessments or other
governmental charges which are not yet due and
payable or the payment of which is not at the
time required by Section 6.01(d);
(ii) Liens of landlords and Liens of
carriers, warehousemen, mechanics, materialmen
and other similar Liens, in each case incurred in
the ordinary course of business for sums not yet
due and payable or the payment of which is not at
the time required by Section 6.01(e);
(iii) Liens incurred or deposits made in the
ordinary course of business (A) in connection
with workers' compensation, unemployment
insurance and other types of social security or
retirement benefits (other than Liens imposed
under ERISA), (B) to secure (or to obtain letters
of credit that secure) the performance of
tenders, statutory obligations, surety bonds,
appeal bonds (not in excess of $5,000,000.00),
bids, leases (other than Capital Leases),
performance bonds, purchase, construction or
sales contracts and other similar obligations or
(C) which do not materially detract from the
value of the Property to which they pertain;
(iv) any attachment or judgment Lien, unless
the judgment it secures (A) shall not, within
thirty (30) days after the entry thereof, have
been discharged or execution thereof stayed
pending appeal, or shall not have been discharged
within thirty (30) days after the expiration of
any such stay or (B) exceeds $1,000,000.00 in the
aggregate for all of such judgments; and
<PAGE>
(v) Liens arising in favor of a governmental
authority to secure partial, progress, advance or
other payments pursuant to any contract or
statute; and
(d) Liens which would otherwise not be permitted
by clauses (a) or (b) above, securing additional Debt
of Borrower or a Subsidiary, provided that after giving
effect thereto the sum (without duplication) of (i) the
aggregate unpaid amount of Debt (including Capitalized
Lease Obligations) of Borrower secured by such Liens
permitted by this clause (d) PLUS (ii) the aggregate
18
unpaid principal amount of Debt of Subsidiaries (other
than Debt permitted by Section 6.02(a)(ii)(C)) PLUS
(iii) the aggregate Attributable Debt in connection
with all sale and leaseback transactions of Borrower
and its Subsidiaries entered into after the date of
this Agreement in accordance with the provisions of
Section 6.02(c), does not exceed Fifteen Percent
(15%) of Consolidated Assets.
For purposes of this definition, any Lien existing in respect of
Property at the time such Property is acquired or in respect of
Property of a Person at the time such Person is acquired,
consolidated or merged with or into Borrower or a Subsidiary
shall be deemed to have been created at that time.
PERSON shall mean any individual, sole proprietorship,
partnership, joint venture, limited liability company, trust,
unincorporated organization, association, corporation,
institution, entity or government (whether national, Federal,
state, county, city, municipal or otherwise, including, without
limitation, any instrumentality, division, agency, body or
department thereof).
PREFERRED STOCK, as applied to any corporation, shall
mean shares of such corporation that shall be entitled to
preference or priority over any other shares of such corporation
in respect of either the payment of dividends or the distribution
of assets upon liquidation, or both.
PRIME RATE shall mean the interest rate announced from
time to time by Mercantile as its "prime rate" on commercial
loans (which rate shall fluctuate as and when said prime rate
shall change). Borrower acknowledges that such "prime rate" is
a reference rate and does not necessarily represent the lowest or
best rate offered by Mercantile or any of the other Banks to
their respective customers.
<PAGE>
PROPERTY shall mean any interest in any kind of
property or asset, whether real, personal or mixed, or tangible
or intangible. PROPERTIES shall mean the plural of Property.
For purposes of this Agreement, Borrower and each Subsidiary
shall be deemed to be the owner of any Property which it has
acquired or holds subject to a conditional sale agreement,
financing lease or other arrangement pursuant to which title to
the Property has been retained by or vested in some other Person
for security purposes.
PRO RATE SHARE shall mean, with respect to each Bank,
a percentage, the numerator of which is the Commitment of such
Bank and the denominator of which is the total Commitments of all
of the Banks. The Pro Rata Shares of each of the Banks as of the
date of this Agreement are as follows: Mercantile - Forty-Two and
One-Half Percent (42.5%); Harris Trust and Savings Bank - Thirty-
Two and One-Half Percent (32.5%); and The Sumitomo Bank, Limited
- - Twenty-Five Percent (25%).
19
RCRA shall mean the Solid Waste Disposal Act, as
amended by the Resource Conservation and Recovery Act of 1976 and
Hazardous and Solid Waste Amendments of 1984, 42 U.S.C. Sections
6901 ET SEQ., and any future amendments.
REGULATION D shall mean Regulation D of the Board of
Governors of the Federal Reserve System, as from time to time
amended.
REGULATORY CHANGE shall have the meaning ascribed
thereto in Section 2.13.
RELATED PARTY ARRANGEMENT shall have the meaning
ascribed thereto in Section 6.02(g).
RELEASE shall mean any spilling, leaking, pumping,
pouring, emitting, emptying, discharging, injecting, escaping,
leaching, dumping or disposing into the environment, including,
without limitation, the abandonment or discarding of barrels,
drums, containers, tanks and/or other receptacles containing or
previously containing any Hazardous Substance.
REPORTABLE EVENT shall have the meaning given to such
term in ERISA.
REQUIRED BANKS shall mean at any time Banks having
Sixty-Six and Two-Thirds Percent (66-2/3%) of the aggregate
amount of Loans and Letters of Credit then outstanding or, if no
<PAGE>
Loans or Letters of Credit are then outstanding, Sixty-Six and
Two-Thirds Percent (66-2/3%) of the total Commitments of all of
the Banks.
RESPONSIBLE OFFICER shall mean the chief executive
officer, chief operating officer, chief financial officer or
chief accounting officer of Borrower or any other officer of
Borrower involved principally in the financial administration or
controllership function of Borrower.
RESTRICTED AGREEMENT shall have the meaning ascribed
thereto in Section 6.02(m).
REVOLVING CREDIT LOAN and REVOLVING CREDIT LOANS shall
have the meanings ascribed thereto in Section 2.01(a).
REVOLVING CREDIT PERIOD shall mean the period
commencing on the date of this Agreement and ending June 16,
2000.
SUBSIDIARY shall mean, as to any Person, any
corporation or other business entity a majority of the combined
voting power of all Voting Stock of which is owned by such Person
or one or more of its Subsidiaries or such Person and one or more
of its Subsidiaries. Unless the context otherwise clearly
requires, any reference to a "Subsidiary" is a reference to a
Subsidiary of Borrower.
20
SWAPS shall mean, with respect to any Person, payment
obligations with respect to interest rate swaps, currency swaps
and similar obligations obligating such Person to make payments,
whether periodically or upon the happening of a contingency. For
the purposes of this Agreement, the amount of the obligation
under any Swap shall be the amount determined in respect thereof
as of the end of the then most recently ended fiscal quarter of
such Person, based on the assumption that such Swap had
terminated at the end of such fiscal quarter, and in making such
determination, if any agreement relating to such Swap provides
for the netting of amounts payable by and to such Person
thereunder or if any such agreement provides for the simultaneous
payment of amounts by and to such Person, then in each such case,
the amount of such obligation shall be the net amount so
determined.
TELERATE PAGE 3750 shall mean the display designated as
"Page 3750" on the Telerate Service (or such other page as may
replace Page 3750 on that service or such other service as may be
nominated by the British Bankers' Association as the information
<PAGE>
vendor for the purpose of displaying British Bankers' Association
Interest Settlement Rates for U.S. Dollar Deposits).
TOTAL OUTSTANDINGS shall mean, as of any date, the sum
of (i) the aggregate principal amount of all Revolving Credit
Loans outstanding as of such date, PLUS (ii) the aggregate
principal amount of all Letter of Credit Loans outstanding as of
such date PLUS (iii) the aggregate undrawn face amount of all
Letters of Credit outstanding as of such date.
TRANSACTION DOCUMENTS shall mean this Agreement, the
Notes, the Letter of Credit Applications and all other
agreements, documents and instruments heretofore, now or
hereafter delivered to the Agent or any of the Banks with respect
to or in connection with or pursuant to this Agreement, any Loans
made hereunder, any Letters of Credit issued hereunder or any
other of Borrower's Obligations, and executed by or on behalf of
Borrower, all as the same may from time to time be amended,
modified, extended or renewed.
TRANSFER shall have the meaning ascribed thereto in
Section 6.02(c).
VOTING STOCK shall mean, with respect to any Person,
any shares of stock or other equity interests of any class or
classes of such Person whose holders are entitled under ordinary
circumstances (irrespective of whether at the time stock or other
equity interests of any other class or classes shall have or
might have voting power by reason of the happening of any
contingency) to vote for the election of a majority of the
directors, managers, trustees or other governing body of such
Person.
WELFARE PLAN shall mean a "welfare plan" as such term
is defined in Section 3(1) of ERISA, which is established or
maintained by Borrower, any Subsidiary or any ERISA Affiliate,
other than a Multi-Employer Plan.
21
WHOLLY-OWNED SUBSIDIARY shall mean any Subsidiary all
of the equity interests (except directors' qualifying shares) and
voting interests of which are owned by Borrower and/or one or
more of its Wholly-Owned Subsidiaries.
1.02 ACCOUNTING TERMS AND DETERMINATIONS; PRO FORMA
COMPUTATIONS. (a) Except as otherwise specified in this
Agreement, all accounting terms used in this Agreement shall be
interpreted, all accounting determinations under this Agreement
shall be made and all financial statements required to be
<PAGE>
delivered under this Agreement shall be prepared in accordance
with GAAP as in effect from time to time, applied on a basis
consistent (except for changes approved by the Required Banks and
by Borrower's independent certified public accountants) with the
most recent audited financial statements of Borrower delivered to
Banks. Notwithstanding the foregoing, Borrower may from time to
time change its accounting methods, either at its option or in
order to comply with GAAP, provided that (a) any such change(s)
are in accordance with GAAP and are approved by the independent
certified public accountants of Borrower and (b) if the Required
Banks, in good faith, determine that any such accounting
change(s), individually or in the aggregate, have any significant
effect on any of the financial covenants contained in this
Agreement (i) with respect to those financial covenant(s) upon
which the effect of such accounting change(s) can be determined
with mathematical certainty, such financial covenant(s) shall be
amended to reflect the effect of such accounting change(s) (and
Borrower, the Agent and each of the Banks shall be obligated to
promptly execute an amendment to such effect) and (ii) with
respect to those financial covenant(s) upon which the effect of
such accounting change(s) cannot be determined with mathematical
certainty, Borrower and the Banks shall, in good faith, negotiate
and use their best efforts to agree upon new financial
covenant(s) reasonably acceptable to Borrower and the Banks to
replace the affected financial covenant(s) (which new financial
covenant(s) shall, to the extent reasonably possible, approximate
the effect of such accounting change(s) on the existing financial
covenant(s)), and if Borrower and the Banks cannot, in good
faith, agree on said new financial covenant(s), the existing
financial covenant(s) shall remain in full force and effect and
shall be computed using the accounting methods in effect prior to
the applicable change in accounting methods. Each such amendment
shall be evidenced by an instrument in writing signed by
Borrower, the Agent and each of the Banks and until such
amendment has been fully executed the existing financial
covenant(s) shall remain in full force and effect and shall be
computed using the accounting methods in effect prior to the
applicable change in accounting methods.
(b) Any pro forma computation required to be made under
this Agreement shall include adjustments (without limitation as
to other appropriate pro forma adjustments in accordance with
generally accepted financial practice) giving effect to all
acquisitions and dispositions made during the period with respect
to which such computation is being made as if such acquisitions
and dispositions were made on the first day of such period.
22
<PAGE>
SECTION 2. THE REVOLVING CREDIT LOANS.
2.01 COMMITMENTS TO LEND. Subject to the terms and
conditions set forth in this Agreement and so long as no Default
or Event of Default under this Agreement has occurred and is
continuing, during the Revolving Credit Period, each Bank
severally agrees to make such loans to Borrower (individually, a
"Revolving Credit Loan" and collectively, the "Revolving Credit
Loans") as Borrower may from time to time request pursuant to
Section 2.02. Each Revolving Credit Loan under this Section 2.01
which is a Floating Rate Loan shall be for an aggregate principal
amount of at least $100,000.00 or any larger multiple of
$25,000.00. Each Revolving Credit Loan under this Section 2.01
which is a LIBOR Loan shall be for an aggregate principal amount
of at least $1,000,000.00 or any larger multiple of $500,000.00.
The aggregate principal amount of Revolving Credit Loans which
each Bank shall be required to have outstanding hereunder at any
one time shall not exceed the lesser of (a) such Bank's
Commitment or (b) such Bank's Pro Rata Share of the sum of (i)
the total Commitments of all of the Banks, MINUS (ii) the
aggregate principal amount of all outstanding Letter of Credit
Loans MINUS (iii) the aggregate undrawn face amount of all
outstanding Letters of Credit. Each Revolving Credit Loan under
this Section 2.01 shall be made from the several Banks ratably in
proportion to their respective Pro Rata Shares. Within the
foregoing limits, Borrower may borrow under this Section 2.01,
prepay under Section 2.08 and reborrow at any time during the
Revolving Credit Period under this Section 2.01. The failure of
any Bank to make any Revolving Credit Loan required under this
Agreement shall not release any other Bank from its obligation to
make Revolving Credit Loans as provided herein.
2.02 METHOD OF BORROWING. (a) Borrower shall give
notice (a "Notice of Borrowing") to the Agent by 11:30 a.m. (St.
Louis time) on the Domestic Business Day of each Floating Rate
Loan, and by 11:30 a.m. (St. Louis Time) at least three (3)
Eurodollar Business Days before each LIBOR Loan, specifying:
(i) the date of such Revolving Credit Loan, which
shall be a Domestic Business Day in the case of a
Floating Rate Loan and a Eurodollar Business Day in the
case of a LIBOR Loan,
(ii) the aggregate principal amount of such
Revolving Credit Loan,
(iii) whether such Revolving Credit Loan is to be
a Floating Rate Loan or a LIBOR Loan,
<PAGE>
(iv) in the case of a LIBOR Loan, the duration of
the initial Interest Period applicable thereto, subject
to the provisions of the definition of Interest Period.
(b) Upon receipt of a Notice of Borrowing given to it,
the Agent shall notify each Bank by 12:30 p.m. (St. Louis time)
on
23
the date of receipt of such Notice of Borrowing by the Agent
(which must be a Domestic Business Day) of the contents thereof
and of such Bank's Pro Rata Share of such Revolving Credit Loan.
A Notice of Borrowing shall not be revocable by Borrower. The
Agent shall not be required to make any amount available to
Borrower hereunder except to the extent the Agent shall have
received such amounts from the Banks as set forth herein;
provided, however, that unless the Agent shall have been notified
by a Bank prior to the time a Revolving Credit Loan is to be made
hereunder that such Bank does not intend to make its Pro Rata
Share of such Revolving Credit Loan available to the Agent, the
Agent may assume that such Bank has made such Pro Rata Share
available to the Agent prior to such time, and the Agent may in
reliance upon such assumption make available to Borrower a
corresponding amount. If such corresponding amount is not in
fact made available to the Agent by such Bank and the Agent has
made such amount available to Borrower, the Agent shall be
entitled to receive such amount from such Bank forthwith upon its
demand, together with interest thereon in respect of each day
during the period commencing on the date such amount was made
available to Borrower and ending on but excluding the date the
Agent recovers such amount from such Bank at a rate per annum
equal to the Fed Funds Base Rate.
(c) Not later than 2:00 p.m. (St. Louis time) on the
date of each Revolving Credit Loan, each Bank shall (except as
provided in subsection (d) of this Section) make available its
Pro Rata Share of such Revolving Credit Loan, in Federal or other
funds immediately available in St. Louis, Missouri, to the Agent
at its address specified in or pursuant to Section 9.07. Unless
the Agent determines that any applicable condition specified in
Section 4 has not been satisfied, the Agent will make the funds
so received from the Banks available to Borrower immediately
thereafter at the Agent's aforesaid address by crediting such
funds to Borrower's Account No. 100-1665965 at Mercantile (or
such other account of Borrower at Mercantile as may from time to
time be mutually agreed upon in writing between the Agent and
Borrower).
(d) If any Bank makes a new Revolving Credit Loan
hereunder on a day on which Borrower is required to or has
elected to repay all or any part of an outstanding Revolving
Credit Loan from such Bank, such Bank shall apply the proceeds of
<PAGE>
its new Revolving Credit Loan to make such repayment and only an
amount equal to the difference (if any) between the amount being
borrowed and the amount being repaid shall be made available by
such Bank to the Agent as provided in subsection (c) of this
Section, or remitted by Borrower to the Agent as provided in
Section 2.09, as the case may be.
(e) Borrower hereby authorizes the Agent to rely on
telephonic, telegraphic, telecopy, telex or written instructions
of any individual identifying himself or herself as an individual
authorized to request a Revolving Credit Loan hereunder or to
make a repayment hereunder, and on any signature which the Agent
in good faith believes to be genuine, and Borrower shall be bound
thereby in the same manner as if such individual was actually
authorized or
24
such signature were genuine. Borrower also hereby agrees to
indemnify the Agent and each of the Banks and to hold the Agent
and each of the Banks harmless from and against any and all
claims, demands, damages, liabilities, losses, costs and expenses
(including, without limitation, reasonable attorneys' fees and
expenses) relating to or arising out of or in connection with the
acceptance of instructions for making Revolving Credit Loans or
repayments hereunder.
2.03 NOTES. (a) The Revolving Credit Loans of each
Bank to Borrower shall be evidenced by a Revolving Credit Note of
Borrower dated the date hereof and payable to the order of such
Bank in a principal amount equal to its Commitment in
substantially the form of EXHIBIT A attached hereto (with
appropriate insertions) (collectively, as the same may from time
to time be amended, modified extended or renewed, the "Notes").
(b) Each Bank shall record the date, amount, type and
maturity of each Revolving Credit Loan made by it and the date
and amount of each payment of principal made by Borrower with
respect thereto in its books and records. The books and records
of each Bank showing the account between such Bank and Borrower
shall be admissible in evidence in any action or proceeding and
shall constitute prima facie proof of the items therein set forth
in the absence of manifest error.
2.04 DURATION OF INTEREST PERIODS AND SELECTION OF
INTEREST RATES. (a) The duration of the initial Interest Period
for each LIBOR Loan shall be as specified in the applicable
Notice of Borrowing. Borrower shall elect the duration of each
subsequent Interest Period applicable to such LIBOR Loan and the
interest rate to be applicable during such subsequent Interest
Period (and Borrower shall have the option (i) in the case of any
Floating Rate Loan, to elect that such Loan become a LIBOR Loan
<PAGE>
and the Interest Period to be applicable thereto, and (ii) in the
case of any LIBOR Loan, to elect that such Loan become a Floating
Rate Loan), by giving notice of such election to the Agent by
11:30 a.m. (St. Louis time) on the Domestic Business Day of, in
the case of the election of the Floating Rate, and by 11:30 a.m.
(St. Louis time) at least three (3) Eurodollar Business Days
before, in the case of the election of the LIBOR Rate, the end of
the immediately preceding Interest Period applicable thereto, if
any; provided, however, that notwithstanding the foregoing, in
addition to and without limiting the rights and remedies of the
Agent and the Banks under Section 7 hereof, so long as any
Default or Event of Default under this Agreement has occurred and
is continuing, Borrower shall not be permitted to renew any LIBOR
Loan as a LIBOR Loan or to convert any Floating Rate Loan into a
LIBOR Loan.
(b) If the Agent does not receive a notice of election
for a Revolving Credit Loan pursuant to subsection (a) above
within the applicable time limits specified therein, Borrower
shall be deemed to have elected to pay such Revolving Credit Loan
in whole pursuant to Section 2.08 on the last day of the current
Interest
25
Period with respect thereto and to reborrow the principal amount
of such Revolving Credit Loan on such date as a Floating Rate
Loan.
2.05 INTEREST RATES. (a) Each Floating Rate Loan
shall bear interest on the outstanding principal amount thereof,
for each day from the date such Loan is made until it becomes
due, at a rate per annum equal to the Floating Rate. Such
interest shall be payable monthly in arrears on the tenth (10th)
day of each month, commencing on the first such date after such
Floating Rate Loan is made, and at maturity (whether by reason of
acceleration or otherwise). Any overdue principal of and, to the
extent permitted by law, overdue interest on, any Floating Rate
Loan shall bear interest, payable on demand, for each day until
paid at a rate per annum equal to the sum of Two Percent (2%)
plus the otherwise applicable rate for such day.
(b) Each LIBOR Loan shall bear interest on the
outstanding principal amount thereof for each Interest Period
applicable thereto at a rate per annum equal to the applicable
LIBOR Rate. Interest shall be payable for each Interest Period
on the last day thereof and at maturity (whether by reason of
acceleration or otherwise), unless the duration of the applicable
Interest Period exceeds three (3) months, in which case such
interest shall be payable at the end of the first three (3)
months of such Interest Period and on the last day of such
<PAGE>
Interest Period and at maturity (whether by reason of
acceleration or otherwise). Any overdue principal of and, to the
extent permitted by law, overdue interest on, any LIBOR Loan
shall bear interest, payable on demand, for each day until paid,
at a rate per annum equal to the sum of Two Percent (2%) plus the
higher of (i) the LIBOR Rate for the immediately preceding
Interest Period applicable to such LIBOR Loan or (ii) the rate
applicable to Floating Rate Loans for such day.
(c) The Agent shall determine each interest rate
applicable to the Loans hereunder and its determination thereof
shall be conclusive in the absence of manifest error.
2.06 FEES. (a) From the date of this Agreement to but
excluding the last day of the Revolving Credit Period, Borrower
shall pay to the Agent for the account of each Bank a
nonrefundable commitment fee on the unused portion of the
Commitment of such Bank (determined by subtracting such Bank's
Pro Rata Share of the Total Outstandings (other than any portion
of the Total Outstandings consisting of the undrawn face amount
of any Letters of Credit which are commercial Letters of Credit)
from such Bank's Commitment) at a rate per annum equal to the
Applicable Commitment Fee Rate. Such commitment fee shall be (i)
calculated on a daily basis, (ii) payable quarterly in arrears on
each January 5, April 5, July 5 and October 5 during the
Revolving Credit Period commencing July 5, 1997, and on the last
day of the Revolving Credit Period and (iii) calculated on an
actual day, 360-day year basis.
26
(b) Contemporaneously with the execution of this
Agreement, Borrower shall pay to the Agent for the ratable
benefit of each of the Banks a nonrefundable facility fee in the
amount of $30,000.00.
(c) Borrower shall also pay to the Agent for its own
account a nonrefundable agent's fee in the amounts set forth in
a letter agreement between the Agent and Borrower.
2.07 TERMINATION OR REDUCTION OF COMMITMENTS.
Borrower may, upon three (3) Domestic Business Days' prior
written notice to the Agent, terminate entirely at any time, or
proportionately reduce from time to time on a pro rata basis
among the Banks based on their respective Pro Rata Shares by an
aggregate amount of $5,000,000.00 or any larger multiple of
$1,000,000.00 the unused portions of the Commitments; provided,
however, that (i) at no time shall the Commitments be reduced to
a figure less than the Total Outstandings, (ii) at no time shall
the Commitments be reduced to a figure greater than zero but less
than $20,000,000.00 and (iii) any such termination or reduction
<PAGE>
shall be permanent and Borrower shall have no right to thereafter
reinstate or increase, as the case may be, the Commitment of any
Bank.
2.08 EARLY PAYMENTS. (a) Borrower may, upon notice to
the Agent specifying that it is paying its Floating Rate Loans,
pay without penalty or premium its Floating Rate Loans in whole
at any time, or from time to time in part in amounts aggregating
$100,000.00 or any larger multiple of $25,000.00, by paying the
principal amount to be paid together with all accrued and unpaid
interest thereon to and including the date of payment; provided,
however, that in no event may Borrower make a partial payment of
Floating Rate Loans which results in the total outstanding
Floating Rate Loans being greater than zero but less than
$100,000.00. Each such optional payment shall be applied to pay
the Floating Rate Loans of the several Banks in proportion to
their respective Pro Rata Shares.
(b) Borrower may, upon at least one (1) Eurodollar
Business Day's notice to the Agent specifying that it is paying
its LIBOR Loans, pay on the last day of any Interest Period its
LIBOR Loans to which such Interest Period applies, in whole, or
in part in amounts aggregating $1,000,000.00 or any larger
multiple of $500,000.00, by paying the principal amount to be
paid together with all accrued and unpaid interest thereon to and
including the date of payment and any funding losses and other
amounts payable under Section 2.10; provided, however, that in no
event may Borrower make a partial payment of LIBOR Loans which
results in the total outstanding LIBOR Loans with respect to
which a given Interest Period applies being greater than zero but
less than $1,000,000.00. Each such optional payment shall be
applied to pay such LIBOR Loans of the several Banks in
proportion to their respective Pro Rata Shares.
(c) Upon receipt of a notice of payment pursuant to
this Section, the Agent shall promptly notify each Bank of the
27
contents thereof and of such Bank's Pro Rata Share of such
payment and such notice shall not thereafter be revocable by
Borrower.
2.09 GENERAL PROVISIONS AS TO PAYMENTS. Borrower
shall make each payment of principal of, and interest on, the
Revolving Credit Loans and of fees and all other amounts payable
hereunder, not later than 12:00 p.m. (St. Louis time) on the date
when due, in Federal or other funds immediately available in St.
Louis, Missouri, to the Agent at its address referred to in
Section 9.07. All payments received by the Agent after 12:00
p.m. (St. Louis time) on a Domestic Business Day shall be deemed
<PAGE>
to be received by the Agent on the next succeeding Domestic
Business Day. The Agent and the Banks agree that irrevocable
authorization from Borrower to the Agent to debit an account of
Borrower at Mercantile shall constitute "payment" by Borrower
under this Section at the time such authorization is given
provided there are sufficient collected funds in such account to
cover the requested payment(s). The Agent will promptly
distribute to each Bank in immediately available funds its Pro
Rata Share of each such payment received by the Agent for the
account of the Banks. Whenever any payment of principal of, or
interest on, the Revolving Credit Loans or of fees shall be due
on a day which is not a Domestic Business Day, the date for
payment thereof shall be extended to the next succeeding Domestic
Business Day. If the date for any payment of principal is
extended by operation of law or otherwise, interest thereon, at
the then applicable rate, shall be payable for such extended
time.
2.10 FUNDING LOSSES. Notwithstanding any provision
contained herein to the contrary, if Borrower makes any payment
of principal with respect to any LIBOR Loan (pursuant to Sections
2 or 7 or otherwise) on any day other than the last day of an
Interest Period applicable thereto, or if Borrower fails to
borrow or pay any LIBOR Loan after notice has been given to the
Agent in accordance with Section 2.02, 2.04 or 2.08(b), Borrower
shall reimburse each Bank on demand for any resulting losses and
expenses incurred by it, including, without limitation, any
losses incurred in obtaining, liquidating or employing deposits
from third parties, but excluding loss of margin for the period
after any such payment, provided that such Bank shall have
delivered to Borrower a certificate as to the amount of such
losses and expenses, which certificate shall be conclusive in the
absence of manifest error.
2.11 BASIS FOR DETERMINING INTEREST RATE INADEQUATE OR
UNFAIR. If with respect to any Interest Period:
(i) the Agent is advised by Mercantile that
deposits in dollars (in the applicable amounts) are not
being offered to Mercantile in the relevant market for
such Interest Period, or
(ii) Banks holding Notes evidencing Fifty Percent
(50%) or more in aggregate principal amount of the
affected LIBOR Loans (or having Fifty Percent (50%) or
more of the aggregate amount of the total Commitments
of all of the Banks, if no LIBOR Loans are then
outstanding)
28
<PAGE>
advise the Agent that the LIBOR Rate as determined by
the Agent will not adequately and fairly reflect the
cost to such Banks of maintaining or funding their
LIBOR Loans for such Interest Period,
the Agent shall forthwith give notice thereof to Borrower and the
Banks, whereupon until the Agent notifies Borrower that the
circumstances giving rise to such suspension no longer exist, (a)
the obligations of the Banks to make LIBOR Loans shall be
suspended and (b) Borrower shall repay in full the then
outstanding principal amount of each of its LIBOR Loans together
with all accrued and unpaid interest thereon, on the last day of
the then current Interest Period applicable to such Loan.
Concurrently with repaying each such LIBOR Loan of each Bank
pursuant to this Section, Borrower may borrow a Floating Rate
Loan in an equal principal amount from such Bank, and, if
Borrower so elects, such Bank shall make such a Floating Rate
Loan to Borrower.
2.12 ILLEGALITY. If, after the date of this
Agreement, the adoption of any applicable law, rule or
regulation, or any change therein, or any change in the
interpretation or administration thereof by any governmental or
regulatory authority, central bank or comparable agency charged
with the interpretation or administration thereof, or compliance
by any Bank with any request or directive (whether or not having
the force of law) of any such governmental or regulatory
authority, central bank or comparable agency shall make it
unlawful or impossible for any Bank to make, maintain or fund its
LIBOR Loans to Borrower and such Bank shall so notify the Agent,
the Agent shall forthwith give notice thereof to the other Banks
and Borrower. Upon receipt of such notice, Borrower shall repay
in full the then outstanding principal amount of each of its
LIBOR Loans from such Bank, together with all accrued and unpaid
interest thereon, on either (a) the last day of the then current
Interest Period applicable to such LIBOR Loan if such Bank may
lawfully continue to maintain and fund its LIBOR Loans to such
day or (b) immediately if such Bank may not lawfully continue to
fund and maintain its LIBOR Loan to such day. Concurrently with
repaying each LIBOR Loan of such Bank, Borrower may borrow a
Floating Rate Loan in an equal principal amount from such Bank,
and, if Borrower so elects, such Bank shall make such a Floating
Rate Loan to Borrower.
2.13 INCREASED COST. (a) If (i) Regulation D or (ii)
after the date hereof, the adoption of any applicable law, rule
or regulation, or any change therein, or any change in the
interpretation or administration thereof by any governmental or
regulatory authority, central bank or comparable agency charged
with the interpretation or administration thereof, or compliance
<PAGE>
by any Bank with any request or directive (whether or not having
the force of law) of any such governmental or regulatory
authority, central bank or comparable agency (a "Regulatory
Change"):
(A) shall subject any Bank to any tax, duty or
other charge with respect to its LIBOR Loans, its Note
or its obligation to make LIBOR Loans, or shall change
29
the basis of taxation of payments to any Bank of the
principal of or interest on its LIBOR Loans or any
other amounts due under this Agreement in respect of
its LIBOR Loans or its obligation to make LIBOR Loans
(except for taxes on or changes in the rate of tax on
the overall net income of such Bank); or
(B) shall impose, modify or deem applicable any
reserve (including, without limitation, any reserve
imposed by the Board of Governors of the Federal
Reserve System), special deposit, capital or similar
requirement against assets of, deposits with or for the
account of, or credit extended or committed to be
extended by, any Bank or shall, with respect to any
Bank or the London interbank market, impose, modify or
deem applicable any other condition affecting its LIBOR
Loans, its Note or its obligation to make LIBOR Loans;
and the result of any of the foregoing is to increase the cost to
(or in the case of Regulation D, to impose a cost on or increase
the cost to) such Bank of making or maintaining any LIBOR Loan,
or to reduce the amount of any sum received or receivable by such
Bank under this Agreement or under its Note with respect thereto,
by an amount deemed by such Bank, in its good faith judgment, to
be material, and if such Bank is not otherwise fully compensated
for such increase in cost or reduction in amount received or
receivable by virtue of the inclusion of the reference to "LIBOR
Reserve Percentage" in the calculation of the interest rate
applicable to LIBOR Loans, then, within fifteen (15) days after
notice by such Bank to Borrower together with a copy of the
official notice of the applicable change in law (if applicable)
and a work sheet showing how the increase in cost or reduction in
amount received or receivable was calculated (with a copy to the
Agent and all of the other Banks), Borrower shall pay for the
account of such Bank as additional interest, such additional
amount or amounts as will compensate such Bank for such increased
cost or reduction. Each Bank will promptly notify Borrower, the
Agent and all of the other Banks of any event of which it has
knowledge, occurring after the date hereof, which will entitle
such Bank to compensation pursuant to this Section. The
<PAGE>
determination by any Bank under this Section of the additional
amount or amounts to be paid to it hereunder shall be conclusive
in the absence of manifest error. In determining such amount or
amounts, such Bank may use any reasonable averaging and
attribution methods.
(b) If any Bank demands compensation under this
Section, Borrower may at any time, upon at least two (2) Domestic
Business Days' prior notice to such Bank and the Agent, repay in
full its then outstanding LIBOR Loans from such Bank, together
with all accrued and unpaid interest thereon to the date of
prepayment and any funding losses and other amounts due under
Section 2.10. Concurrently with repaying such LIBOR Loans of
such Bank, Borrower may borrow from such Bank a Floating Rate
Loan in an amount equal to the aggregate principal amount of such
LIBOR Loans, and, if
30
Borrower so elects, such Bank shall make such a Floating Rate
Loan to Borrower.
2.14 FLOATING RATE LOANS SUBSTITUTED FOR AFFECTED
LIBOR LOANS. If notice has been given by a Bank pursuant to
Sections 2.11 or 2.12 or by Borrower pursuant to Section 2.13
requiring LIBOR Loans of any Bank to be repaid, then, unless and
until such Bank notifies Borrower that the circumstances giving
rise to such repayment no longer apply, all Loans which would
otherwise be made by such Bank to Borrower as LIBOR Loans shall
be made instead as Floating Rate Loans. Such Bank shall promptly
notify Borrower if and when the circumstances giving rise to such
repayment no longer apply.
2.15 CAPITAL ADEQUACY. If, after the date of this
Agreement, any Bank shall have determined in good faith that the
adoption of any applicable law, rule, regulation or guideline
regarding capital adequacy, or any change therein, or any change
in the interpretation or administration thereof by any
governmental or regulatory authority, central bank or comparable
agency charged with the interpretation or administration thereof,
or compliance by such Bank with any request or directive
regarding capital adequacy (whether or not having the force of
law) of any such authority, central bank or comparable agency,
has or will have the effect of reducing the rate of return on
such Bank's capital in respect of its obligations hereunder to a
level below that which such Bank could have achieved but for such
adoption, change or compliance (taking into consideration such
Bank's policies with respect to capital adequacy), then from time
to time Borrower shall pay to such Bank upon demand such
additional amount or amounts as will compensate such Bank for
such reduction. All determinations made in good faith by such
<PAGE>
Bank of the additional amount or amounts required to compensate
such Bank in respect of the foregoing shall be conclusive in the
absence of manifest error. In determining such amount or
amounts, such Bank may use any reasonable averaging and
attribution methods.
2.16 SURVIVAL OF INDEMNITIES. All indemnities and all
provisions relating to reimbursement to Bank of amounts
sufficient to protect the yield to Bank with respect to the
Revolving Credit Loans, including, without limitation, Sections
2.10, 2.11, 2.12, 2.13 and 2.15 hereof, shall survive the payment
of the Notes and the other Borrower's Obligations and the
termination of this Agreement.
2.17 DISCRETION OF BANK AS TO MANNER OF FUNDING.
Notwithstanding any provision contained in this Agreement to the
contrary, each of the Banks shall be entitled to fund and
maintain its funding of all or any part of its LIBOR Loans in any
manner it elects, it being understood, however, that for purposes
of this Agreement all determinations hereunder (including,
without limitation, the determination of each Bank's funding
losses and expenses under Section 2.10) shall be made as if such
Bank had actually funded and maintained each LIBOR Loan through
the purchase of deposits having a maturity corresponding to the
maturity of the
31
applicable Interest Period relating to the applicable LIBOR Loan
and bearing an interest rate equal to the applicable LIBOR Rate.
2.18 LATE PAYMENT FEES. If Borrower fails to make any
payment of any principal of or interest on any Revolving Credit
Loan within ten (10) days after the date the same shall become
due and payable, whether by reason of maturity, acceleration or
otherwise, in addition to all of the other rights and remedies of
the Agent and the Banks under this Agreement and at law or in
equity, Borrower shall pay the Agent for the ratable benefit of
the Banks on demand with respect to each such late payment a late
fee in an amount equal to the greater of $100.00 or Five Percent
(5%) of the amount of each such late payment.
2.19 COMPUTATION OF INTEREST. Interest on Floating
Rate Loans hereunder shall be computed on the basis of a year of
360 days and paid for the actual number of days elapsed
(including the first day but excluding the last day). Interest
on LIBOR Loans shall be computed on the basis of a year of 360
days and paid for the actual number of days elapsed, calculated
as to each Interest Period from and including the first day
thereof to but excluding the last day thereof.
<PAGE>
2.20 MATURITY. All Revolving Credit Loans not paid
prior to the last day of the Revolving Credit Period, together
with all accrued and unpaid interest thereon and all fees and
other amounts owing by Borrower to the Banks with respect
thereto, shall be due and payable on the last day of the
Revolving Credit Period.
2.21 SHARING OF PAYMENTS. The Banks agree among
themselves that, in the event that any of the Banks shall
directly or indirectly obtain any payment (whether voluntary,
involuntary, through the exercise of any right of set-off,
banker's lien or counterclaim, through the realization,
collection, sale or liquidation of any collateral or otherwise)
on account of or in respect of any of the Loans or any of the
other Borrower's Obligations in excess of its Pro Rata Share of
all such payments, such Bank(s) shall immediately purchase from
the other Bank(s) participations in the Loans or other Borrower's
Obligations owed to such other Bank(s) in such amounts, and make
such other adjustments from time to time, as shall be equitable
to the end that the Banks share such payment ratably in
accordance with their respective Pro Rata Shares of the
outstanding Loans and other Borrower's Obligations. The Banks
further agree among themselves that if any such excess payment to
a Bank shall be rescinded or must otherwise be restored, the
other Bank(s) which shall have shared the benefit of such payment
shall, by repurchase of participation theretofore sold, or
otherwise, return its share of that benefit to the Bank whose
Payment shall have been rescinded or otherwise restored. Borrower
agrees that any Bank(s) so purchasing a participation in the
Loans or other Borrower's Obligations owed to the other Bank(s)
may exercise all rights of set-off, banker's lien and/or
counterclaim as fully as if such Bank(s) were a holder of such
Loan or other Borrower's Obligations in the amount of such
participation. If under any applicable bankruptcy, insolvency or
32
other similar law any of the Banks receives a secured claim in
lieu of a set-off to which this Section 2.21 would apply, such
Bank(s) shall, to the extent practicable, exercise their rights
in respect of such secured claim in a manner consistent with the
rights of the Bank(s) entitled under this Section 2.21 to share
in the benefits of any recovery of such secured claim.
SECTION 3. LETTERS OF CREDIT.
3.01 LETTER OF CREDIT COMMITMENT. (a) Subject to the
terms and conditions of this Agreement and so long as no Default
or Event of Default under this Agreement has occurred and is
continuing (provided, however, that Mercantile shall have no
liability to any of the other Banks for issuing a Letter of
<PAGE>
Credit while a Default or Event of Default under this Agreement
has occurred and is continuing unless Mercantile, prior to
issuing such Letter of Credit, had received notice in writing
from Borrower or any of the other Banks of the occurrence and
continuance of such Default or Event of Default or otherwise had
actual knowledge of the occurrence and continuance of such
Default or Event of Default), during the Letter of Credit Period,
Mercantile hereby agrees to issue irrevocable commercial and/or
standby letters of credit for the account of Borrower
(individually, a "Letter of Credit" and collectively, the
"Letters of Credit") in an amount and for the term specifically
requested by Borrower by notice in writing to Mercantile in the
form of EXHIBIT B attached hereto and incorporated herein by
reference (a "Letter of Credit Request") at least three (3)
Domestic Business Days prior to the requested issuance thereof;
provided, however, that:
(i) Borrower shall have executed and delivered to
Mercantile a Letter of Credit Application with respect
to such Letter of Credit;
(ii) the term of any such Letter of Credit shall
not extend beyond the date one (1) year after the date
of issuance thereof;
(iii) any Letter of Credit may only be utilized
to guaranty the payment of obligations of Borrower or
any Subsidiary to third parties;
(iv) the Total Outstandings shall not at any one
time exceed the total Commitments of all of the Banks
as of such time;
(v) the sum of (A) the aggregate undrawn face
amount of all outstanding Letters of Credit PLUS (B)
the aggregate principal amount of all outstanding
Letter of Credit Loans shall not at any one time exceed
the lesser of (A) the total Commitments of all of the
Banks as of such time or (B) $10,000,000.00; and
(vi) the text of any such Letter of Credit is
provided to Mercantile no less than three (3) Domestic
33
Business Days prior to the requested issuance date,
which text must be acceptable to Mercantile in its sole
and absolute discretion.
<PAGE>
(b) The payment of drafts under each Letter of Credit
shall be made in accordance with the terms thereof and, in that
connection, Mercantile shall be entitled to honor any drafts and
accept any documents presented to it by the beneficiary of such
Letter of Credit in accordance with the terms of such Letter of
Credit and believed in good faith by Mercantile to be genuine.
Mercantile shall not have any duty to inquire as to the accuracy
or authenticity of any draft or other drawing document that may
be presented to it other than the duties contemplated by the
applicable Letter of Credit Application. If Mercantile shall
have received documents that in its good faith judgment
constitute all of the documents that are required to be presented
before payment of a draft under a Letter of Credit, it shall be
entitled to pay such draft provided such documents conform on
their face to the requirements of such Letter of Credit.
(c) In the event of any payment by Mercantile of a
draft presented under a Letter of Credit, Borrower agrees to pay
to Mercantile in immediately available funds at the time of such
drawing an amount equal to the sum of such drawing PLUS
Mercantile's customary negotiation, processing and other fees
related thereto. Borrower hereby authorizes Mercantile to charge
or cause to be charged Borrower's bank accounts at Mercantile to
the extent there are balances of immediately available funds
therein, in an amount equal to the sum of such drawing plus
Mercantile's customary negotiation, processing and other fees
related thereto, and Borrower agrees to pay the amount of any
such drawing (and/or Mercantile's customary negotiation,
processing and other fees related thereto) not so charged prior
to the close of business of Mercantile on the day of such
drawing. In the event any payment under a Letter of Credit is
made by Mercantile prior to receipt of payment from Borrower,
such payment by Mercantile shall constitute a loan (a "Letter of
Credit Loan") by Mercantile to Borrower, payable on demand of
Mercantile. Borrower agrees to pay interest on demand of
Mercantile on any unpaid Letter of Credit Loan at a rate per
annum equal to Two Percent (2%) over and above the Floating Rate
until such Letter of Credit Loan is paid in full, calculated on
an actual day, 360-day year basis.
(d) Borrower hereby further agrees to pay to the order
of Mercantile:
(i) with respect to each Letter of Credit which
is a standby Letter of Credit, a nonrefundable issuance
fee in the amount of $125.00 and with respect to each
Letter of Credit which is a commercial Letter of
Credit, a nonrefundable issuance fee in the amount of
$135.00 (the "Letter of Credit Issuance Fees"), which
Letter of Credit Issuance Fees shall be due and payable
on the date of issuance of each such Letter of Credit;
34
<PAGE>
(ii) with respect to each Letter of Credit which
is a standby Letter of Credit, a nonrefundable
commitment fee at a rate per annum equal to the
Applicable Standby Letter of Credit Commitment Fee Rate
(calculated on an actual day, 360-day year basis) on
the face amount (taking into account any scheduled
increases or decreases therein during the period in
question) of each such Letter of Credit ("Letter of
Credit Commitment Fee"), which Letter of Credit
Commitment Fee shall be due and payable annually in
advance on the date of issuance of each such Letter of
Credit and on each anniversary date of such Letter of
Credit. Mercantile shall, on the date of this
Agreement, make appropriate adjustments to the Letter
of Credit Commitment Fees payable by Borrower with
respect to the Existing Letters of Credit which are
standby Letters of Credit to take into account letter
of credit commitment fees paid by Borrower prior to the
date of this Agreement on or with respect to such
Existing Letters of Credit for the period after the
date of this Agreement;
(iii) with respect to each Letter of Credit which
is a commercial Letter of Credit, a nonrefundable
negotiation fee in an amount equal to Three-Tenths of
One Percent (.30%) of the amount of each draw on each
such Letter of Credit ("Letter of Credit Negotiation
Fee"), which Letter of Credit Negotiation Fee shall be
due and payable on the date of each draw of each such
Letter of Credit; and
(iv) with respect to each Letter of Credit, such
other fees as may be charged by Mercantile from time to
time in accordance with Mercantile's published schedule
of fees in effect from time to time, which fees shall
be due and payable on demand by Mercantile.
3.02 EXISTING LETTERS OF CREDIT. Notwithstanding any
provision contained in this Agreement to the contrary, (i) all
references in this Agreement to Letters of Credit shall include
the irrevocable standby and commercial letters of credit listed
on SCHEDULE 3.02 attached hereto which have heretofore been
issued by Mercantile for the account of Borrower (the "Existing
Letters of Credit") and (ii) all references in this Agreement to
the Letter of Credit Applications shall include the applications
and agreements for irrevocable standby and commercial letters of
credit heretofore executed by Borrower, as account party, with
respect to the Existing Letters of Credit.
<PAGE>
3.03 PARTICIPATION BY OTHER BANKS. Upon the issuance
of a Letter of Credit by Mercantile (and on the date of this
Agreement with respect to the Existing Letters of Credit), an
undivided participation interest therein (including, without
limitation, an undivided participation interest in the
reimbursement risk relating to such Letter of Credit, in all
payments and Letter of Credit Loans made by Mercantile in
connection with such Letter of Credit
35
and in all collateral securing such Letter of Credit and/or such
Letter of Credit Loans) shall automatically be granted by
Mercantile to and accepted by each of the other Banks in an
amount based on each such other Bank's Pro Rata Share of the face
amount of such Letter of Credit, which participation shall be
evidenced by a single Letter of Credit Participation Certificate
executed by Mercantile in favor of such Bank in the form attached
hereto as EXHIBIT E and incorporated herein by reference. If
Mercantile shall make payment on any draft presented or accepted
under a Letter of Credit, Mercantile shall give notice of such
payment to the other Banks, and each of the other Banks hereby
authorizes and requests Mercantile to advance for their
respective accounts, pursuant to the terms hereof, their
respective shares of any such payment based upon their respective
Pro Rata Shares. If such drawing is not paid by Borrower in
immediately available funds prior to the close of business of
Mercantile on the date of such drawing, Mercantile shall promptly
so notify the other Banks and each of the other Banks agrees to
promptly reimburse Mercantile in immediately available funds for
its Pro Rata Share of the amount of such drawing, plus (if a Bank
does not reimburse Mercantile for its Pro Rata Share of a drawing
on the date Mercantile pays such drawing) interest calculated on
such Banks's Pro Rata Share of such amount at a rate per annum
equal to Two Percent (2%) over and above the Floating Rate
calculated from the date of such payment by Mercantile to but
excluding the date of reimbursement by such other Bank and on an
actual-day, 360-day year basis (and upon such payment (including
any required interest), such Bank's participation in the
resulting Letter of Credit Loan shall be dated the date such
drawing was paid by Mercantile and not the date such Bank
reimbursed Mercantile for its Pro Rata Share of such drawing).
Each of the other Banks will be entitled to its Pro Rata Share of
any Letter of Credit Commitment Fees (including, without
limitation, Letter of Credit Commitment Fees on the Existing
Letters of Credit for the period after the date of this
Agreement) and any Letter of Credit Negotiation Fees paid by
Borrower, but such other Banks shall have no right to share in
any Letter of Credit Issuance Fees or any other fees paid by
Borrower to Mercantile in connection with any of the Letters of
Credit.
<PAGE>
3.04 REPLACEMENT OR COLLATERALIZATION OF LETTERS OF
CREDIT. Notwithstanding any provision contained in this
Agreement or any of the Letter of Credit Applications to the
contrary: (a) if any of the Letters of Credit remain outstanding
on the last day of the Letter of Credit Period, Borrower shall,
on or before 12:00 noon (St. Louis time) on the last day of the
Letter of Credit Period, (i) surrender the originals of the
applicable Letter(s) of Credit to Mercantile for cancellation or
(ii) provide Mercantile with cash collateral (or other collateral
acceptable to the Required Banks in their sole and absolute
discretion) in an amount at least equal to the aggregate undrawn
face amount of all Letter(s) of Credit which remain outstanding
at such time and execute and deliver to Mercantile such
agreements as the Required Banks may require to grant Mercantile
a first priority perfected security interest in such cash or
other collateral; and (b) upon the occurrence of any Event of
Default under this Agreement
36
(including, without limitation, Borrower's failure to comply with
the requirements of clause (a) above), at Mercantile's option and
without demand or further notice to Borrower, an amount equal to
the aggregate undrawn face amount of all Letter(s) of Credit then
outstanding shall be deemed (as between Mercantile and Borrower)
to have been paid or disbursed by Mercantile (notwithstanding
that such amounts may not in fact have been so paid or disbursed
by Mercantile), and a Letter of Credit Loan to Borrower in such
amount to have been made and accepted by Borrower, which Letter
of Credit Loan shall be immediately due and payable. In lieu of
the foregoing, at the election of Mercantile, Borrower shall,
upon Mercantile's demand, deliver to Mercantile cash, or other
collateral acceptable to the Required Banks in their sole and
absolute discretion, having a value, as determined by the
Required Banks, at least equal to aggregate undrawn face amount
of all outstanding Letters of Credit and execute and deliver to
Mercantile such agreements as the Required Banks may require to
grant Mercantile a first priority perfected security interest in
such cash or other collateral. Any such collateral and/or any
amounts received by Mercantile in payment of the Letter of Credit
Loan made pursuant to this Section 3.04 shall be held by
Mercantile in a separate account at Mercantile appropriately
designated as a cash collateral account in relation to this
Agreement and the Letters of Credit and retained by Mercantile as
collateral security for the payment of the Borrower's
Obligations. Cash amounts delivered to Mercantile pursuant to
the foregoing requirements of this Section 3.04 shall be
invested, at the request and for the account of Borrower, in
investments of a type and nature and with a term acceptable to
the Required Banks. Such amounts, including in the case of cash
amounts invested in the manner set forth above, any investment
<PAGE>
realized thereon, shall not be used by Mercantile to pay any
amounts drawn or paid under or pursuant to any Letter of Credit,
but may be applied to reimburse Mercantile for drawings or
payments under or pursuant to the Letters of Credit which
Mercantile has paid, or if no such reimbursement is required to
the payment of such other of Borrower's Obligations as Mercantile
shall determine. Any amounts remaining in any cash collateral
account established pursuant to this Section 3.04 after the
payment in full of all of the Borrower's Obligations and the
expiration or cancellation of all of the Letters of Credit shall
be returned to Borrower (after deduction of Mercantile's
expenses, if any).
SECTION 4. PRECONDITIONS TO LOANS AND LETTERS OF CREDIT.
4.01 INITIAL REVOLVING CREDIT LOAN OR LETTER OF
CREDIT. Notwithstanding any provision contained in this
Agreement to the contrary, none of the Banks shall have any
obligation to make the initial Revolving Credit Loan under this
Agreement and Mercantile shall have no obligation to issue the
initial Letter of Credit hereunder unless the Agent shall have
first received:
(a) this Agreement, executed by a duly authorized
officer of Borrower;
37
(b) the Notes, each executed by a duly authorized
officer of Borrower;
(c) a copy of resolutions of the Board of
Directors of Borrower, duly adopted, which authorize
the execution, delivery and performance of this
Agreement, the Notes, the Letter of Credit Applications
and the other Transaction Documents, certified by the
Secretary of Borrower;
(d) a copy of the Certificate of Incorporation of
Borrower, including any amendments thereto, certified
by the Secretary of State of the State of Delaware;
(e) a copy of the By-Laws of Borrower, including
any amendments thereto, certified by the Secretary of
Borrower;
(f) an incumbency certificate, executed by the
Secretary of Borrower, which shall identify by name and
title and bear the signatures of all of the officers of
Borrower executing any of the Transaction Documents;
<PAGE>
(g) certificates of corporate good standing of
Borrower issued by the Secretaries of State of the
States of Delaware and Missouri;
(h) an opinion of counsel of White & Case,
independent counsel for Borrower, in the form of
EXHIBIT F attached hereto and incorporated herein by
reference; and an opinion of Jane E. Nelson, Esq.,
General Counsel of Borrower, in the form of EXHIBIT F-1
attached hereto and incorporated herein by reference;
(i) the Notice of Borrowing required by Section
2.02 and/or the Letter of Credit Request and the Letter
of Credit Application required by Section 3.01(a), as
the case may be;
(j) a letter agreement executed by Borrower
terminating its right to obtain any additional loans or
letters of credit under the Existing Revolving Credit
Agreement;
(k) evidence in form and substance satisfactory
to the Agent that all of the "Borrower's Obligations"
(as defined therein) under the Existing Revolving
Credit Agreement have been paid in full;
(l) copies of the executed Note Purchase
Agreements;
(m) evidence satisfactory to the Agent that the
transactions contemplated by the Note Purchase
Agreement have been consummated; and
38
(n) such other agreements, documents, instruments
and certificates as the Agent or any of the Banks may
reasonably request.
4.02 ALL REVOLVING CREDIT LOANS. Notwithstanding any
provision contained in this Agreement to the contrary, none of
the Banks shall have any obligation to make any Revolving Credit
Loan under this Agreement unless:
(a) the Agent shall have received a Notice of
Borrowing for such Revolving Credit Loan as required by
Section 2.02;
(b) on the date of and immediately after such
Revolving Credit Loan, no Default or Event of Default
under this Agreement shall have occurred and be
continuing;
<PAGE>
(c) no material adverse change in the Properties,
assets, liabilities, business, operations, prospects,
income or condition (financial or otherwise) of
Borrower and its Subsidiaries taken as a whole shall
have occurred since the date of this Agreement and be
continuing; and
(d) all of the representations and warranties of
Borrower contained in this Agreement and in the other
Transaction Documents shall be true and correct in all
material respects on and as of the date of such
Revolving Credit Loan as if made on and as of the date
of such Revolving Credit Loan (and for purposes of this
Section 4.02(d), the representations and warranties
made by Borrower in Section 5.04 shall be deemed to
refer to the most recent financial statements of
Borrower delivered to the Banks pursuant to Section
6.01(a)).
Each request for a Revolving Credit Loan by Borrower
under this Agreement shall be deemed to be a representation and
warranty by Borrower on the date of such Revolving Credit Loan as
to the facts specified in clauses (b), (c) and (d) of this
Section 4.02.
4.03 ALL LETTERS OF CREDIT. Notwithstanding any
provision contained herein to the contrary, Mercantile shall have
no obligation to issue any Letter of Credit under this Agreement
unless:
(a) Mercantile shall have received a Letter of
Credit Request for such Letter of Credit as required by
Section 3.01(a);
(b) Mercantile shall have received a Letter of
Credit Application for such Letter of Credit as
required by Section 3.01(a), duly executed by an
authorized officer of Borrower as account party;
39
(c) Borrower shall have complied with all of the
procedures and requirements set forth in Section 3.01;
(d) on the date of and immediately after the
issuance of such Letter of Credit, no Default or Event
of Default under this Agreement shall have occurred and
be continuing;
(e) no material adverse change in the Properties,
assets, liabilities, business, operations, prospects,
income or condition (financial or otherwise) of
<PAGE>
Borrower and its Subsidiaries taken as a whole shall
have occurred since the date of this Agreement and be
continuing;
(f) all of the representations and warranties of
Borrower contained in this Agreement and in the other
Transaction Documents shall be true and correct in all
material respects on and as of the date of the issuance
of such Letter of Credit as if made on and as of the
date of the issuance of such Letter of Credit (and for
purposes of this Section 4.03(f), the representations
and warranties made by Borrower in Section 5.04 shall
be deemed to refer to the most recent financial
statements of Borrower delivered to the Banks pursuant
to Section 6.01(a)); and
(g) Mercantile shall have received such other
documents, certificates and agreements as it may
reasonably request.
Each request for the issuance of a Letter of Credit by Borrower
under this Agreement shall be deemed to be a representation and
warranty by Borrower on the date of the issuance of such Letter
of Credit as to the facts specified in clauses (d), (e) and (f)
of this Section 4.03.
SECTION 5. REPRESENTATIONS AND WARRANTIES.
Borrower represents and warrants to the Agent and each
of the Banks that:
5.01 CORPORATE EXISTENCE AND POWER. Borrower and each
Subsidiary: (a) is duly incorporated, validly existing and in
good standing under the laws of the jurisdiction of its
incorporation; (b) has all requisite corporate powers and all
material governmental and regulatory licenses, authorizations,
consents and approvals required to own or hold under lease the
Properties it purports to own or hold under lease and to transact
the business it transacts and proposes to transact; and (c) is
duly qualified to do business in, and is in good standing in, all
jurisdictions in which the nature of the business conducted by it
makes such qualification necessary, other than those
jurisdictions as to which the failure to be so qualified or in
good standing could not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect.
40
5.02 CORPORATE AUTHORIZATION. The execution, delivery
and performance by Borrower of this Agreement, the Notes, the
<PAGE>
Letter of Credit Applications and the other Transaction Documents
are within the corporate powers of Borrower and have been duly
authorized by all necessary corporate action.
5.03 BINDING EFFECT. This Agreement, the Notes, the
Letter of Credit Applications and the other Transaction Documents
executed prior to or contemporaneously with the execution of this
Agreement have been duly executed and delivered by Borrower and
constitute the legal, valid and binding obligations of Borrower
enforceable in accordance with their respective terms, except as
such enforceability may be limited by bankruptcy, insolvency or
other similar laws affecting creditors' rights generally and by
general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at law)
and the Letter of Credit Applications and the other Transaction
Documents not executed prior to or contemporaneously with the
execution of this Agreement, when executed and delivered in
accordance with this Agreement, will constitute the legal, valid
and binding obligations of Borrower enforceable in accordance
with their respective terms, except as such enforceability may be
limited by bankruptcy, insolvency or other similar laws affecting
creditors' rights generally and by general principles of equity
(regardless of whether such enforceability is considered in a
proceeding in equity or at law).
5.04 FINANCIAL STATEMENTS. Borrower has furnished
each of the Banks with the following financial statements,
identified by the principal financial officer of Borrower: (1)
consolidated balance sheets and statements of income, cash flows
and changes in stockholders' equity of Borrower and its
Subsidiaries as of February 1, 1997, all certified by Borrower's
independent certified public accountants, which financial
statements have been prepared in accordance with GAAP; and (2)
unaudited consolidated balance sheets and statements of income,
cash flows and changes in stockholders' equity of Borrower and
its Subsidiaries as of April 26, 1997, certified by the principal
financial officer of Borrower as being true and correct to the
best of his knowledge and as being prepared in accordance with
GAAP. Borrower further represents and warrants to Bank that:
(1) said balance sheets and their accompanying notes fairly
present the condition of Borrower and its Subsidiaries as of the
dates thereof; (2) there has been no material adverse change in
the Properties, assets, liabilities, business, operations,
prospects, income or condition (financial or otherwise) of
Borrower and its Subsidiaries taken as a whole since April 26,
1997; and (3) neither Borrower nor any of its Subsidiaries had
any direct or contingent liabilities which were not disclosed on
said financial statements or the notes thereto (to the extent
such disclosure is required by GAAP).
41
<PAGE>
5.05 LITIGATION. Except as disclosed on SCHEDULE 5.05
attached hereto, there is no action or proceeding pending or, to
the knowledge of Borrower, threatened against or affecting
Borrower or any Subsidiary before any court, arbitrator or any
governmental, regulatory or administrative body, agency or
official which, individually or in the aggregate, could
reasonably be expected to have a Material Adverse Effect, and
neither Borrower nor any Subsidiary is in default with respect to
any order, writ, injunction, decision or decree of any court,
arbitrator or any governmental, regulatory or administrative
body, agency or official, a default under which, individually or
in the aggregate, could reasonably be expected to have a Material
Adverse Effect. To the best knowledge of Borrower after due
inquiry, there are no outstanding judgments against Borrower or
any Subsidiary.
5.06 PENSION AND WELFARE PLANS. Each Pension Plan and
Welfare Plan complies in all material respects with ERISA and all
other applicable statutes and governmental and regulatory rules
and regulations; no Reportable Event has occurred and is
continuing with respect to any Pension Plan; neither Borrower nor
any Subsidiary nor any ERISA Affiliate has withdrawn from any
Multi-Employer Plan in a "complete withdrawal" or a "partial
withdrawal" as defined in Sections 4203 or 4205 of ERISA,
respectively; neither Borrower nor any Subsidiary nor any ERISA
Affiliate has entered into an agreement pursuant to Section 4204
of ERISA; neither Borrower nor any Subsidiary nor any ERISA
Affiliate has in the past contributed to or currently contributes
to a Multi-Employer Plan; neither Borrower nor any Subsidiary nor
any ERISA Affiliate has any withdrawal liability with respect to
a Multi-Employer Plan; no steps have been instituted by Borrower
or any Subsidiary or any ERISA Affiliate to terminate any Pension
Plan; no condition exists or event or transaction has occurred in
connection with any Pension Plan, Multi-Employer Plan or Welfare
Plan which could result in the incurrence by Borrower or any
Subsidiary or any ERISA Affiliate of any material liability, fine
or penalty; and neither Borrower nor any Subsidiary nor any ERISA
Affiliate is a "contributing sponsor" as defined in Section
4001(a)(13) of ERISA of a "single-employer plan" as defined in
Section 4001(a)(15) of ERISA which has two or more contributing
sponsors at least two of whom are not under common control.
Except as disclosed on the consolidated financial statements of
Borrower and its Subsidiaries delivered by Borrower to the Banks,
neither Borrower nor any Subsidiary nor any ERISA Affiliate has
any liability with respect to any Welfare Plan.
5.07 TAX RETURNS AND PAYMENT. Except as disclosed on
SCHEDULE 5.07 attached hereto, Borrower and its Subsidiaries have
filed all United States Federal and all other tax returns which
are required to be filed and have paid all taxes which have
become due pursuant to such returns and all other taxes,
assessments, fees and other governmental charges upon Borrower
<PAGE>
and its Subsidiaries and upon their respective Properties,
assets, income and franchises which have become due and payable
by Borrower or any of its Subsidiaries, except for (a) the filing
of state and local tax
42
returns which the failure to file (i) by the Borrower or any
Subsidiary was not willful and (ii) could not, individually or in
the aggregate, reasonably be expected to result in a Material
Adverse Effect, (b) taxes, assessments, fees and other
governmental charges wherein the amount, applicability or
validity are being contested by Borrower or any such Subsidiary
by appropriate proceedings being diligently conducted in good
faith and in respect of which adequate reserves in accordance
with GAAP have been established and (c) taxes, assessments, fees
and other governmental charges the nonpayment of which (i) by the
Borrower or any Subsidiary was not willful and (ii) could not,
individually or in the aggregate, reasonably be expected to
result in a Material Adverse Effect. All material tax
liabilities of Borrower and its Subsidiaries were adequately
provided for as of April 26, 1997, and are now so provided for on
the books of Borrower and its Subsidiaries. Except as disclosed
on SCHEDULE 5.07 attached hereto, there is no proposed, asserted
or assessed tax deficiency against Borrower or any of its
Subsidiaries which, individually or in the aggregate, could
reasonably be expected to have a Material Adverse Effect.
5.08 SUBSIDIARIES. Borrower has no Subsidiaries other
than as identified on SCHEDULE 5.08 attached hereto, as the same
may from time to time be amended, modified or supplemented as
provided herein. SCHEDULE 5.08 attached hereto correctly sets
forth, for each Subsidiary, the number of shares of each class of
common and preferred stock authorized for such Subsidiary, the
number of outstanding and the percentage of the outstanding
shares of each such class owned, directly or indirectly, by
Borrower or one or more of its Subsidiaries. All of the issued
and outstanding Capital Stock of Borrower and each of its
Subsidiaries is duly authorized, validly issued and fully paid
and nonassessable. Borrower may at any time amend, modify or
supplement SCHEDULE 5.08 by notifying the Agent and each of the
Banks in writing of any changes thereto, including any formation,
acquisition, merger or liquidation of Subsidiaries or any change
in the capitalization of any Subsidiary, in each case, in
accordance with the terms of this Agreement, and thereby the
representations and warranties contained in this Section 5.08
shall be amended accordingly so long as such amendment,
modification or supplement is made within thirty (30) days after
the occurrence of any such changes in the facts stated therein
and that such changes reflect transactions that are permitted
under this Agreement.
<PAGE>
5.09 COMPLIANCE WITH OTHER INSTRUMENTS; NONE
BURDENSOME. Neither Borrower nor any Subsidiary is a party to
any contract or agreement or subject to any charter or other
corporate restriction which, individually or in the aggregate,
has or could reasonably be expected to have a Material Adverse
Effect; none of the execution and delivery by Borrower of the
Transaction Documents, the consummation of the transactions
therein contemplated or the compliance with the provisions
thereof will violate any law, rule, regulation, order, writ,
judgment, injunction, decree or award binding on Borrower or any
of its Subsidiaries, or any of the provisions of Borrower's
Certificate of Incorporation or By-Laws or
43
any of the provisions of any indenture, agreement, document,
instrument or undertaking to which Borrower or any of its
Subsidiaries is a party or subject, or by which Borrower or any
of its Subsidiaries or any Property of Borrower or any of its
Subsidiaries is bound, or conflict with or constitute a default
thereunder or result in the creation or imposition of any Lien
pursuant to the terms of any such indenture, agreement, document,
instrument or undertaking. No order, consent, approval, license,
authorization or validation of, or filing, recording or
registration with, or exemption by, any governmental, regulatory,
administrative or public body or authority, or any subdivision
thereof, or any other Person is required to authorize, or is
required in connection with, the execution, delivery or
performance of, or the legality, validity, binding effect or
enforceability of, any of the Transaction Documents.
5.10 OTHER DEBT, GUARANTIES AND CAPITAL LEASES.
Except as disclosed on SCHEDULE 5.10 attached hereto and except
for Indebtedness of any Subsidiary to Borrower or any other
Subsidiary, neither Borrower nor any Subsidiary is a borrower,
guarantor or obligor with respect to, or a lessee under, any
Debt, Guaranties or Capital Leases. Borrower may at any time
amend, modify or supplement SCHEDULE 5.10 by notifying the Agent
and each of the Banks in writing of any changes thereto, and
thereby the representations and warranties contained in this
Section 5.10 shall be amended accordingly so long as such
amendment, modification or supplement is made within thirty (30)
days after the occurrence of any such changes in the facts stated
therein and that such changes reflect transactions that are
permitted under this Agreement.
5.11 LABOR MATTERS. Neither Borrower nor any
Subsidiary is a party to any labor dispute which, individually or
in the aggregate, could reasonably be expected to have a Material
Adverse Effect. There are no strikes or walkouts relating to any
labor contract to which Borrower or any Subsidiary is subject.
<PAGE>
Hours worked and payments made to the employees of Borrower and
its Subsidiaries have not been in violation of (a) the Fair Labor
Standards Act or (b) any other applicable law dealing with such
matters, the violation of which, individually or in the
aggregate, could reasonably be expected to have a Material
Adverse Effect. All payments due from Borrower or any
Subsidiary, or for which any claim may be made against any of
them, in respect of wages, employee health and welfare insurance
and/or other benefits have been paid or accrued as a liability on
their respective books.
5.12 TITLE TO PROPERTY. Borrower and each Subsidiary
is the sole and absolute owner of, or has the legal right to use
and occupy, all Property it claims to own or which is necessary
for Borrower or such Subsidiary to conduct its business, and all
of such Property is free and clear of all Liens other than
Permitted Liens. Borrower and its Subsidiaries enjoy peaceful
and undisturbed possession in all material respects under all
material leases under which they are operating as lessees.
44
5.13 REGULATION U. Borrower is not engaged
principally, or as one of its important activities, in the
business of extending credit for the purpose of purchasing or
carrying margin stock (within the meaning of Regulation U of The
Board of Governors of the Federal Reserve System, as amended) and
no part of the proceeds of any Revolving Credit Loan will be
used, whether directly or indirectly, and whether immediately,
incidentally or ultimately (i) for the purpose of buying or
carrying margin stock (other than repurchases by Borrower of
shares of common stock of Borrower) or to extend credit to others
for the purpose of buying or carrying margin stock, or to refund
or repay indebtedness originally incurred for such purpose or
(ii) for any purpose which entails a violation of, or which is
inconsistent with, the provisions of any of the Regulations of
The Board of Governors of the Federal Reserve System, including,
without limitation, Regulations G, U, T or X thereof, as amended.
If requested by the Agent or any of the Banks, Borrower shall
furnish to the Agent a statement in conformity with the
requirements of Federal Reserve Form U-1 referred to in
Regulation U.
5.14 MULTI-EMPLOYER PENSION PLAN AMENDMENTS ACT OF
1980. Borrower and each Subsidiary is in compliance with the
Multi-Employer Pension Plan Amendments Act of 1980, as amended
("MEPPAA"), and has no liability for pension contributions
pursuant to MEPPAA.
<PAGE>
5.15 INVESTMENT COMPANY ACT OF 1940; PUBLIC UTILITY
HOLDING COMPANY ACT OF 1935. Borrower is not an "investment
company" as that term is defined in, and is not otherwise subject
to regulation under, the Investment Company Act of 1940, as
amended. Borrower is not a "holding company" as that term is
defined in, and is not otherwise subject to regulation under, the
Public Utility Holding Company Act of 1935, as amended.
5.16 PATENTS, LICENSES, TRADEMARKS, ETC. Except as
disclosed on SCHEDULE 5.16 attached hereto:
(a) Borrower and its Subsidiaries own or possess all
licenses, permits, franchises, authorizations, patents,
proprietary software, copyrights, service marks, trademarks and
trade names, or rights thereto, that individually or in the
aggregate are material, without known conflict with the rights of
others;
(b) to the best knowledge of Borrower, no product of
Borrower or any Subsidiary infringes in any material respect any
license, permit, franchise, authorization, patent, proprietary
software, copyright, service mark, trademark, trade name or other
right owned by any other Person; and
(c) to the best knowledge of Borrower, there is no
material violation by any Person of any right of Borrower or any
of its Subsidiaries with respect to any patent, proprietary
software,
45
copyright, service mark, trademark, trade name or other right
owned or used by Borrower or any of its Subsidiaries.
5.17 Environmental and Safety and Health Matters.
Except as disclosed on SCHEDULE 5.17 attached hereto: (i) the
operations of Borrower and each Subsidiary comply in all material
respects with (A) all applicable Environmental Laws and (B) all
applicable Occupational Safety and Health Laws; (ii) none of the
operations of Borrower or any Subsidiary are subject to any
Environmental Claim or any judicial, governmental, regulatory or
administrative proceeding alleging the violation of any
Occupational Safety and Health Law, which, individually or in the
aggregate, could reasonably be expected to have a Material
Adverse Effect; (iii) to the best of Borrower's knowledge after
inquiry, none of the operations of Borrower or any Subsidiary is
the subject of any Federal or state investigation evaluating
whether any remedial action is needed to respond to any Release
of Hazardous Substances or any unsafe or unhealthful condition at
any premises owned, leased or operated by Borrower or such
Subsidiary; (iv) neither Borrower nor any Subsidiary has filed
any notice under any Environmental Law or Occupational Safety and
Health Law indicating or reporting (A) any past or present
<PAGE>
spillage, disposal or Release into the environment of, or
treatment, storage or disposal of, any Hazardous Substance or any
other hazardous, toxic or dangerous waste, substance or
constituent or other substance or (B) any unsafe or unhealthful
condition at any premises owned, leased or operated by Borrower
or such Subsidiary; and (v) neither Borrower nor any Subsidiary
has any known material contingent liability in connection with
(A) any spillage, disposal or Release into the environment of, or
otherwise with respect to, any Hazardous Substances or any other
hazardous, toxic or dangerous waste, substance or constituent or
other substance or (B) any unsafe or unhealthful condition at any
premises of Borrower or such Subsidiary.
5.18 NO DEFAULT. No Default or Event of Default under
this Agreement has occurred and is continuing. There is no
existing default or event of default under or with respect to any
indenture, contract, agreement, lease or other instrument to
which Borrower or any Subsidiary is a party or by which any
Property of Borrower or any Subsidiary is bound or affected, a
default under which, individually or in the aggregate, could
reasonably be expected to have a Material Adverse Effect.
Borrower and each Subsidiary of Borrower has and is in full
compliance with and in good standing with respect to all
governmental permits, licenses, certificates, consents and
franchises necessary to continue to conduct its business as
previously conducted by it and to own or lease and operate its
Properties as now owned or leased by it, the failure to have or
noncompliance with which, individually or in the aggregate, could
reasonably be expected to have a Material Adverse Effect, and, to
the best of Borrower's knowledge, none of said permits,
certificates, consents or franchises contain any term, provision,
condition or limitation more burdensome than such as are
generally applicable to Persons engaged in the same or similar
business as Borrower or such Subsidiary, as the case may be.
46
Neither Borrower nor any Subsidiary of Borrower is in violation
of any applicable statute, law, rule, regulation or ordinance of
the United States of America, of any state, city, town,
municipality, county or of any other jurisdiction, or of any
agency thereof, a violation of which, individually or in the
aggregate, could reasonably be expected to have a Material
Adverse Effect.
5.19 Government Contracts. Neither Borrower nor any
Subsidiary is a party to or bound by any supply or purchase
agreements with the Federal government or any state or local
government or any agency thereof, the termination or cancellation
of which, individually or in the aggregate, could reasonably be
expected to have a Material Adverse Effect.
<PAGE>
5.20 PURCHASE AND OTHER COMMITMENTS AND OUTSTANDING
BIDS. No material purchase or other commitment of Borrower or
any Subsidiary is in excess of the normal, ordinary and usual
requirements of its business, or was made at any price in excess
of the then current market price, or, to the best of Borrower's
knowledge, contains terms and conditions more onerous than those
usual and customary in the applicable industry. There is no
material outstanding bid, sales proposal, contract or unfilled
order of Borrower or any Subsidiary which (i) will, or could if
accepted, require Borrower or any Subsidiary to supply goods or
services at a cost to Borrower or any Subsidiary in excess of the
revenues to be received therefor or (ii) quotes prices which do
not include a markup over reasonably estimated costs consistent
with past markups on similar business based on market conditions
current at that time.
5.21 DISCLOSURE. Neither this Agreement nor any of
the Exhibits or Schedules hereto nor any certificate or other
data furnished to the Agent or any of the Banks in writing by or
on behalf of Borrower or any Subsidiary in connection with the
transactions contemplated by this Agreement contains any untrue
or incorrect statement of a material fact or omits to state a
material fact necessary to make the statements contained herein
or therein not misleading. To the best knowledge of Borrower,
there is no fact peculiar to Borrower or any of its Subsidiaries
which, individually or in the aggregate, presently has a Material
Adverse Effect or in the future (so far as Borrower can now
reasonably foresee) could reasonably be expected to have a
Material Adverse Effect, which has not heretofore been disclosed
in writing by Borrower to the Agent and each of the Banks.
Borrower has no reason to believe that Sears Roebuck & Co. will
exercise its rights under its license agreement with Borrower to
materially reduce the scope of Borrower's business with Sears
Roebuck & Co.
47
SECTION 6. COVENANTS.
6.01 AFFIRMATIVE COVENANTS OF BORROWER. Borrower
covenants and agrees that, so long as (i) any of the Banks has
any obligation to make any Loan under this Agreement, (ii)
Mercantile has any obligation to issue any Letter of Credit under
this Agreement, (iii) any Letter of Credit remains outstanding or
(iv) any of Borrower's Obligations remain unpaid:
(a) INFORMATION. Borrower will deliver to each of
the Banks:
(i) as soon as available and in any event within
ninety (90) days after the end of each fiscal year of
<PAGE>
Borrower: (A) a consolidated balance sheet of Borrower
and its Subsidiaries as of the end of such fiscal year
and the related consolidated statements of income, cash
flows and changes in stockholders' equity for such
fiscal year, setting forth in each case, in comparative
form, the figures for the previous fiscal year, all
such financial statements to be prepared in accordance
with GAAP consistently applied and reported on by and
accompanied by the unqualified opinion of independent
certified public accountants of nationally recognized
standing selected by Borrower and reasonably acceptable
to the Required Banks together with (1) a certificate
from such accountants to the effect that, in making the
examination necessary for the signing of such annual
audit report, such accountants have not become aware of
any Default or Event of Default that has occurred and
is continuing, or, if such accountants have become
aware of any such event, describing it and the steps,
if any, being taken to cure it, (2) the computations of
such accountants evidencing Borrower's compliance with
the financial covenants contained in Sections
6.02(a)(i), 6.02(a)(ii), 6.02(b), 6.02(c), 6.02(d) and
6.02(e) of this Agreement and (3) industry segment
information prepared in the same amount of detail as
set forth in Borrower's annual report to shareholders
for the fiscal year ended February 1, 1997, certified
by the chief financial officer of Borrower as fairly
presenting the information therein; provided, however,
that delivery within the time period specified above of
copies of the Annual Report on Form 10-K of Borrower
for such fiscal year as filed with the Securities and
Exchange Commission (together with Borrower's annual
report to shareholders, if any, prepared pursuant to
Rule 14a-3 under the Exchange Act) together with the
accountant's certificate described above shall be
deemed to satisfy the requirements of this Section
6.01(a)(i) with respect to delivery of the audited
consolidated financial statements referred to above
and, so long as the annual report to shareholders
accompanying such Annual Report on Form 10-K is
prepared as to business segment information in the
48
same amount of detail as set forth in the annual report
to shareholders for the fiscal year ended February 1,
1997, the industry segment information referred to
above;
(ii) as soon as available and in any event
within forty-five (45) days after the end of each of
the first three (3) fiscal quarters of each fiscal year
of Borrower: (A) a consolidated balance sheet of
<PAGE>
Borrower and its Subsidiaries as of the end of such
fiscal quarter and the related consolidated statements
of income, cash flows and changes in stockholders'
equity for such fiscal quarter and for the portion of
Borrower's fiscal year ended at the end of such fiscal
quarter, setting forth in each case in comparative
form, the figures for the corresponding fiscal quarter
and the corresponding portion of Borrower's previous
fiscal year, all in reasonable detail and satisfactory
in form to the Required Banks and certified (subject to
normal year-end adjustments) as to fairness of
presentation, GAAP and consistency by the chief
financial officer of Borrower; provided, however, that
delivery within the time period specified above of
copies of the Quarterly Report on Form 10-Q of Borrower
for such fiscal quarter as filed with the Securities
and Exchange Commission shall be deemed to satisfy the
requirements of this Section 6.01(a)(ii) with respect
to consolidated financial statements;
(iii) promptly upon transmission thereof, one
copy of (A) each financial statement, report, notice or
proxy statement sent by Borrower or any Subsidiary
generally to its stockholders or to its creditors
(other than Borrower or another Subsidiary) and
(B) each regular or periodic report, each registration
statement (without exhibits except as expressly
requested by the Agent or any Bank), and each
prospectus and all amendments thereto filed by Borrower
or any Subsidiary with the Securities and Exchange
Commission (or any governmental body or agency
succeeding to the functions of the Securities and
Exchange Commission) and of each press release and
other statement made available generally by Borrower or
any Subsidiary to the public concerning developments
that are material;
(iv) simultaneously with the delivery of each
set of financial statements referred to in clauses (i)
and (ii) above, a certificate of the principal
financial officer of Borrower in the form attached
hereto as EXHIBIT G and incorporated herein by
reference, accompanied by supporting financial work
sheets where appropriate, (A) evidencing Borrower's
compliance with the financial covenants contained in
Sections 6.02(a)(i), 6.02(a)(ii), 6.02(b), 6.02(c),
6.02(d) and 6.02(e) of this Agreement, (B) stating
whether there exists on the date of such certificate
any Default or Event of Default and, if any Default or
Event of Default then exists,
49
<PAGE>
setting forth the details thereof and the action which
Borrower is taking or proposes to take with respect
thereto, (C) certifying that all of the representations
and warranties of Borrower contained in this Agreement
and in the other Transaction Documents are true and
correct in all material respects on and as of the date
of such certificate as if made on and as of the date of
such certificate and (D) containing a detailed
description of any Related Party Arrangement entered
into during the period covered by such financial
statements;
(v) promptly upon receipt thereof, any reports
submitted to Borrower or any Subsidiary (other than
reports previously delivered pursuant to Sections
6.01(a)(i) and (ii) above) by independent accountants
in connection with any annual, interim or special audit
made by them of the books of Borrower or any
Subsidiary;
(vi) as soon as available and in any event
within ninety (90) days after the beginning of each
fiscal year of Borrower, consolidated balance sheet,
income statement and cash flow projections for Borrower
and its Subsidiaries for such fiscal year and the
succeeding one (1) year period, all in form and detail
reasonably acceptable to the Required Banks; and
(vii) with reasonable promptness, such further
information regarding the business, affairs and
financial condition of Borrower or any Subsidiary as
the Agent or any of the Banks may from time to time
reasonably request.
Each of the Banks is hereby authorized to deliver a
copy of any financial statement or other information made
available by Borrower or any Subsidiary to any regulatory
authority having jurisdiction over such Bank pursuant to any
request therefor.
(b) PAYMENT OF INDEBTEDNESS. Borrower will, and will
cause each Subsidiary to, (i) pay and discharge any and all
Indebtedness payable or guaranteed by Borrower or such
Subsidiary, as the case may be, and any interest or premium
thereon, when due (whether by scheduled maturity, required
prepayment, acceleration, demand or otherwise) in accordance with
the agreement, document or instrument relating to such
Indebtedness or Guaranty and (ii) faithfully perform, observe and
discharge all covenants, conditions and obligations which are
imposed upon Borrower or such Subsidiary, as the case may be, by
any and all agreements, documents and instruments evidencing,
securing or otherwise relating to such Indebtedness or Guaranty.
<PAGE>
(c) MAINTENANCE OF BOOKS AND RECORDS; CONSULTATIONS
AND INSPECTIONS. Borrower will, and it will cause each
Subsidiary to, maintain books and records in accordance with GAAP
and in which full, true and correct entries shall be made of all
dealings and transactions in relation to its business and
activities. Borrower
50
will permit, and will cause each Subsidiary to permit, the Agent
and each of the Banks (and any Person appointed by the Agent or
any of the Banks to whom Borrower does not reasonably object) to
discuss the affairs, finances and accounts of Borrower and each
Subsidiary with the officers of Borrower and each Subsidiary and
their independent public accountants, all at such reasonable
times and as often as the Agent or any of the Banks may from time
to time reasonably request. Borrower will also permit, and will
cause each Subsidiary to permit, inspection of its Properties,
books and records by the Agent and each of the Banks during
normal business hours and at other reasonable times. Borrower
will reimburse the Agent and each of the Banks upon demand for
all costs and expenses incurred by the Agent or any of the Banks
in connection with any such inspection conducted by the Agent or
any of the Banks during the continuance of any Default or Event
of Default under this Agreement. Borrower irrevocably authorizes
the Agent and each of the Banks to communicate directly with its
independent public accountants and irrevocably authorizes and
directs such accountants to disclose to the Agent and each of the
Banks any and all information with respect to the business and
financial condition of Borrower and its Subsidiaries as the Agent
or any of the Banks may from time to time reasonably request in
writing.
(d) PAYMENT OF TAXES. Borrower will, and it will
cause each Subsidiary to, duly file all Federal, state and local
income tax returns and all other tax returns and reports of
Borrower or such Subsidiary, as the case may be, which are
required to be filed and duly pay and discharge promptly all
taxes, assessments and other governmental charges imposed upon it
or any of its Property; provided, however, that neither Borrower
nor any Subsidiary shall be required to pay any such tax,
assessment or other governmental charge the payment of which is
being contested in good faith and by appropriate proceedings
being diligently conducted and for which adequate reserves in
accordance with GAAP have been provided, except that Borrower or
such Subsidiary, as the case may be, shall pay or cause to be
paid all such taxes, assessments and governmental charges
forthwith upon the commencement of proceedings to foreclose any
Lien which is attached as security therefor, unless such
foreclosure is stayed by the filing of an appropriate bond in a
manner reasonably satisfactory to the Required Banks.
<PAGE>
(e) PAYMENT OF CLAIMS. Borrower will, and it will
cause each Subsidiary to, promptly pay and discharge (i) all
trade accounts payable in accordance with usual and customary
business practices (but in no event later than thirty (30) days
after the due date thereof) and (ii) all claims for work, labor
or materials which if unpaid might become a Lien upon any of its
Property or assets; provided, however, that neither Borrower nor
any Subsidiary shall be required to pay any such account payable
or claim the payment of which is being contested in good faith
and by appropriate proceedings being diligently conducted and for
which adequate reserves in accordance with GAAP have been
provided, except that Borrower or such Subsidiary, as the case
may be, shall pay or cause to be paid all such accounts payable
and claims forthwith upon the commencement of proceedings to
foreclose any
51
Lien which is attached as security therefor, unless such
foreclosure is stayed by the filing of an appropriate bond in a
manner reasonably satisfactory to the Required Banks.
(f) CORPORATE EXISTENCE. Borrower will, and it will
cause each Subsidiary to, do all things necessary to (i) preserve
and keep in full force and effect at all times its corporate
existence and all permits, licenses, franchises and other rights
material to its business and (ii) be duly qualified to do
business in all jurisdictions where the nature of its business or
its ownership of Property requires such qualification.
(g) MAINTENANCE OF PROPERTY. Borrower will, and it
will cause each Subsidiary to, at all times, preserve and
maintain all of the Property used or useful in the conduct of its
business in good condition, working order and repair, ordinary
wear and tear excepted.
(h) INSURANCE. Borrower will, and it will cause each
Subsidiary to, insure all of its Property of the character
usually insured by corporations engaged in the same or similar
businesses similarly situated, against loss or damage of the kind
customarily insured against by such corporations, unless higher
limits or coverage are reasonably required in writing by the
Required Banks, and carry adequate liability insurance and other
insurance of a kind and in an amount generally carried by
corporations engaged in the same or similar businesses similarly
situated, unless higher limits or coverage are reasonably
required in writing by the Required Banks. All insurance
required by this Section 6.01(h) shall be with insurers
reasonably acceptable to the Required Banks. All such insurance
may be subject to reasonable deductible amounts.
<PAGE>
(i) ACCOUNTANT. Borrower shall give each of the Banks
prompt notice of any change of Borrower's independent certified
public accountants and a statement of the reasons for such
change. Borrower shall at all times utilize independent
certified public accountants of nationally recognized standing
reasonably acceptable to the Required Banks.
(j) ERISA COMPLIANCE. If Borrower, any Subsidiary or
any ERISA Affiliate shall have any Pension Plan, Borrower will,
and it will cause each Subsidiary and each ERISA Affiliate to,
comply with all requirements of ERISA relating to such Pension
Plan. Without limiting the generality of the foregoing, Borrower
will not, and it will not cause or permit any Subsidiary or any
ERISA Affiliate to:
(i) permit any Pension Plan maintained by
Borrower, any Subsidiary or any ERISA Affiliate, as the
case may be, to engage in any nonexempt "prohibited
transaction," as such term is defined in Section 4975
of the Code;
(ii) permit any Pension Plan maintained by
Borrower, any Subsidiary or any ERISA Affiliate, as the
52
case may be, to incur any "accumulated funding
deficiency", as such term is defined in Section 302 of
ERISA, 29 U.S.C. Section 1082, whether or not waived;
(iii) terminate any such Pension Plan in a
manner which could result in the imposition of a Lien
on any Property of Borrower, any Subsidiary or any
ERISA Affiliate pursuant to Section 4068 of ERISA, 29
U.S.C. Section 1368; or
(iv) take any action which would constitute a
complete or partial withdrawal from a Multi-Employer
Plan within the meaning of Sections 4203 and 4205 of
Title IV of ERISA.
Notwithstanding any provision contained in this Section
6.01(j) to the contrary, an act by Borrower, any Subsidiary or
any ERISA Affiliate shall not be deemed to constitute a violation
of this Section 6.01(j) unless the Required Banks determine in
good faith that said action, individually or cumulatively with
other acts of Borrower, its Subsidiaries and its ERISA
Affiliates, has or could reasonably be expected to have a
Material Adverse Effect.
(k) FURTHER ASSURANCES. Borrower will execute any and
all further agreements, documents and instruments, and take any
and all further actions which may be required under applicable
<PAGE>
law, or which the Agent or any of the Banks may from time to time
reasonably request, in order to effectuate the transactions
contemplated by this Agreement, the Notes, the Letter of Credit
Applications and the other Transaction Documents.
(l) COMPLIANCE WITH LAW. Borrower will, and will
cause each Subsidiary to, comply with any and all laws,
ordinances and governmental and regulatory rules and regulations
to which it is subject (including, without limitation, all
Occupational Safety and Health Laws and all Environmental Laws)
and obtain any and all licenses, permits, franchises and other
governmental and regulatory authorizations necessary to the
ownership of its Properties or to the conduct of its business,
which violation or failure to obtain, individually or in the
aggregate, could reasonably be expected to have a Material
Adverse Effect.
(m) NOTICES. Borrower will notify the Agent and each
of the Banks in writing of any of the following within two (2)
Domestic Business Days after learning of the occurrence thereof,
describing the same and, if applicable, the steps being taken by
the Person(s) affected with respect thereto:
(i) the occurrence of any Default or Event of
Default under this Agreement;
(ii) the occurrence of any default or event of
default by Borrower, any other Obligor or any
Subsidiary under any note, indenture, loan agreement,
mortgage, deed of trust, security agreement, lease or
other similar
53
agreement, document or instrument to which Borrower,
any other Obligor or any Subsidiary, as the case may
be, is a party or by which it is bound or to which it
is subject;
(iii) the institution of any litigation,
arbitration proceeding or governmental or regulatory
proceeding affecting Borrower, any other Obligor or any
Subsidiary, whether or not considered to be covered by
insurance, in which the prayer or claim for relief
seeks recovery of an amount in excess of $5,000,000.00
(or, if no dollar amount is specified in the prayer or
claim for relief, in which there is a reasonable
likelihood of recovery of an amount in excess of
$5,000,000.00) or any form of equitable relief;
(iv) the entry of any judgment or decree in an
amount in excess of $100,000.00 against Borrower, any
other Obligor or any Subsidiary;
<PAGE>
(v) the occurrence of a Reportable Event with
respect to any Pension Plan; the filing of a notice of
intent to terminate a Pension Plan by Borrower, any
ERISA Affiliate or any Subsidiary; the institution of
proceedings to terminate a Pension Plan by the PBGC or
any other Person; the withdrawal in a "complete
withdrawal" or a "partial withdrawal" as defined in
Sections 4203 and 4205, respectively, of ERISA by
Borrower, any ERISA Affiliate or any Subsidiary from
any Multi-Employer Plan; or the incurrence of any
material increase in the contingent liability of
Borrower or any Subsidiary with respect to any
"employee welfare benefit plan" as defined in Section
3(1) of ERISA which covers retired employees and their
beneficiaries;
(vi) the occurrence of any material adverse
change in the Properties, assets, liabilities,
business, operations, prospects, income or condition
(financial or otherwise) of Borrower, any other Obligor
or any Subsidiary;
(vii) any change in Borrower's or any
Subsidiary's line(s) of business;
(viii) the occurrence of any Change of Control
Event; and
(ix) any notices required to be provided pursuant
to other provisions of this Agreement and notice of the
occurrence of such other events as the Agent or any of
the Banks may from time to time reasonably specify.
(n) COVENANT TO SECURE BORROWER'S OBLIGATIONS EQUALLY.
Borrower will, if it or any Subsidiary shall create or assume any
Lien upon any of its Property or assets, whether now owned or
54
hereinafter acquired, other than Permitted Liens (unless prior
written consent to the creation or assumption thereof shall have
been obtained pursuant to Section 9.10 of this Agreement), make
or cause to be made effective provision whereby all of the
Borrower's Obligations will be secured by such Lien equally and
ratably with any and all other Debt thereby secured so long as
any such other Debt shall be so secured as evidenced by
documentation which is acceptable to the Required Banks.
Borrower acknowledges and agrees that compliance with this
covenant will not cure a violation of Section 6.02(b) of this
Agreement or any other covenant contained in this Agreement.
(o) AMENDMENT OF NOTE AGREEMENTS. Borrower shall
provide each of the Banks with a written copy of any proposed
<PAGE>
amendment to any of the Note Agreements at least fifteen (15)
Domestic Business Days prior to the effective date of such
amendment and shall promptly furnish each of the Banks with a
copy of each effective amendment to any of the Note Agreements.
6.02 NEGATIVE COVENANTS OF BORROWER. Borrower
covenants and agrees that, so long as (i) any of the Banks has
any obligation to make any Loan under this Agreement, (ii)
Mercantile has any obligation to issue any Letter of Credit under
this Agreement, (iii) any Letter of Credit remains outstanding or
(iv) any of Borrower's Obligations remain unpaid, unless the
prior written consent of the Required Banks is obtained:
(a) INCURRENCE OF DEBT AND SUBSIDIARY DEBT.
(i) Borrower will not, and it will not cause or
permit any Subsidiary to, create, assume, incur,
guarantee or otherwise become liable in respect of any
Debt (by way of merger, consolidation or otherwise)
unless immediately after giving effect thereto and to
the application of the proceeds thereof Consolidated
Debt does not exceed Fifty-Five Percent (55%) of
Consolidated Capitalization.
(ii) Borrower will not cause or permit any
Subsidiary to create, assume, incur, guarantee or
otherwise become liable in respect of any Debt except:
(A) Debt existing on the date of this
Agreement and described on SCHEDULE 5.10 attached
hereto;
(B) Debt secured by Liens permitted by
clause (b) of the definition of Permitted Liens;
(C) Debt owing to Borrower or a Wholly-
Owned Subsidiary;
(D) Debt of any Person outstanding at the
time such Person becomes a Subsidiary (not
incurred in anticipation thereof); and
55
(E) other Debt, provided that immediately
after giving effect to the incurrence of such
other Debt the sum (without duplication) of
(1) the aggregate unpaid amount of Debt(including
Capitalized Lease Obligations) of Borrower
secured by Liens permitted by clause (d) of the
definition of Permitted Liens PLUS (2) the
aggregate unpaid amount of Debt of all
Subsidiaries (other than Debt permitted by clause
(C) above) PLUS (3) the aggregate Attributable
<PAGE>
Debt in connection with all sale and leaseback
transactions of Borrower and its Subsidiaries
entered into after the date of this Agreement in
accordance with the provisions of Section 6.02(c)
of this Agreement, does not exceed Fifteen
Percent (15%) of Consolidated Assets.
For purposes of this Section 6.02(a), Borrower and each
Subsidiary shall be deemed to have incurred Debt in respect of
any obligation previously owed to Borrower or to a Wholly-Owned
Subsidiary on the date the obligee ceases for any reason to be
Borrower or a Wholly-Owned Subsidiary.
(b) LIMITATION ON LIENS. Borrower will not, and it
will not cause or permit any Subsidiary to, create or incur, or
suffer to be incurred or to exist, any Lien on any of its or
their Property or assets (other than treasury stock of Borrower),
whether now owned or hereafter acquired, or upon any income or
profits therefrom (whether or not provision is made for the equal
and ratable securing of the Borrower's Obligations in accordance
with the provisions of Section 6.01(n)), except for Permitted
Liens.
(c) LIMITATION ON SALE AND LEASEBACK TRANSACTIONS.
Borrower will not, and it will not cause or permit any Subsidiary
to, sell, lease, transfer or otherwise dispose of (each, a
"Transfer") any asset on terms whereby the asset or a
substantially similar asset is or may be leased or reacquired by
Borrower or any Subsidiary over a period in excess of three (3)
years, unless:
(i) the lease is between Borrower and a Wholly-
Owned Subsidiary or between Wholly-Owned Subsidiaries;
(ii) Borrower or a Subsidiary could create a Lien
under clauses (b), (c) and (e) of the definition of
Permitted Liens on such asset to secure Debt in an
amount at least equal to the Attributable Debt in
respect of such transaction;
(iii) after giving effect to such transaction and
the incurrence of Attributable Debt in respect thereof,
the sum (without duplication) of (A) the aggregate
unpaid principal amount of Debt (including Capitalized
Lease Obligations) of Borrower secured by such Liens
permitted by clause (d) of the definition of Permitted
Liens PLUS (B) the aggregate unpaid principal amount of
Debt of
56
Subsidiaries (other than Debt permitted by
Section 6.02(a)(ii)(C)) PLUS (iii) the aggregate
Attributable Debt in connection with all sale and
<PAGE>
leaseback transactions of Borrower and its Subsidiaries
entered into after the date of this Agreement in
accordance with the provisions of this Section 6.02(c),
does not exceed Fifteen Percent (15%) of Consolidated
Assets; or
(iv) the net proceeds realized from the Transfer
are applied within one hundred eighty (180) days after
the receipt thereof (A) to the repayment of
unsubordinated Debt (other than any Debt owing by
Borrower or a Subsidiary to another Subsidiary or
Borrower, as the case may be) (which may but need not
include prepayment of the Borrower's Obligations) or
(B) to the purchase of non-current assets for use in
the business of Borrower and its Subsidiaries.
(d) MAINTENANCE OF FIXED CHARGE COVERAGE AND DEBT TO
EBITDA RATIO. Borrower will not at any time permit:
(i) the sum of Consolidated EBITDA and
Consolidated Lease Rental Expense for any period of
four consecutive fiscal quarters (beginning with the
four consecutive fiscal quarters ending on July 19,
1997) to be less than 200% of Consolidated Fixed
Charges for such period; or
(ii) Consolidated Debt on any date to exceed 300%
of pro forma Consolidated EBITDA for the period of four
consecutive fiscal quarters ending on or immediately
before such date.
Pro forma Consolidated EBITDA shall be determined in accordance
with Section 1.02(b).
(e) ASSET SALES. Borrower will not, and it will not
cause or permit any Subsidiary to, directly or indirectly, make
any sale, transfer, lease (as lessor), loan or other disposition
(each, an "Asset Sale") of any Property or assets (other than
treasury stock of Borrower), other than:
(i) Asset Sales in the ordinary course of
business;
(ii) Sale of Borrower's interest in Fox Photo,
Inc. pursuant to the provisions of Sections 8 or 9 of
that certain Stockholders' Agreement among Eastman
Kodak Company, Borrower, Consumer Programs Holding,
Inc. and Fox Photo, Inc. (the "Fox Shareholders") dated
as of October 4, 1996, or as otherwise agreed by the
Fox Shareholders and approved by the Board of Directors
of Borrower;
<PAGE>
(iii) Asset Sales of Property or assets by a
Subsidiary to Borrower or a Wholly-Owned Subsidiary;
and
57
(iv) other Asset Sales, provided that in each
case:
(A) immediately before and after giving
effect thereto, no Default or Event of Default
under this Agreement shall have occurred and be
continuing,
(B) the aggregate net book value of Property
or assets disposed of in such Asset Sale and all
other Asset Sales by Borrower and its
Subsidiaries during the immediately preceding
twelve (12) months does not exceed Twenty Percent
(20%) of Consolidated Assets (as of the last day
of the quarterly accounting period ending on or
most recently prior to the last day of such
twelve (12) month period), and
(C) the aggregate net book value of Property
or assets disposed of in such Asset Sale and all
other Asset Sales by Borrower and its
Subsidiaries during the period commencing on the
date of this Agreement and ending on the date of
such Asset Sale does not exceed Thirty Percent
(30%) of Consolidated Assets (as of the last day
of the quarterly accounting period ending on
or most recently prior to the date of such Asset
Sale),
and provided further that for purposes of clauses (B)
and (C) immediately above there shall be excluded the
net book value of Property or assets disposed of in an
Asset Sale if and to the extent such Asset Sale is made
for cash, payable in full upon the completion of such
Asset Sale, and an amount equal to the net proceeds
realized upon such Asset Sale is applied by Borrower or
such Subsidiary, as the case may be, within one hundred
eighty (180) days after the effective date of such
Asset Sale (x) to reinvest in the business of Borrower
and its Subsidiaries (either through capital
expenditures or acquisitions) or (y) to repay
unsubordinated Debt (other than any Debt owing by
Borrower or a Subsidiary to another Subsidiary or
Borrower, as the case may be) (which may but need not
include prepayment of the Borrower's Obligations).
<PAGE>
For purposes of this Section 6.02(e), any shares of
Voting Stock of a Subsidiary that are the subject of an Asset
Sale shall be valued at the greater of (1) the fair market value
of such shares as determined in good faith by the Board of
Directors of Borrower and (2) the aggregate net book value of the
assets of such Subsidiary multiplied by a fraction of which the
numerator is the aggregate number of shares of Voting Stock of
such Subsidiary disposed of in such Asset Sale and the
denominator is the aggregate number of shares of Voting Stock of
such Subsidiary outstanding immediately prior to such Asset Sale.
58
(f) MERGER CONSOLIDATION, ETC.. Borrower will not,
and it will not cause or permit any Subsidiary to, consolidate
with or merge with any other corporation or convey, transfer or
lease all or substantially all of its assets in a single
transaction or series of transactions to any Person, except:
(i) any Subsidiary may merge or consolidate with
or into Borrower (provided that Borrower shall be the
continuing or surviving corporation) or with or into
any one or more Wholly-Owned Subsidiaries and any
Subsidiary may convey, transfer or lease all or
substantially all of its assets in a single transaction
or series of transactions to Borrower or any one or
more Wholly-Owned Subsidiaries; and
(ii) any Subsidiary may, subject to the
limitations set forth in Section 6.02(e) of this
Agreement, consolidate with or merge with any other
corporation or convey, transfer or lease all or
substantially all of its assets in a single transaction
or series of transactions to any Person, provided that,
at the time of such transaction and immediately after
giving effect thereto, (A) no Default or Event of
Default under this Agreement shall exist and (B)
Borrower could incur at least an additional $1.00 of
Debt under the provisions of Section 6.02(a)(i) of this
Agreement.
(g) TRANSACTIONS WITH AFFILIATES. Borrower will not,
and it will not cause or permit any Subsidiary to, enter into or
be a party to any transaction or arrangement with any Affiliate
(other than Borrower or another Subsidiary) (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 business and pursuant to the
reasonable requirements of Borrower's or such Subsidiary's
business and upon fair and reasonable terms no less favorable to
Borrower or such Subsidiary than would be obtained in a
comparable arm's-length transaction with a Person not an
<PAGE>
Affiliate. The provisions of this Section 6.02(g) shall not
apply to transactions between Borrower or any of its Subsidiaries
and Fox Photo, Inc. The provisions of this Section 6.02(g) shall
not apply to any arrangements between Borrower or any of its
Subsidiaries and any entity subsequently created to continue
development and licensing of certain of Borrower's software and
related intellectual property; provided that the terms of such
arrangements are determined to be fair and reasonable from
Borrower's point of view by Borrower's Board of Directors (any
such arrangement being herein referred to as a "Related Party
Arrangement").
(h) CHANGES IN NATURE OF BUSINESS. Borrower will
not, and it will not cause or permit any Subsidiary to, engage in
any business if, as a result, the general nature of the business
which would then be engaged in by Borrower and its Subsidiaries,
59
considered as a whole, would be substantially changed from the
general nature of the business engaged in by Borrower and its
Subsidiaries as of the date of this Agreement.
(i) FISCAL YEAR. Borrower will not, and it will not
cause or permit any Subsidiary to, change its fiscal year.
(j) PENSION PLANS. Borrower will not, and it will
not cause or permit any Subsidiary or any ERISA Affiliate to, (a)
permit any condition to exist in connection with any Pension Plan
which might constitute grounds for the PBGC to institute
proceedings to have such Pension Plan terminated or a trustee
appointed to administer such Pension Plan, (b) engage in, or
permit to exist or occur, any other condition, event or
transaction with respect to any Pension Plan which could result
in the incurrence by Borrower, any Subsidiary or any ERISA
Affiliate of any material liability, fine or penalty, (c) incur
or suffer to exist any material accumulated funding deficiency
within the meaning of ERISA or incur any material liability to
the PBGC in connection with any Pension Plan established or
maintained by Borrower or any Subsidiary or (d) become obligated
to contribute to any Pension Plan or Multi-Employer Plan other
than any such plan or plans in existence on the date hereof.
(k) LIMITATIONS ON ACQUISITIONS. Borrower will not,
and it will not cause or permit any Subsidiary to, make or suffer
to exist any Acquisition of any Person, except Acceptable
Acquisitions.
(l) LIMITATIONS ON RESTRICTIVE AGREEMENTS. Borrower
will not, and it will not cause or permit any Subsidiary to,
enter into, or suffer to exist, any agreement with any Person
<PAGE>
which prohibits or limits the ability of any Subsidiary to (a)
pay dividends or make other distributions or prepay any
Indebtedness owed to Borrower or any other Subsidiary, (b) make
loans or advances to Borrower or any other Subsidiary, (c)
transfer any of its properties or assets to Borrower or any other
Subsidiary (other than with respect to assets subject to Liens
permitted by clause (b) of the definition of Permitted Liens) or
(d) create, incur, assume or suffer to exist any Lien upon any of
its property, assets or revenues, whether now owned or hereafter
acquired (other than with respect to assets subject to Liens
permitted by clause (b) of the definition of Permitted Liens);
provided that the foregoing shall not apply to (i) restrictions
in effect on the date of this Agreement contained in agreements
governing Debt outstanding on the date of this Agreement and
listed on SCHEDULE 6.02(l) attached hereto and, if such Debt is
renewed, extended or refinanced, restrictions in the agreements
governing the renewed, extended or refinanced Debt (and
successive renewals, extensions and refinancings thereof) if such
restrictions are no more restrictive than those contained in the
agreements governing the Debt being renewed, extended or
refinanced or (ii) restrictions contained in agreements governing
Debt incurred after the date of this Agreement by Borrower or any
Subsidiary in compliance with this Agreement
60
PROVIDED that such restrictions are no more restrictive than
those contained in this Agreement.
(m) FINANCIAL COVENANTS AND COLLATERAL PROVISIONS OF
NOTE PURCHASE AGREEMENTS AND OTHER RESTRICTED AGREEMENTS.
Borrower will not, and it will not cause or permit any Subsidiary
to: (i) enter into any indenture, agreement or other instrument
under which any Debt of Borrower or any Subsidiary may be issued
(a "Restricted Agreement") or (ii) agree to any amendment,
waiver, consent, modification, refunding, refinancing or
replacement of any of the Note Purchase Agreements or any other
Restricted Agreement, in either case, with terms the effect of
which is to (A) include a Financial Covenant which is not
contained in this Agreement, (B) revise or alter any Financial
Covenant contained therein the effect of which is to increase or
expand the restriction on Borrower or any Subsidiary or (C)
except for Permitted Liens, grant collateral for the obligations
of Borrower or any Subsidiary thereunder, unless Borrower or such
Subsidiary, as the case may be, concurrently incorporates herein
such additional, altered or revised Financial Covenant or grant
of collateral (as the case may be). The incorporation of each
such additional Financial Covenant is hereby deemed to occur
automatically and concurrently by reason of the execution of this
Agreement without any further action or the execution of any
<PAGE>
additional document by any of the parties to this Agreement (and
Borrower hereby agrees to give the Agent and each of the Banks
prompt written notice of each such Financial Covenant so
incorporated into this Agreement). Without limiting the
foregoing, neither Borrower nor any Subsidiary, directly or
indirectly, will offer any economic inducement (including,
without limitation, any collateral) to any holder of notes under
the Note Purchase Agreements or to any other Person who is a
party to any other Restricted Agreement for the purpose of
inducing such holder or such other Person to enter into any
waiver of any event of default under the Note Purchase Agreements
or such other Restricted Agreement or event which with the lapse
of time or the giving of notice, or both, would constitute such
an event of default, unless the same such economic inducement has
been concurrently offered and paid on a pro-rata basis
(determined with respect to the aggregate Commitments hereunder,
whether used or unused) to all of the Banks (it being understood
and agreed that the offering of such economic inducement to the
Banks shall not be deemed or construed to obligate any such Bank
to enter into any waiver of any Default or Event of Default
hereunder). Borrower acknowledges and agrees that compliance
with this covenant will not cure a violation of Section 6.02(b)
of this Agreement or any other covenant contained in this
Agreement.
6.03 USE OF PROCEEDS. Borrower represents and
warrants to the Agent and each of the Banks and covenants and
agrees with the Agent and each of the Banks that: (a) the
proceeds of the Revolving Credit Loans will be used solely (i)
for the general corporate purposes of Borrower and (ii) to enable
Borrower to make loans to one or more of its Subsidiaries for
their respective general corporate purposes; (b) none of such
proceeds will be used in violation of any applicable law or
regulation; (c) Borrower will
61
not directly or indirectly use the proceeds of any Revolving
Credit Loan for the purpose of buying or carrying margin stock
within the meaning of Regulation U of The Board of Governors of
the Federal Reserve System, as amended, other than for the
purpose of financing Borrower's repurchase of shares of common
stock of Borrower; and (d) not more than Twenty-Five Percent
(25%) of the value of the consolidated assets of Borrower and its
Subsidiaries (other than any treasury stock of Borrower) is now,
or will at any time be, represented by margin stock. As used in
this Section, the terms "margin stock" and "purpose of buying or
carrying" shall have the respective meanings ascribed to them in
Regulation U of The Board of Governors of the Federal Reserve
System, as amended.
<PAGE>
SECTION 7. EVENTS OF DEFAULT.
If any of the following (each of the following herein
sometimes called an "Event of Default") shall occur and be
continuing:
7.01 Borrower shall fail to pay any of Borrower's
Obligations constituting interest within five (5) days after the
date the same shall first become due and payable, whether by
reason of demand, maturity, acceleration or otherwise;
7.02 Borrower shall fail to pay any of Borrower's
Obligations (other than interest) as and when the same shall
become due and payable, whether by reason of demand, maturity,
acceleration or otherwise;
7.03 Any representation or warranty of Borrower made
in this Agreement, in any other Transaction Document to which
Borrower is a party or in any certificate, agreement, instrument
or statement furnished or made or delivered pursuant hereto or
thereto or in connection herewith or therewith, shall prove to
have been untrue or incorrect in any material respect when made
or effected;
7.04 Borrower shall fail to perform or observe any
term, covenant or provision contained in Section 2.01, Section
3.04, Section 6.01(c), 6.01(h), Section 6.01(k), Section 6.01(l),
Section 6.01(m), Section 6.01(n), Section 6.02 or Section 6.03;
7.05 Borrower shall fail to perform or observe any
term, covenant or provision contained in Section 6.01(a) and any
such failure shall remain unremedied for ten (10) days after the
earlier of (i) written notice of default is given to Borrower by
the Agent or any of the Banks or (ii) a Responsible Officer of
Borrower obtaining knowledge of such default;
7.06 Borrower shall fail to perform or observe any
other term, covenant or provision contained in this Agreement
(other than those specified in Sections 7.01, 7.02, 7.03, 7.04 or
7.05 above) and any such failure shall remain unremedied for
thirty (30) days after the earlier of (i) written notice of
default is given to Borrower by the Agent or any of the Banks or
(ii) a Responsible Officer of Borrower obtaining knowledge of
such default;
62
7.07 This Agreement or any of the other Transaction
Documents shall at any time for any reason cease to be in full
force and effect or shall be declared to be null and void by a
<PAGE>
court of competent jurisdiction, or if the validity or
enforceability thereof shall be contested or denied by Borrower,
or if the transactions completed hereunder or thereunder shall be
contested by Borrower or if Borrower shall deny that it has any
or further liability or obligation hereunder or thereunder;
7.08 Borrower, any other Obligor or any Subsidiary
shall (i) voluntarily commence any proceeding or file any
petition seeking relief under Title 11 of the United States Code
or any other Federal, state or foreign bankruptcy, insolvency,
receivership, liquidation or similar law, (ii) consent to the
institution of, or fail to contravene in a timely and appropriate
manner, any such proceeding or the filing of any such petition,
(iii) apply for or consent to the appointment of a receiver,
trustee, custodian, sequestrator or similar official of itself or
of a substantial part of its Property or assets, (iv) file an
answer admitting the material allegations of a petition filed
against itself in any such proceeding, (v) make a general
assignment for the benefit of creditors, (vi) become unable,
admit in writing its inability or fail generally to pay its debts
as they become due or (vii) take any corporate or other action
for the purpose of effecting any of the foregoing;
7.09 An involuntary proceeding shall be commenced or
an involuntary petition shall be filed in a court of competent
jurisdiction seeking (i) relief in respect of Borrower, any other
Obligor or any Subsidiary, or of a substantial part of the
Property or assets of Borrower, any other Obligor or any
Subsidiary, under Title 11 of the United States Code or any other
Federal, state or foreign bankruptcy, insolvency, receivership,
liquidation or similar law, (ii) the appointment of a receiver,
trustee, custodian, sequestrator or similar official of Borrower,
any other Obligor or any Subsidiary or of a substantial part of
the Property or assets of Borrower, any other Obligor or any
Subsidiary or (iii) the winding-up or liquidation of Borrower,
any other Obligor or any Subsidiary; and such proceeding or
petition shall continue undismissed for thirty (30) consecutive
days or an order or decree approving or ordering any of the
foregoing shall continue unstayed and in effect for thirty (30)
consecutive days;
7.10 Any of the Letter of Credit Applications shall at
any time for any reason cease to be in full force and effect or
shall be declared to be null and void by a court of competent
jurisdiction, or if the validity or enforceability of any of the
Letter of Credit Applications shall be contested or denied by
Borrower, or if Borrower shall deny that it has any further
liability or obligation under any of the Letter of Credit
Applications or if Borrower shall fail to comply with or observe
<PAGE>
any of the terms, provisions or conditions contained in any of
the Letter of Credit Applications;
63
7.11 Borrower, any other Obligor or any Subsidiary
shall be declared by any Bank to be in default on, or pursuant to
the terms of, (1) any other present or future obligation to such
Bank, including, without limitation, any other loan, line of
credit, revolving credit, guaranty or letter of credit
reimbursement obligation, or (2) any other present or future
agreement purporting to convey to such Bank a Lien upon any
Property or assets of Borrower, such other Obligor or such
Subsidiary, as the case may be;
7.12 (i) Borrower or any Subsidiary is in default (as
principal or as guarantor or other surety) in the payment of any
principal of or premium or make-whole amount or interest on any
Debt (other than the Borrower's Obligations) that is outstanding
in an aggregate principal amount of at least $5,000,000.00 beyond
any period of grace provided with respect thereto; (ii) any
Borrower, any other Obligor or any Subsidiary shall be in default
in the performance of or compliance with any term, provision,
condition or covenant contained in any agreement, document or
instrument evidencing, securing, guaranteeing the payment of or
otherwise relating to any Debt having an aggregate outstanding
principal balance equal to or in excess of $5,000,000.00 or any
other condition exists, and as a consequence of such default or
condition described in this clause (ii) such Debt has become, or
has been declared (or one or more Persons are entitled to declare
such Indebtedness to be), due and payable before its stated
maturity or before its regularly scheduled dates of payment; or
(iii) as a consequence of the occurrence or continuation of any
event or condition (other than the passage of time or the right
of the holder of Debt to convert such Debt into equity interests
or a sale of assets or other transaction that permitted if made
in connection with a repayment of Debt), Borrower or any
Subsidiary has become obligated to purchase or repay (or one or
more Persons are entitled to cause Borrower or any Subsidiary to
purchase or repay) Debt in an aggregate principal amount of at
least $5,000,000.00 before its regular maturity or before its
regularly scheduled dates of payment;
7.13 Borrower, any other Obligor or any Subsidiary
shall have a judgment in excess of $1,000,000.00 entered against
it by a court having jurisdiction in the premises and such
judgment shall not be appealed in good faith or satisfied by
Borrower, such other Obligor or such Subsidiary, as the case may
be, within the time period permitted by applicable law for an
appeal of such judgment;
<PAGE>
7.14 The occurrence of a Reportable Event with respect
to any Pension Plan; the filing of a notice of intent to
terminate a Pension Plan by Borrower, any ERISA Affiliate or any
Subsidiary; the institution of proceedings to terminate a Pension
Plan by the PBGC or any other Person; the withdrawal in a
"complete withdrawal" or a "partial withdrawal" as defined in
Sections 4203 and 4205, respectively, of ERISA by Borrower, any
ERISA Affiliate or any Subsidiary from any Multi-Employer Plan;
or the incurrence of any
64
material increase in the contingent liability of Borrower or any
Subsidiary with respect to any "employee welfare benefit plan" as
defined in Section 3(1) of ERISA which covers retired employees
and their beneficiaries;
7.15 The institution by Borrower, any ERISA Affiliate
or any Subsidiary of steps to terminate any Pension Plan if, in
order to effectuate such termination, Borrower, such ERISA
Affiliate or such Subsidiary, as the case may be, would be
required to make a contribution to such Pension Plan, or would
incur a liability or obligation to such Pension Plan, in excess
of $1,000,000.00; or the institution by the PBGC of steps to
terminate any Pension Plan;
7.16 Any "Event of Default" (as defined therein) shall
occur under or within the meaning of any of the Note Agreements;
or
7.17 The occurrence of any Change of Control Event;
THEN, and in each such event (other than an event
described in Sections 7.08 or 7.09), the Agent may, or if
requested in writing by the Required Banks, the Agent shall,
declare that the obligation of the Banks to make Loans under this
Agreement and the obligation of Mercantile to issue Letters of
Credit under this Agreement have terminated, whereupon such
obligations of the Banks and Mercantile shall be immediately and
forthwith terminated, and the Agent may, and if requested in
writing by the Required Banks, the Agent shall, declare the
entire outstanding principal balance of and all accrued and
unpaid interest on the Notes and all of the other Loans under
this Agreement and all of the other Borrower's Obligations to be
forthwith due and payable, whereupon all of the unpaid principal
balance of and all accrued and unpaid interest on the Notes and
all of the other Loans under this Agreement and all such other
Borrower's Obligations shall become and be immediately due and
payable, without presentment, demand, protest or further notice
of any kind, all of which are hereby expressly waived by
Borrower, and the Agent and each of the Banks may exercise any
and all other rights and remedies which they may have under any
<PAGE>
of the other Transaction Documents or under applicable law;
provided, however, that upon the occurrence of any event
described in Sections 7.08 or 7.09, the obligation of the Banks
to make Loans under this Agreement and the obligation of
Mercantile to issue Letters of Credit under this Agreement shall
automatically terminate and the entire outstanding principal
balance of and all accrued and unpaid interest on the Notes and
all of the other Loans under this Agreement and all of the other
Borrower's Obligations shall automatically become immediately due
and payable, without presentment, demand, protest or further
notice of any kind, all of which are hereby expressly waived by
Borrower, and the Agent and each of the Banks may exercise any
and all other rights and remedies which they may have under any
of the other Transaction Documents or under applicable law.
65
SECTION 8. AGENT
8.01 APPOINTMENT. Mercantile Bank National
Association is hereby appointed by the Banks as Agent under this
Agreement, the Notes and the other Transaction Documents. The
Agent agrees to act as such upon the express conditions contained
in this Agreement.
8.02 POWERS. The Agent shall have and may exercise
such powers hereunder as are specifically delegated to the Agent
by the terms of this Agreement and the other Transaction
Documents, together with such powers as are reasonably incidental
thereto. The Agent shall have no implied duties to the Banks,
nor any obligation to the Banks to take any action under this
Agreement or any of the other Transaction Documents, except any
action specifically provided by the this Agreement or any of the
other Transaction Documents to be taken by the Agent. Without
limiting the generality of the foregoing, the Agent shall not be
required to take any action with respect to any Default or Event
of Default, except as expressly provided in Section 7 and Section
8.06.
8.03 GENERAL IMMUNITY. Neither the Agent nor any of
its directors, officers, employees, agents or advisors shall be
liable to any of the Banks for any action taken or not taken by
it in connection with this Agreement or any of the other
Transaction Documents (i) with the consent or at the request of
the Required Banks or (ii) in the absence of its own gross
negligence or willful misconduct.
8.04 NO RESPONSIBILITY FOR LOANS, RECITALS, ETC.
Neither the Agent nor any of its directors, officers, employees,
agents or advisors shall (i) be responsible for or have any duty
to ascertain, inquire into or verify any recitals, reports,
<PAGE>
statements, representations or warranties contained in this
Agreement or any of the other Transaction Documents or furnished
pursuant hereto or thereto; (ii) be responsible for any Loans or
Letters of Credit hereunder, (iii) be bound to ascertain or
inquire as to the performance or observance of any of the terms
of this Agreement or any of the other Transaction Documents; (iv)
be responsible for the satisfaction of any condition specified in
Section 4, except receipt of items required to be delivered to
the Agent; (v) be responsible for the validity, effectiveness,
genuineness or enforceability of this Agreement or any of the
other Transaction Documents; or (vi) be responsible for the
creation, attachment, perfection or priority of any security
interests or liens purported to be granted to the Agent or any of
the Banks pursuant to this Agreement or any of the other
Transaction Documents.
8.05 RIGHT TO INDEMNITY. Notwithstanding any other
provision contained in this Agreement to the contrary, to the
extent Borrower fails to reimburse the Agent pursuant to Section
9.03, Section 9.04 or Section 9.05, or if any Default or Event of
Default shall occur under this Agreement, the Banks shall
66
ratably in accordance with their respective Pro Rata Shares
indemnify the Agent and hold it harmless from and against any and
all liabilities, losses (except losses occasioned solely by
failure of Borrower to make any payments or to perform any
obligations required by this Agreement (excepting those described
in Sections 9.03, 9.04 and 9.05), the Notes, the Letter of Credit
Applications or any of the other Transaction Documents), costs
and/or expenses, including, without limitation, any liabilities,
losses, costs and/or expenses arising from the failure of any
Bank to perform its obligations hereunder or in respect of this
Agreement, and also including, without limitation, reasonable
attorneys' fees and expenses, which the Agent may incur, directly
or indirectly, in connection with this Agreement, the Notes or
any of the other Transaction Documents, or any action or
transaction related hereto or thereto; provided only that the
Agent shall not be entitled to such indemnification for any
losses, liabilities, costs and/or expenses directly and solely
resulting from its own gross negligence or willful misconduct.
This indemnity shall be a continuing indemnity, contemplates all
liabilities, losses, costs and expenses related to the execution,
delivery and performance of this Agreement, the Notes and the
other Transaction Documents, and shall survive the satisfaction
and payment of the Loans, the expiration or other termination of
the Letters of Credit and the termination of this Agreement.
8.06 ACTION UPON INSTRUCTIONS OF REQUIRED BANKS. The
Agent agrees, upon the written request of the Required Banks, to
<PAGE>
take any action of the type specified in this Agreement or any of
the other Transaction Documents as being within the Agent's
rights, duties, powers or discretion. Notwithstanding the
foregoing, the Agent shall be fully justified in failing or
refusing to take any action hereunder, unless it shall first be
indemnified to its satisfaction by the Banks pro rata against any
and all liabilities, losses, costs and expenses (including,
without limitation, attorneys' fees and expenses) which may be
incurred by it by reason of taking or continuing to take any such
action, other than any liability which may arise out of Agent's
gross negligence or willful misconduct. The Agent shall in all
cases be fully protected in acting, or in refraining from acting,
hereunder in accordance with written instructions signed by the
Required Banks, and such instructions and any action taken or
failure to act pursuant thereto shall be binding on all of the
Banks and on all holders of the Notes. In the absence of a
request by the Required Banks, the Agent shall have authority, in
its sole discretion, to take or not to take any action, unless
this Agreement or any of the other Transaction Documents
specifically requires the consent of the Required Banks or of all
of the Banks.
8.07 EMPLOYMENT OF AGENTS AND COUNSEL. The Agent may
execute any of its duties as Agent hereunder by or through
employees, agents and attorneys-in-fact and shall not be
answerable to the Banks, except as to money or securities
received by it or its authorized agents, for the default or
misconduct of any such agents or attorneys-in-fact selected by it
in good faith and with reasonable care. The Agent shall be
entitled to advice and opinion
67
of legal counsel concerning all matters pertaining to the duties
of the agency hereby created.
8.08 RELIANCE ON DOCUMENTS; COUNSEL. The Agent shall
be entitled to rely upon any note, notice, consent, certificate,
affidavit, letter, telegram, statement, paper or document
believed by it to be genuine and correct and to have been signed
or sent by the proper person or persons, and, in respect to legal
matters, upon the opinion of legal counsel selected by the Agent.
8.09 MAY TREAT PAYEE AS OWNER. The Agent may deem and
treat the payee of any Note as the owner thereof for all purposes
hereof unless and until a written notice of the assignment or
transfer thereof shall have been filed with the Agent. Any
request, authority or consent of any person, firm or corporation
who at the time of making such request or giving such authority
or consent is the holder of any such Note shall be conclusive and
<PAGE>
binding on any subsequent holder, transferee or assignee of such
Note or of any Note issued in exchange therefor.
8.10 AGENT'S REIMBURSEMENT. Each Bank agrees to
reimburse the Agent pro rata in accordance with its Pro Rata
Share for any out-of-pocket costs and expenses not reimbursed by
Borrower (a) for which the Agent is entitled to reimbursement by
the Borrower under this Agreement or any of the other Transaction
Documents and (b) for any other out-of-pocket costs and expenses
incurred by the Agent on behalf of the Banks, in connection with
the preparation, execution, delivery, amendment, modification,
extension, renewal, administration and/or enforcement of this
Agreement and/or any of the other Transaction Documents.
8.11 RIGHTS AS A BANK. With respect to its
Commitment, the Loans made by it, the Letters of Credit issued by
it and the Note issued to it, the Agent shall have the same
rights and powers hereunder as any Bank and may exercise the same
as though it were not the Agent, and the terms "Bank" and "Banks"
shall, unless the context otherwise indicates, include the Agent
in its individual capacity. The Agent may accept deposits from,
lend money to, issue letters of credit for the account of and
generally engage in any kind of banking or trust business with
the Borrower and its Subsidiaries and Affiliates as if it were
not the Agent.
8.12 INDEPENDENT CREDIT DECISION. Each Bank
acknowledges that it has, independently and without reliance upon
the Agent or any other Bank and based on the financial statements
referred to in Section 5.04 and such other documents and
information as it has deemed appropriate, made its own credit
analysis and decision to enter into this Agreement and the other
Transaction Documents. Each Bank also acknowledges that it will,
independently and without reliance upon the Agent or any other
Bank and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit
decisions in taking or not taking action under this Agreement and
the other Transaction Documents.
68
8.13 RESIGNATION OF AGENT. Subject to the appointment
of a successor Agent, the Agent may resign as Agent for the Banks
under this Agreement and the other Transaction Documents at any
time by thirty (30) days' notice in writing to the Banks and
Borrower. Such resignation shall take effect upon appointment of
such successor Agent. The Required Banks shall have the right to
appoint a successor Agent who shall be entitled to all of the
rights of, and vested with the same powers as, the original Agent
under this Agreement and the other Transaction Documents. In the
event a successor Agent shall not have been appointed within the
<PAGE>
thirty (30) day period following the giving of notice by the
Agent, the Agent may appoint its own successor. Resignation by
the Agent shall not affect or impair the rights of the Agent
under Sections 8.05 and 8.10 hereof with respect to all matters
preceding such resignation. Any successor Agent must be a
national banking association or a bank chartered in any State of
the United States having a combined capital and surplus of at
least $100,000,000.00.
8.14 REMOVAL OF AGENT. Subject to the appointment of
a successor Agent, the Banks (by a unanimous vote), with the
consent of the Borrower (which consent will not be unreasonably
withheld), may remove the Agent for the Banks under this
Agreement and the other Transaction Documents at any time by
thirty (30) days' notice in writing to the Agent. Such removal
shall take effect upon appointment of such successor Agent. The
Banks shall have the right to appoint a successor Agent who shall
be entitled to all of the rights of, and vested with the same
powers as, the original Agent under this Agreement and the other
Transaction Documents. In the event a successor Agent shall not
have been appointed within the thirty (30) day period following
the giving of notice to the Agent, the Agent may appoint its own
successor. The removal of the Agent shall not affect or impair
the rights of the Agent under Sections 8.05 and 8.10 hereof with
respect to all matters preceding such removal. Any successor
Agent must be a national banking association or a bank chartered
in any State of the United States having a combined capital and
surplus of at least $100,000,000.00.
8.15 DURATION OF AGENCY. The agency established by
Section 8.01 hereof shall continue, and Sections 8.01 through and
including this Section 8.15 shall remain in full force and
effect, until all of the Borrowers' Obligations shall have been
paid in full, all of the Letters of Credit have expired or been
terminated and the Banks' commitments to make Loans, issue
Letters of Credit and/or extend credit to or for the benefit of
the Borrower shall have terminated or expired.
SECTION 9. GENERAL.
9.01 NO WAIVER. No failure or delay by the Agent or
any of the Banks in exercising any right, remedy, power or
privilege hereunder or under any other Transaction Document shall
operate as a waiver thereof; nor shall any single or partial
exercise thereof preclude any other or further exercise thereof
or the exercise of
69
any other right, remedy, power or privilege. The remedies
provided herein and in the other Transaction Documents are
cumulative and not exclusive of any remedies provided by law.
<PAGE>
Nothing herein contained shall in any way affect the right of any
of the Banks to exercise any statutory or common law right of
banker's lien or set-off.
9.02 RIGHT OF SET-OFF. Upon the occurrence and during
the continuance of any Event of Default, each of the Banks is
hereby authorized at any time and from time to time, without
notice to Borrower (any such notice being expressly waived by
Borrower) and to the fullest extent permitted by law, to set-off
and apply any and all deposits (general or special, time or
demand, provisional or final) at any time held by such Bank(s)
and any and all other indebtedness at any time owing by such
Bank(s) to or for the credit or account of Borrower against any
and all of Borrower's Obligations irrespective of whether or not
such Bank(s) shall have made any demand hereunder or under any of
the other Transaction Documents and although such obligations may
be contingent or unmatured. Each of the Banks agrees to promptly
notify Borrower after any such set-off and application made by
such Bank(s), provided, however, that the failure to give such
notice shall not affect the validity of such set-off and
application. The rights of the Banks under this Section 9.02 are
in addition to any other rights and remedies (including, without
limitation, other rights of set-off) which the Banks may have.
Nothing contained in this Agreement or any other Transaction
Document shall impair the right of any of the Banks to exercise
any right of set-off or counterclaim it may have against Borrower
and to apply the amount subject to such exercise to the payment
of indebtedness of Borrower unrelated to this Agreement or the
other Transaction Documents.
9.03 COST AND EXPENSES. Borrower agrees, whether or
not any Loan is made hereunder or any Letter of Credit is issued
hereunder, to pay the Agent and each of the Banks upon demand (i)
all reasonable out-of-pocket costs and expenses and all
Attorneys' Fees of the Agent and each of the Banks in connection
with the preparation, documentation, negotiation and execution of
this Agreement, the Notes, the Letter of Credit Applications and
the other Transaction Documents; provided, however, that such
Attorneys' Fees of Harris Trust and Savings Bank shall not exceed
the sum of $1,500.00 and such Attorneys' Fees of The Sumitomo
Bank, Limited shall not exceed the sum of $1,500.00, (ii) all
recording, filing and search fees and expenses incurred in
connection with this Agreement and the other Transaction
Documents, (iii) all out-of-pocket costs and expenses and all
Attorneys' Fees of the Agent and each of the Banks in connection
with the (A) the preparation, documentation, negotiation and
execution of any amendment, modification, extension or renewal of
this Agreement, the Notes, the Letter of Credit Applications
and/or any of the other Transaction Documents, (B) the
preparation of any waiver or consent hereunder or under any of
the other Transaction Documents or (C) any Default or Event of
<PAGE>
Default or alleged Default or Event of Default hereunder, (iv) if
an Event of Default occurs, all out-of-pocket costs and expenses
and all Attorneys' Fees incurred
70
by the Agent and each of the Banks in connection with such Event
of Default and collection and other enforcement proceedings
resulting therefrom and (v) all other Attorneys' Fees incurred by
the Agent or any of the Banks relating to or arising out of or in
connection with this Agreement or any of the other Transaction
Documents. Borrower further agrees to pay or reimburse the Agent
and each of the Banks for any stamp or other taxes which may be
payable with respect to the execution, delivery, recording and/or
filing of this Agreement, the Notes, the Letter of Credit
Applications or any of the other Transaction Documents. All of
the obligations of Borrower under this Section 9.03 shall survive
the satisfaction and payment of Borrower's Obligations and the
termination of this Agreement.
9.04 ENVIRONMENTAL INDEMNITY. Borrower hereby agrees
to indemnify the Agent and each of the Banks and hold the Agent
and each of the Banks harmless from and against any and all
losses, liabilities, damages, injuries, costs, expenses and
claims of any and every kind whatsoever (including, without
limitation, court costs and attorneys' fees and expenses) which
at any time or from time to time may be paid, incurred or
suffered by, or asserted against, the Agent or any of the Banks
for, with respect to or as a direct or indirect result of the
violation by Borrower or any Subsidiary of any Environmental
Laws; or with respect to, or as a direct or indirect result of
the presence on or under, or the Release from, properties
utilized by Borrower and/or any Subsidiary in the conduct of
their respective businesses into or upon any land, the atmosphere
or any watercourse, body of water or wetland, of any Hazardous
Substances or any other hazardous or toxic waste, substance or
constituent or other substance (including, without limitation,
any losses, liabilities, damages, injuries, costs, expenses or
claims asserted or arising under the Environmental Laws); and the
provisions of and undertakings and indemnification set out in
this Section 9.04 shall survive the satisfaction and payment of
Borrower's Obligations and the termination of this Agreement.
9.05 GENERAL INDEMNITY. In addition to the payment of
expenses pursuant to Section 9.03, whether or not the
transactions contemplated hereby shall be consummated, Borrower
hereby agrees to indemnify, pay and hold the Agent and each of
the Banks and any holder(s) of the Notes, and the officers,
directors, employees, agents and affiliates of the Agent, each of
the Banks and such holder(s) (collectively, the "Indemnitees")
harmless from and against any and all other liabilities,
<PAGE>
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 such Indemnitees in
connection with any investigative, administrative or judicial
proceeding commenced or threatened, whether or not such
Indemnitees shall be designated a party thereto), that may be
imposed on, incurred by or asserted against the Indemnitees, in
any manner relating to or arising out of this Agreement, any of
the other Transaction Documents or any other agreement, document
or instrument executed and delivered by
71
Borrower or any other Obligor in connection herewith or
therewith, the statements contained in any commitment letters
delivered by the Agent or any of the Banks, the agreement of any
of the Banks to make the Loans hereunder, the agreement of
Mercantile to issue the Letters of Credit hereunder or the use or
intended use of the proceeds of any Loan hereunder (collectively,
the "indemnified liabilities"); PROVIDED that Borrower shall have
no obligation to an Indemnitee hereunder with respect to
indemnified liabilities arising from the gross negligence or
willful misconduct of that Indemnitee as determined by a court of
competent jurisdiction in a final nonappealable order. To the
extent that the undertaking to indemnify, pay and hold harmless
set forth in the preceding sentence may be unenforceable because
it is violative of any law or public policy, Borrower shall
contribute the maximum portion that it is permitted to pay and
satisfy under applicable law to the payment and satisfaction of
all indemnified liabilities incurred by the Indemnitees or any of
them. The provisions of the undertakings and indemnification set
out in this Section 9.05 shall survive the satisfaction and
payment of Borrower's Obligations and the termination of this
Agreement.
9.06 AUTHORITY TO ACT. The Agent shall be entitled to
act on any notices and instructions (telephonic or written)
believed by the Agent in good faith to have been delivered by any
person authorized to act on behalf of Borrower pursuant hereto,
regardless of whether such notice or instruction was in fact
delivered by a person authorized to act on behalf of Borrower,
and Borrower hereby agrees to indemnify the Agent and hold the
Agent harmless from and against any and all losses and expenses,
if any, ensuing from any such action.
9.07 NOTICES. Any notice, request, demand, consent,
confirmation or other communication hereunder shall be in writing
and delivered in person or sent by telecopy or registered or
certified mail, return receipt requested and postage prepaid, to
the applicable party at its address or telecopy number set forth
<PAGE>
on the signature pages hereof, or at such other address or
telecopy number as any party hereto may designate as its address
for communications hereunder by notice so given. Such notices
shall be deemed effective on the day on which delivered or sent
if delivered in person or sent by telecopy, or on the third (3rd)
Domestic Business Day after the day on which mailed, if sent by
registered or certified mail; provided, however, that notices to
the Agent under Section 2 and notices to Mercantile under Section
3 shall not be effective until actually received by the Agent or
Mercantile, as the case may be.
9.08 CONSENT TO JURISDICTION; WAIVER OF JURY TRIAL.
BORROWER IRREVOCABLY SUBMITS TO THE NON-EXCLUSIVE JURISDICTION OF
ANY MISSOURI STATE COURT OR ANY UNITED STATES OF AMERICA COURT
SITTING IN THE EASTERN DISTRICT OF MISSOURI, EASTERN DIVISION, AS
THE AGENT MAY ELECT, IN ANY SUIT, ACTION OR PROCEEDING ARISING
OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER TRANSACTION
DOCUMENT. BORROWER HEREBY IRREVOCABLY AGREES THAT ALL CLAIMS IN
RESPECT TO SUCH SUIT, ACTION OR PROCEEDING MAY BE HELD AND
72
DETERMINED IN ANY OF SUCH COURTS. BORROWER IRREVOCABLY WAIVES,
TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH
BORROWER MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY
SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT, AND
BORROWER FURTHER IRREVOCABLY WAIVES ANY CLAIM THAT SUCH SUIT,
ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT
IN AN INCONVENIENT FORUM. BORROWER HEREBY EXPRESSLY WAIVES ALL
RIGHTS OF ANY OTHER JURISDICTION WHICH BORROWER MAY NOW OR
HEREAFTER HAVE BY REASON OF ITS PRESENT OR SUBSEQUENT DOMICILES.
BORROWER AUTHORIZES THE SERVICE OF PROCESS UPON BORROWER BY
REGISTERED MAIL SENT TO BORROWER AT ITS ADDRESS SET FORTH IN
SECTION 9.07. "BORROWER, THE AGENT AND THE BANKS IRREVOCABLY
WAIVE THE RIGHT TO TRIAL BY JURY WITH RESPECT TO ANY ACTION IN
WHICH BORROWER AND THE AGENT AND/OR ANY OF THE BANKS ARE PARTIES
RELATING TO OR ARISING OUT OF OR IN CONNECTION WITH THIS
AGREEMENT OR ANY OF THE OTHER TRANSACTION DOCUMENTS."
9.09 GOVERNING LAW. This Agreement, the Notes, the
Letter of Credit Applications and all of the other Transaction
Documents shall be governed by and construed in accordance with
the substantive laws of the State of Missouri (without reference
to conflict of law principles).
9.10 AMENDMENTS AND WAIVERS. Any provision of this
Agreement, the Notes, the Letter of Credit Applications or any of
the other Transaction Documents may be amended or waived if, but
only if, such amendment or waiver is in writing and is signed by
Borrower and the Required Banks (and, if the rights or duties of
the Agent in its capacity as Agent are affected thereby, by the
<PAGE>
Agent; and if the rights or duties of Mercantile in its capacity
as the issuer or the Letters of Credit are affected thereby, by
Mercantile); provided that no such amendment or waiver shall,
unless signed by all of the Banks, (i) increase the Commitment of
any Bank, (ii) reduce the principal amount of or rate of interest
on any Loan or any fees hereunder (other than any fees relating
to the Letters of Credit other than Letter of Credit Commitment
Fees and Letter of Credit Negotiation Fees), (iii) postpone the
date fixed for any payment of principal of or interest on any
Loan or any fees hereunder, (iv) change the percentage of the
Commitments or of the aggregate principal amount of Loans or
Letters of Credit or the number of Banks which shall be required
for the Banks or any of them to take any action or obligations
under this Section or any other provision of this Agreement, (v)
change the definition of "Required Banks" or (vi) amend this
Section 9.10.
9.11 REFERENCES; HEADINGS FOR CONVENIENCE. Unless
otherwise specified herein, all references herein to Section
numbers refer to Section numbers of this Agreement, all
references herein to EXHIBITS "A", "B", "C", "D", "E", "F", "F-1"
and "G" refer to annexed EXHIBITS "A", "B", "C", "D", "E", "F",
"F-1" and "G" which are hereby incorporated herein by reference
and all references herein to SCHEDULES 3.02, 5.05, 5.07, 5.08,
5.10, 5.12, 5.16, 5.17 and 6.02(l) refer to annexed SCHEDULES
3.02, 5.05, 5.07, 5.08, 5.10, 5.12, 5.16, 5.17 and 6.02(l) which
are hereby incorporated herein by reference. The Section
headings are
73
furnished for the convenience of the parties and are not to be
considered in the construction or interpretation of this
Agreement.
9.12 SUCCESSORS AND ASSIGNS. (a) The provisions of
this Agreement shall be binding upon and inure to the benefit of
the parties hereto and their respective successors and assigns,
except that Borrower may not assign or otherwise transfer any of
its rights or delegate any of its obligations or duties under
this Agreement without the prior written consent of the Agent and
each of the Banks.
(b) Any Bank may at any time grant to one or more
banks or other financial institutions (each a "Participant")
participating interests in its Commitment, any or all of its
Loans or its interest in any of the Letters of Credit. In the
event of any such grant by a Bank of a participating interest to
a Participant, whether or not upon notice to Borrower and the
Agent, such Bank shall remain responsible for the performance of
its obligations hereunder, and Borrower and the Agent shall
continue to deal solely and directly with such Bank in connection
<PAGE>
with such Bank's rights and obligations under this Agreement.
Any agreement pursuant to which any Bank may grant such a
participating interest shall provide that such Bank shall retain
the sole right and responsibility to enforce the obligations of
Borrower hereunder including, without limitation, the right to
approve any amendment, modification or waiver of any provision of
this Agreement; provided, that such participation agreement may
provide that such Bank will not agree to any modification,
amendment or waiver of this Agreement described in clauses (i),
(ii) and (iii) of the proviso to Section 9.10 of this Agreement
without the consent of the Participant. Borrower agrees that
each Participant shall, to the extent provided in its
participation agreement, be entitled to the benefits of Sections
2.10, 2.11, 2.12, 2.13, 2.14, 2.15, 2.16 and 2.17 of this
Agreement with respect to its participating interest. An
assignment or other transfer which is not permitted by subsection
(c) or (d) below shall be given effect for purposes of this
Agreement only to the extent of a participating interest granted
in accordance with this subsection (b).
(c) Any Bank may at any time assign to one or more
banks or other financial institutions (each an "Assignee") all,
or a proportionate part of all, of its rights and obligations
under this Agreement and its Note, and such Assignee shall assume
such rights and obligations, pursuant to an Assignment and
Assumption Agreement in substantially the form of EXHIBIT H
attached hereto executed by such Assignee and such transferor
Bank, with (and subject to) the subscribed consent of Borrower
and the Agent, which, in each case, shall not be unreasonably
withheld or delayed; provided, however, that (i) if any Assignee
is an affiliate of such transferor Bank or, immediately prior to
such assignment, a Bank, no consent shall be required and (ii) if
any Event of Default under this Agreement has occurred and is
continuing no consent of Borrower to such assignment shall be
required. Upon execution and delivery of such instrument and
payment by such Assignee to such transferor Bank of an amount
equal to the purchase price agreed between such
74
transferor Bank and such Assignee, such Assignee shall be a Bank
party to this Agreement and shall have all the rights and
obligations of a Bank with a Commitment as set forth in such
instrument of assumption, and the transferor Bank shall be
released from its obligations hereunder to a corresponding
extent, and no further consent or action by any party shall be
required. Upon the consummation of any assignment pursuant to
this subsection (c), the transferor Bank, the Agent, Mercantile
and Borrower shall make appropriate arrangements so that, if
required, new Note(s) and/or Letter of Credit Participation
Certificate(s) are issued to the Assignee. In connection with
<PAGE>
any such assignment, the transferor Bank shall pay to the Agent
an administrative fee for processing such assignment in the
amount of $2,500.00.
(d) Any Bank may at any time assign all or any
portion of its rights under this Agreement and its Note to a
Federal Reserve Bank. No such assignment shall release the
transferor Lender from any of its obligations hereunder.
9.13 NO ORAL AGREEMENTS; ENTIRE AGREEMENT. "ORAL
AGREEMENTS OR COMMITMENTS TO LOAN MONEY, EXTEND CREDIT OR TO
FORBEAR FROM ENFORCING REPAYMENT OF A DEBT, INCLUDING PROMISES TO
EXTEND OR RENEW SUCH DEBT, ARE NOT ENFORCEABLE. TO PROTECT
BORROWER, THE AGENT AND THE BANKS FROM MISUNDERSTANDING OR
DISAPPOINTMENT, ANY AGREEMENTS REACHED BY BORROWER, THE AGENT AND
THE BANKS COVERING SUCH MATTERS ARE CONTAINED IN THIS AGREEMENT
AND THE OTHER TRANSACTION DOCUMENTS, WHICH AGREEMENT AND OTHER
TRANSACTION DOCUMENTS ARE A COMPLETE AND EXCLUSIVE STATEMENT OF
THE AGREEMENTS AMONG BORROWER, THE AGENT AND THE BANKS, EXCEPT AS
BORROWER, THE AGENT AND THE BANKS MAY LATER AGREE IN WRITING TO
MODIFY THEM." This Agreement embodies the entire agreement and
understanding between the parties hereto and supersedes all prior
agreements and understandings (oral or written) relating to the
subject matter hereof.
9.14 SEVERABILITY. In the event any one or more of
the provisions contained in this Agreement should be invalid,
illegal or unenforceable in any respect, the validity, legality
and enforceability of the remaining provisions contained herein
shall not in any way be affected or impaired thereby.
9.15 COUNTERPARTS. This Agreement may be executed in
any number of counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and the
same instrument.
9.16 RESURRECTION OF BORROWER'S OBLIGATIONS. To the
extent that any of the Banks receives any payment on account of
any of Borrower's Obligations, and any such payment(s) or any
part thereof are subsequently invalidated, declared to be
fraudulent or preferential, set aside, subordinated and/or
required to be repaid to a trustee, receiver or any other Person
under any bankruptcy act, state or Federal law, common law or
equitable cause, then, to the extent of such payment(s) received,
Borrower's Obligations or part thereof intended to be satisfied
and any and all Liens upon or
75
pertaining to any Property or assets of Borrower and theretofore
created and/or existing in favor of such Bank(s) as security for
<PAGE>
the payment of such Borrower's Obligations shall be revived and
continue in full force and effect, as if such payment(s) had not
been received by such Bank(s) and applied on account of
Borrower's Obligations.
9.17 INDEPENDENCE OF COVENANTS. All of the covenants
contained in this Agreement and the other Transaction Documents
shall be given independent effect so that if a particular action,
event or condition is prohibited by any one of such covenants,
the fact that it would be permitted by an exception to, or
otherwise be in compliance within the provisions of, another
covenant shall not avoid the occurrence of a Default or Event of
Default if such action is taken, such event occurs or such
condition exists.
9.18 COLLATERAL. Each of the Banks represents to the
Agent and each of the other Banks that it in good faith is not
relying upon any "margin stock" (as defined in Regulation U of
the Board of Governors of the Federal Reserve System, as amended)
as collateral in the extension or maintenance of the credit
provided for in this Agreement.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
76
<PAGE>
IN WITNESS WHEREOF, Borrower, the Agent and the Banks
have executed this Revolving Credit Agreement this 16th day of
June, 1997.
CPI CORP.
/s/ Barry Arthur
------------------------------------
Barry Arthur
Executive Vice President, CFO
1706 Washington Avenue
St. Louis, Missouri 63103
Attention: Chief Financial Officer
Telecopy No.: (314) 878-4537
MERCANTILE BANK NATIONAL ASSOCIATION
/s/ Timothy W. Hassler
------------------------------------
Timothy W. Hassler
Assistant Vice President
721 Locust Street
St. Louis, Missouri 63101
Attention: Large Corporate Accounts
Telecopy No.: (314) 425-2162
HARRIS TRUST AND SAVINGS BANK
/s/ Donald J. Buse
------------------------------------
Donald J. Buse
Vice President
111 West Monroe Street
Chicago, Illinois 60690
Attention:__________________________
Telecopy No.: (312) 461-2591
THE SUMITOMO BANK, LIMITED
/s/ Michael F. Murphy
------------------------------------
Michael F. Murphy
Vice President and Manager
<PAGE>
/s/ Teresa A. Lekich
------------------------------------
Teresa A. Lekich
Vice President
200 North Broadway
Suite 1625
St. Louis, Missouri 63102
Attention: _________________________
Telecopy No.: (314) 241-0736
77
MERCANTILE BANK NATIONAL ASSOCIATION,
as Agent
/s/ Timothy W. Hassler
------------------------------------
Timothy W. Hassler
Assistant Vice President
721 Locust Street
St. Louis, Missouri 63101
Attention: Large Corporate Accounts
Telecopy No.: (314) 425-2162
78
<PAGE>
SCHEDULE 3.02
EXISTING LETTERS OF CREDIT
1. Mercantile Bank of St. Louis National Association
Irrevocable Standby Letter of Credit No. 210-2706936 in the
amount of $312,351.00 issued for the account of CPI Corp.
and for the benefit of American Motorist Insurance, as
amended.
2. Mercantile Bank of St. Louis National Association
Irrevocable Standby Letter of Credit No. 210-2706935 in the
amount of $72,777.00 issued for the account of CPI Corp. and
for the benefit of American Motorist Insurance, as amended.
3. Mercantile Bank of St. Louis National Association
Irrevocable Standby Letter of Credit No. 210-2707674 in the
amount of $3,500,000.00 issued for the account of CPI Corp.
and for the benefit of Travelers Insurance Company, as
amended.
79
<PAGE>
SCHEDULE 5.05
LITIGATION
NONE
80
<PAGE>
SCHEDULE 5.07
TAX MATTERS
The U.S. Department of Treasury and Revenue Canada have recently
agreed to a settlement of a dispute over royalties CPI U.S.
charges its Canadian subsidiary. The settlement will result in
a refund of approximately $350,000.00 from the IRS and additional
taxes paid to Revenue Canada of approximately $400,000.00. All
other disputed matters have been resolved with the IRS.
As of the date of this Agreement, there are no other material
proposed adjustments or disputed tax matters.
81
<PAGE>
SCHEDULE 5.08
<TABLE>
SUBSIDIARIES AS OF JUNE 16, 1997
<CAPTION>
STATE/PROVINCE # OF SHARES
SUBSIDIARIES COUNTRY AUTHORIZED
<S> <C> <C>
CPI Corp. Delaware, USA 4,000
Consumer Programs
Holding, Inc.("CPHI") Delaware, USA 1,000
Consumer Programs,
Incorporated("Programs")
d/b/a Sears Portrait Studios Missouri, USA 6,000
CPI Images, L. L. C. Missouri, USA --
CPI Properties, L.L.C. Missouri, USA --
CPI Management Services,
L.L.C. Missouri, USA --
CPI Research and
Development, Inc. Delaware, USA 1,000
Consumer Programs Partner,
Inc. Delaware, USA 1,000
Fox Photo, Inc. ("Fox")
d/b/a CPI Photo Finish One
Hour Photo, Inc.
d/b/a Fox Photo 1-Hour Lab
Inc. Delaware, USA 2,041
Fox Photo Partner, Inc. Delaware, USA 1,000
Proex Photo Systems, Inc.
d/b/a Proex Portrait &
Photo
d/b/a Proex Photo & Lab
d/b/a Proex Photo
d/b/a Mainstreet Portraits Missouri, USA 5,000
CPI Prints Plus, Inc. ("PP") Delaware, USA 3,000
Ridgedale Prints Plus, Inc.
("RPP")
d/b/a Prints Plus Minnesota, USA 100
Prints Plus, Inc.
d/b/a Prints Plus California, USA 50,000
CPI Technology Corp. Missouri, USA 3,000
CPI Corp. Canada
d/b/a Sears Portrait Studios Ontario, Canada 4,000
</TABLE>
<PAGE>
SCHEDULE 5.08 (...continued)
<TABLE>
SUBSIDIARIES AS OF JUNE 16, 1997
<CAPTION>
# OF SHARES
SUBSIDIARIES OUTSTANDING HOLDINGS
<S> <C> <C>
CPI Corp. 4 --
Consumer Programs
Holding, Inc.("CPHI") 100 CPI-100%
Consumer Programs,
Incorporated("Programs")
d/b/a Sears Portrait Studios 50 CPHI-100%
CPI Images, L. L. C. -- Programs-100%
CPI Properties, L.L.C. -- Programs-100%
CPI Management Services,
L.L.C. -- Programs-100%
CPI Research and
Development, Inc. 1,000 Programs-100%
Consumer Programs Partner,
Inc. 1,000 Programs-100%
Fox Photo, Inc. ("Fox")
d/b/a CPI Photo Finish One
Hour Photo, Inc.
d/b/a Fox Photo 1-Hour Lab
Inc. 2,041 CPHI-49%
Fox Photo Partner, Inc. 1 Fox-100%
Proex Photo Systems, Inc.
d/b/a Proex Portrait &
Photo
d/b/a Proex Photo & Lab
d/b/a Proex Photo
d/b/a Mainstreet Portraits 500 Fox-100%
CPI Prints Plus, Inc. ("PP") 3,000 CPHI-100%
Ridgedale Prints Plus, Inc.
("RPP")
d/b/a Prints Plus 100 PP-100%
Prints Plus, Inc.
d/b/a Prints Plus 50,000 RPP-100%
CPI Technology Corp. 3,000 CPI-100%
CPI Corp. Canada
d/b/a Sears Portrait Studios 4 CPI-100%
</TABLE>
82
<PAGE>
SCHEDULE 5.10
<TABLE>
OTHER DEBT, GUARANTIES AND CAPITALIZED LEASES
<CAPTION>
NAME AMOUNT DESCRIPTION
<S> <C> <C>
Principal/Prudential $ 55,000,000 Senior long-term-debt--
Senior Notes see further disclosure in
Note A
CPI Corp. Revolving - CPI Corp. revolving credit
Credit Agreement agreement with Mercantile
Bank of St.Louis, Harris
Trust and Savings Bank,
and The Sumitomo Bank,
Limited--maximum borrowing
limit: $60,000,000--
covenants similar to Senior
Notes-see Note A
St. Louis Equity Fund 40,799 Investment in St. Louis
------------- Equity Fund 1990 Limited
Partnership
45,040,799
Insurance Costs (145,129) Senior long-term debt--see
------------- further disclosure in
Note A
Total as of May 24, 44,895,670
1997 financial
statements
Bank of America 147,000 Commercial letter of credit
Commercial Line of for CPI Prints Plus, Inc.,
Credit a wholly-owned subsidiary
of CPI Corp.
Royal Bank of Canada 7,270* Standby letter of credit to
Irrevocable Standby ------------- Brampton Hydro Electric
Letter of Credit Commission for CPI
Corporation Canada, a
wholly-owned subsidiary of
CPI Corp.(Canadian dollars
$10,000)
Total $ 45,049,940
=============
<FN>
* Exchange rate of .7270 Canadian to US dollars used
</FN>
</TABLE>
<PAGE>
SCHEDULE 5.10 (...continued)
OTHER DEBT, GUARANTIES AND CAPITALIZED LEASES (...continued)
NOTE A
On August 31, 1993, CPI Corp. privately placed senior notes
in the amount of $60,000,000 (the "Note Agreement") with
two insurance companies. The notes, issued pursuant to the
Note Agreement, mature over a seven-year period with an
average maturity of 5.42 years and with the first principal
payment due at the end of the third year. Interest on the
notes is payable semi-annually at an average effective
fixed rate of 6.44%. The Note Agreement requires the
Company maintain certain financial ratios and comply with
certain restrictive covenants including a limitation on
dividend payment, purchase of treasury stock and certain
restricted investments are not to exceed $25,000,000 plus
50% of net earnings (or less 100% of net losses) credited
at the end of each fiscal year. The Company incurred
$459,000 in issuance costs associated with the private
placement of the notes. These costs are being amortized
ratably over the seven-year life of the notes.
The Company's performance of the conditions of the Note
Agreement and the underlying notes issued under the
agreement was originally secured by a pledge of the stock
of the Company's direct subsidiaries. As the Company
achieved the stipulated financial ratios required by the
agreement to release the pledge of stock and pursuant to the
direction of the lenders, on June 5, 1995, the lien on the
pledged shares of the Company's direct, wholly owned
subsidiaries was released.
The Note Agreement has been amended on the following dates:
February 24, 1994, June 14, 1994, September 18, 1995,
October 2,1 996 and April 11, 1997.
CPI Corp. guarantees all lines of credits to its subsidiaries
and routinely guarantees leases entered into by subsidiaries.
There are numerous intercompany accounts payable and notes
arising in the ordinary course of the business of the Company
and its subsidiaries.
The above information represents both short- and long-term debt
agreements of CPI Corp. as of its most recent fiscal period
close, May 24, 1997. No additional short- or long-term debt,
loan or guarantees agreements have been entered into as of
June 16, 1995.
83
<PAGE>
SCHEDULE 5.12
EXISTING LIENS
NONE
84
<PAGE>
SCHEDULE 5.16
PATENTS, LICENSES, TRADEMARKS, ETC.
NONE
85
<PAGE>
SCHEDULE 5.17
ENVIRONMENTAL AND HEALTH AND SAFETY MATTERS
Borrower and its Subsidiaries are required by Federal, state and
local wastewater authorities to report or respond to any
exceedance of assigned wastewater discharge limits. To date, all
reports or violation notices were minor and had no Material
Adverse Effect on the operations of Borrower and its
Subsidiaries.
86
<PAGE>
SCHEDULE 6.02(l)
RESTRICTIVE AGREEMENTS
NONE
87
<PAGE>
EXHIBIT A
REVOLVING CREDIT NOTE
$________________ St. Louis, Missouri
June 16, 1997
FOR VALUE RECEIVED, on the last day of the Revolving
Credit Period, the undersigned, CPI CORP., a Delaware corporation
("Borrower"), hereby promises to pay to the order of ___________
__________________________________ ("Bank"), the principal sum of
_______________ Million Dollars ($______________), or such lesser
sum as may then constitute the aggregate unpaid principal amount
of all Revolving Credit Loans made by Bank to Borrower pursuant
to the Revolving Credit Agreement referred to below. The
aggregate principal amount of Revolving Credit Loans which Bank
shall be committed to have outstanding hereunder at any time
shall not exceed _____________ Million Dollars ($_________),
which amount may be borrowed, paid, reborrowed and repaid, in
whole or in part, subject to the terms and conditions hereof and
of the Revolving Credit Agreement referred to below. Borrower
further promises to pay to the order of Bank interest on the
aggregate unpaid principal amount of such Revolving Credit Loans
on the dates and at the rate or rates provided for in the
Revolving Credit Agreement. All such payments of principal and
interest shall be made in lawful currency of the United States in
Federal or other immediately available funds at the office of
Mercantile Bank National Association, 721 Locust Street, St.
Louis, Missouri 63101.
All Revolving Credit Loans made by Bank and all
repayments of the principal thereof shall be recorded by Bank on
its books and records. Bank's books and records showing the
account between Bank and Borrower shall be admissible in evidence
in any action or proceeding and shall constitute prima facie
proof of the items therein set forth.
This Note is one of the "Notes" referred to in the
Revolving Credit Agreement dated the date hereof by and among
Borrower, the banks listed on the signature pages thereof and
Mercantile Bank National Association, as agent (as the same may
from time to time be amended, modified, extended or renewed, the
"Revolving Credit Agreement"). The Revolving Credit Agreement,
among other things, contains provisions for acceleration of the
maturity hereof upon the occurrence of certain stated events and
also for prepayments on account of principal hereof and interest
hereon prior to the maturity hereof upon the terms and conditions
specified therein. All capitalized terms used and not otherwise
defined in this Note shall have the respective meanings ascribed
to them in the Revolving Credit Agreement.
<PAGE>
Upon the occurrence of any Event of Default under the
Revolving Credit Agreement, Bank's obligation to make additional
Revolving Credit Loans under this Note may be terminated in the
88
manner and with the effect as provided in the Revolving Credit
Agreement and the entire outstanding principal balance of this
Note and all accrued and unpaid interest thereon may be declared
to be immediately due and payable in the manner and with the
effect as provided in the Revolving Credit Agreement.
In the event that any payment due hereunder shall not
be paid when due, whether by reason of maturity, acceleration or
otherwise, and this Note shall be placed in the hands of an
attorney or attorneys for collection, or if this Note shall be
placed in the hands of an attorney or attorneys for
representation of Bank in connection with bankruptcy or
insolvency proceedings relating hereto, Borrower hereby agrees to
pay to the order of Bank, in addition to all other amounts
otherwise due hereon, the costs and expenses of such collection
and representation, including, without limitation, reasonable
attorneys' fees and expenses (whether or not litigation shall be
commenced in aid thereof). Borrower hereby waives presentment
for payment, demand, protest, notice of protest and notice of
dishonor.
This Note shall be governed by and construed in
accordance with the substantive laws of the State of Missouri
(without reference to conflict of law principles).
CPI CORP.
By_____________________________
Title:_________________________
89
<PAGE>
EXHIBIT B
LETTER OF CREDIT REQUEST
[Borrower's Letterhead]
[Date]
Mercantile Bank National Association
721 Locust Street
St. Louis, Missouri 63101
Attention: Large Corporate Accounts
Gentlemen:
Reference is hereby made to that certain Revolving
Credit Agreement dated June 16, 1997, by and among the
undersigned, the banks listed on the signature pages thereof and
Mercantile Bank National Association, as agent for the Banks (as
the same may from time to time be amended, modified, extended or
renewed, the "Revolving Credit Agreement"). All capitalized
terms used and not otherwise defined herein shall have the
respective meanings ascribed to them in the Revolving Credit
Agreement.
Pursuant to Section 3.01 of the Revolving Credit
Agreement, the undersigned hereby requests that you issue an
irrevocable [standby] [commercial] Letter of Credit in the amount
of $__________ for the account of the undersigned and for the
benefit of __________________________ upon the terms and
conditions set forth in the attached Application and Agreement
for Irrevocable [Standby] [Commercial] Letter of Credit.
The undersigned hereby represents and warrants to you
that as of the date hereof all of the representations and
warranties of the undersigned contained in the Revolving Credit
Agreement are true and correct in all material respects as if
made on and as of the date hereof and no Default or Event of
Default under the Revolving Credit Agreement has occurred and is
continuing and that no such Default or Event of Default will
result from the issuance of the Letter of Credit request hereby.
Very truly yours,
CPI CORP.
By____________________________
Title:________________________
90
<PAGE>
EXHIBIT C
APPLICATION AND AGREEMENT FOR IRREVOCABLE STANDBY LETTER OF
CREDIT
(This Exhibit contains Mercantile's standard form of application
and agreement for irrevocable standby letter of credit.)
91
<PAGE>
EXHIBIT D
APPLICATION AND AGREEMENT FOR IRREVOCABLE COMMERCIAL LETTER OF
CREDIT
(This Exhibit contains Mercantile's standard form of application
and agreement for irrevocable commercial letter of credit.)
92
<PAGE>
EXHIBIT E
LETTER OF CREDIT PARTICIPATION CERTIFICATE
This Letter of Credit Participation Certificate is
issued pursuant to Section 3.03 of that certain Revolving Credit
Agreement dated June 16, 1997, by and among CPI Corp., the banks
listed on the signature pages thereof and Mercantile Bank
National Association, as agent for the Banks, as the same may
from time to time be amended, modified, extended or renewed (the
"Revolving Credit Agreement"). All capitalized terms used and
not otherwise defined herein shall have the respective meanings
ascribed to them in the Revolving Credit Agreement.
Subject to the terms, provisions and conditions
contained in the Revolving Credit Agreement, Mercantile hereby
issues to _______________________________ a __________________
Percent (____________%) undivided participation interest in all
Letters of Credit issued by Mercantile from time to time under
the Revolving Credit Agreement (including, without limitation, an
undivided participation interest in the reimbursement risk
relating to such Letters of Credit, in all payments and Letter of
Credit Loans made by Mercantile in connection with such Letters
of Credit and in all collateral securing such Letters of Credit
and such Letter of Credit Loans).
This Certificate may be signed in any number of
counterparts, each of which shall be an original, with the same
effect as if the signatures thereto and hereto were on the same
instrument.
Executed this 16th day of June, 1997.
MERCANTILE BANK NATIONAL ASSOCIATION
By:________________________________
Title:_____________________________
The foregoing Letter of Credit Participation
Certificate is hereby accepted this 16th day of June, 1997.
___________________________________
By:________________________________
Title:_____________________________
93
<PAGE>
EXHIBIT F
FORM OF LEGAL OPINION OF WHITE & CASE
(This Exhibit contains opinions received from White & Case,
special counsel for the Company.)
96
<PAGE>
EXHIBIT F-1
FORM OF LEGAL OPINION OF GENERAL COUNSEL OF BORROWER
(This Exhibit contains opinions received from Jane E. Nelson,
Esq., General Counsel of the Company.)
101
<PAGE>
EXHIBIT G
_________________, 19_____
Mercantile Bank National Association
721 Locust Street
St. Louis, Missouri 63101
Harris Trust and Savings Bank
111 West Monroe Street
Chicago, Illinois 60690
The Sumitomo Bank, Limited
200 North Broadway
Suite 1625
St. Louis, Missouri 63102
Mercantile Bank National
Association, as Agent
721 Locust Street
St. Louis, Missouri 63101
Gentlemen:
Reference is hereby made to that certain Revolving
Credit Agreement dated June 16, 1997, by and among the
undersigned, the banks listed on the signature pages thereof and
Mercantile Bank National Association, as agent for the Banks (as
the same may from time to time be amended, modified, extended or
renewed, the "Revolving Credit Agreement"). All capitalized
terms used and not otherwise defined herein shall have the
respective meanings ascribed to them in the Revolving Credit
Agreement.
The undersigned hereby certifies to you that as of the
date hereof:
(a) all of the representations and warranties of the
Borrower contained in the Revolving Credit Agreement are true and
correct in all material respects as if made on and as of the date
hereof;
(b) no violation or breach of any of the affirmative
covenants of the Borrower contained in the Revolving Credit
Agreement has occurred and is continuing;
(c) no violation or breach of any of the negative
covenants of the Borrower contained in the Revolving Credit
Agreement has occurred and is continuing;
<PAGE>
(d) no Default or Event of Default under or within the
meaning of the Revolving Credit Agreement has occurred and is
continuing;
102
(e) the financial statements of Borrower and its
Subsidiaries delivered to you with this letter are true, correct
and complete and have been prepared in accordance with generally
accepted accounting principles consistently applied; and
(f) the financial covenant information set forth in
SCHEDULE 1 to this letter is true and correct.
Very truly yours,
CPI CORP.
By:____________________________
Title:_________________________
103
<PAGE>
SCHEDULE 1
Financial Covenant Information
____as of___________, 19______
FINANCIAL COVENANT ACTUAL REQUIRED
104
<PAGE>
EXHIBIT H
ASSIGNMENT AND ASSUMPTION AGREEMENT
THIS ASSIGNMENT AND ASSUMPTION AGREEMENT (this
"Agreement") is made and entered into as of ____________, 19___,
by and among [ASSIGNOR] (the "Assignor"), [ASSIGNEE] (the
"Assignee"), CPI CORP., a Delaware corporation (the "Borrower"),
and MERCANTILE BANK NATIONAL ASSOCIATION, as Agent (the "Agent").
WITNESSETH:
WHEREAS, this Agreement relates to the Revolving Credit
Agreement dated June 16, 1997, by and among Borrower, the
Assignor and the other Banks party thereto, as Banks, and the
Agent, as amended (the "Revolving Credit Agreement");
WHEREAS, as provided under the Revolving Credit
Agreement, (a) the Assignor has a Commitment to make Revolving
Credit Loans to Borrower in an aggregate principal amount at any
one time outstanding not to exceed $_______________ and (b) the
Assignor has a ________________ Percent (______%) [participation]
interest in each of the Letter(s) of Credit (including, without
limitation, all Letter of Credit Loans made with respect
thereto);
WHEREAS, as of the date hereof, (a) the aggregate
outstanding principal amount of all Revolving Credit Loans made
by the Assignor to Borrower is $________________, (b) the
aggregate outstanding principal amount of all Letter of Credit
Loans made by to Borrower is $_________________ and (c) the
aggregate undrawn face amount of all of the outstanding Letter(s)
of Credit is $______________ ; and
WHEREAS, the Assignor proposes to assign to the
Assignee a __________________ Percent (________%) interest in all
of the rights and obligations of the Assignor under the Revolving
Credit Agreement, including, without limitation, all of the
rights and obligations of the Assignor under the Revolving Credit
Agreement in respect of its Commitment, its Revolving Credit
Loans, its Pro Rata Share of the undrawn face amount of each of
the Letter(s) of Credit and its Pro Rata Share of each of the
Letter of Credit Loans (the "Assigned Percentage"), and the
Assignee proposes to accept assignment of such rights and assume
the corresponding obligations from the Assignor on such terms;
NOW, THEREFORE, in consideration of the foregoing and
the mutual agreements contained herein, the parties hereto agree
as follows:
SECTION 1. DEFINITIONS. All capitalized terms not
otherwise defined herein shall have the respective meanings set
forth in the Revolving Credit Agreement.
<PAGE>
SECTION 2. ASSIGNMENT. The Assignor hereby assigns
and sells to the Assignee all of the rights of the Assignor under
the
105
Revolving Credit Agreement to the extent of the Assigned
Percentage, and the Assignee hereby accepts such assignment from
the Assignor and assumes all of the obligations of the Assignor
under the Revolving Credit Agreement to the extent of the
Assigned Percentage, including the purchase from the Assignor of
the corresponding portion of the principal amount of the Loans
made by the Assignor outstanding at the date hereof. Upon the
execution and delivery hereof by the Assignor, the Assignee,
Borrower and the Agent and the payment of the amounts specified
in Section 3 required to be paid on the date hereof (i) the
Assignee shall, as of the date hereof, succeed to the rights and
be obligated to perform the obligations of a Bank under the
Revolving Credit Agreement with a Commitment in an amount equal
to $____________, and (ii) the Commitment of the Assignor shall,
as of the date hereof, be reduced by a like amount and the
Assignor released from its obligations under the Revolving Credit
Agreement to the extent such obligations have been assumed by the
Assignee. The assignment provided for herein shall be without
recourse to the Assignor.
SECTION 3. PAYMENTS. As consideration for the
assignment and sale contemplated in Section 2 hereof, the
Assignee shall pay to the Assignor on the date hereof in Federal
funds the amount heretofore agreed between them.* It is
understood that commitment and/or facility fees accrued to but
excluding the date hereof with respect to the Assigned Percentage
are for the account of the Assignor and such fees accruing from
and including the date hereof are for the account of the
Assignee. Each of the Assignor and the Assignee hereby agrees
that if it receives any amount under the Revolving Credit
Agreement which is for the account of the other party hereto, it
shall receive the same for the account of such other party to the
extent of such other party's interest therein and shall promptly
pay the same to such other party.
[SECTION 4. CONSENT OF THE BORROWER AND THE AGENT.
This Agreement is conditioned upon the consent of the Borrower
and the Agent pursuant to Section 9.12(c) of the Revolving Credit
Agreement. The execution of this Agreement by the Borrower and
the Agent is evidence of this consent. Pursuant to Section
9.12(c) of the Revolving Credit Agreement, the Borrower agrees to
execute and deliver a Note payable to the order of the Assignee
and Mercantile agrees to execute and deliver a Letter of Credit
Participation Certificate with respect to the Letter(s) of Credit
to the Assignee to evidence the assignment and assumption
provided for herein.]
<PAGE>
SECTION 5. NON-RELIANCE ON ASSIGNOR. The Assignor
makes no representation or warranty in connection with, and shall
have no responsibility with respect to, the solvency, financial
condition,
* Amount should combine principal together with accrued
interest and breakage compensation, if any, to be paid by the
Assignee, net of any portion of any upfront fee to be paid by the
Assignor to the Assignee. It may be preferable in an appropriate
case to specify these amounts generically or by formula rather
than as a fixed sum.
106
or statements of Borrower, or the validity and enforceability of
the obligations of Borrower in respect of the Revolving Credit
Agreement, any Note or any other Transaction Document. The
Assignee acknowledges that it has, independently and without
reliance on the Assignor, and based on such documents and
information as it has deemed appropriate, made its own credit
analysis and decision to enter into this Agreement and will
continue to be responsible for making its own independent
appraisal of the business, affairs and financial condition of
Borrower.
SECTION 6. GOVERNING LAW. This Agreement shall be
governed by and construed in accordance with the substantive laws
of the State of Missouri (without reference to conflict of law
principles).
SECTION 7. COUNTERPARTS. This Agreement may be signed
in any number of counterparts, each of which shall be an
original, with the same effect as if the signatures thereto and
hereto were upon the same instrument.
IN WITNESS WHEREOF, the parties have caused this
Assignment and Assumption Agreement to be executed and delivered
by their duly authorized officers as of the date first above
written.
[ASSIGNOR]
By_____________________________
Title:_________________________
[ASSIGNEE]
By_____________________________
Title:_________________________
<PAGE>
CPI CORP.
By_____________________________
Title:_________________________
MERCANTILE BANK NATIONAL
ASSOCIATION, as Agent
By_____________________________
Title:_________________________
107
<PAGE>
