SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
SECURITY CAPITAL CORPORATION
(Exact name of registrant as specified in its charter)
APRIL 6, 1999
Date of Report (Date of earliest event reported)
DELAWARE 1-7921 13-3003070
(State or other juris- (Commission (I.R.S. Employer
diction of incorporation) File Number) Identification No.)
1111 NORTH LOOP WEST, SUITE 400, HOUSTON, TEXAS 77008
(Address of principal executive offices) (Zip Code)
(713) 880-7100
(Registrant's telephone number, including area code)
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Item 2. ACQUISITION OR DISPOSITION OF ASSETS.
On April 6, 1999, Primrose Holdings, Inc. ("Holdings"), a Delaware
corporation and a subsidiary of Security Capital Corporation, a Delaware
corporation ("Security Capital"), acquired all of the outstanding shares of
Common Stock (the "Shares") of Primrose School Franchising Company, a Georgia
corporation ("Primrose"), Metrocorp Properties, Inc., a Georgia corporation
("Metrocorp"), and The Jewel I, Inc. d/b/a Primrose Country Day School, a
Georgia corporation ("Country Day", together with Metrocorp and Primrose, the
"Companies") from Paul L. Erwin and The Paul L. Erwin Grantor Retained Annuity
Trust (together with Paul L. Erwin, the "Shareholders") pursuant to a Stock
Purchase Agreement (the "Stock Purchase Agreement"), dated as of April 6, 1999
by and among Holdings, Security Capital and the Shareholders (the
"Acquisition").
Primrose is a franchiser of educational child care centers (the
"Primrose Schools"). Metrocorp is a real estate development company that assists
Primrose School franchisees in the real estate and project development process.
Country Day is the original Primrose School. The principal executive office of
the Companies is 199 South Erwin Street, Cartersville, Georgia 30120 and the
telephone number is (770) 606-9600. The principal executive office of Holdings
is One Pickwick Plaza, Suite 310, Greenwich, Connecticut 06830 and the telephone
number is (203) 625-0770. The Companies had combined revenues of $5,750,000 for
the year ended December 31, 1998.
The consideration paid to the Shareholders for the Shares was
$26,650,000, consisting of $24,650,000 in cash ($1,500,000 of which is to be
held in escrow for 18 months) and 500,000 shares of Zero Coupon Convertible
Preferred Stock of Security Capital, which have a liquidation value of $10 per
share, are convertible into 500,000 shares of Class A Common Stock, par value
$.01 per share (the "Class A Common Stock"), and are valued at $2,000,000. Of
the cash paid to the Shareholders, $12,750,000 was paid by Security Capital
($5,000,000 of which was provided by Security Capital through a private
placement to Security Capital's controlling stockholder of 1,136,364 shares of
Security Capital's Class A Common Stock at a price of $4.40 per share) and the
balance was borrowed pursuant to the Credit Agreement described below.
Of the 26,000 shares of Common Stock, par value $.01 per share (the
"Common Stock"), issued in connection with the Acquisition, Security Capital
owns 25,500 shares and Jo Kirchner, Robert Benowitz and Raymond Orgera, the
three key executives of the Companies (the "Management Shareholders"), invested
an aggregate of $250,000 in Holdings and received an aggregate of 500 shares of
the Common Stock. The Management Shareholders, Holdings and Security Capital
have agreed to certain restrictions on transfers of shares of Holdings owned by
them, together with certain rights of first refusal, puts and calls and "tag
along/drag along" rights, all pursuant to a Stockholders' Agreement.
In connection with the closing of the Acquisition, Canadian Imperial
Bank of Commerce, as administrative agent ("CIBC") for the lenders
(collectively, the "Lenders") named in the Credit Agreement, dated as of April
6, 1999 (the "Credit Agreement"), among Primrose, Holdings and CIBC, provided
term loans to Holdings in an aggregate principal amount of
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$13,150,000, the proceeds of which term loans were used in part to refinance
certain existing debt of Primrose, to finance to the Acquisition and to pay fees
and expenses incurred in connection with the Acquisition. In addition, the
Lenders are to make available to Holdings, and to Primrose pursuant to a Joinder
and Assumption Agreement, revolving credit loans in an aggregate principal
amount at any one time not to exceed $2,500,000. The facilities are secured by
all of the assets of the Companies as well as by a pledge to the Lenders of the
capital stock of the Companies owned by Holdings. In addition, Metrocorp and
Country Day agreed to guarantee the loans pursuant to a Subsidiaries Guarantee,
dated as of April 6, 1999, among CIBC, Metrocorp and Country Day.
In connection with this financing, Holdings issued to CIBC Capital,
an affiliate of CIBC ("CIBC Capital"), a Warrant to purchase 2,413 shares of the
Common Stock of Holdings (the "Primrose Warrant"). In addition, Security Capital
issued to CIBC Capital a Warrant to purchase shares of the Class A Common Stock
of Security Capital in exchange for the Primrose Warrant. The Warrants and
related Warrant Agreement provide for certain restrictions on transfer,
registration rights and anti-dilution protection.
In addition, the Companies and Holdings became parties to the
Consolidated Income Tax Sharing Agreement, dated May 17, 1996, among Security
Capital, P.D. Holdings, Inc., a Delaware corporation, and Possible Dreams, Ltd.,
a Delaware corporation, and, pursuant to a Joinder Agreement dated as of June
27, 1997, Pumpkin Ltd., whereby Holdings will calculate and pay to Security
Capital the amount of its income tax liability calculated as if Holdings were
not part of a consolidated group. Security Capital will pay to the relevant tax
authorities its tax liability, taking into account its own tax position and the
utilization of its tax loss carryforwards.
The key executives of the Companies have entered into employment
agreements with the Companies. Jo Kirchner, who has become President of the
Companies, has signed a three-year employment agreement; Paul Erwin, who has
become Senior Executive Manager of the Companies, has signed a one-year
employment agreement; Raymond Orgera, who has become Vice President of Primrose,
has signed a three-year employment agreement; and Robert Benowitz, who has
become Vice President of Primrose, has signed a three-year employment agreement.
The Management Shareholders have been granted options to purchase shares of
Common Stock of Holdings pursuant to Holdings' Stock Option Plan.
In connection with the acquisition, Security Capital agreed to
provide management advisory services to the Companies in the areas of corporate
development, strategic planning, investment and financial matters and general
business policies to the Companies pursuant to a Management Advisory Services
Agreement in return for a fee equal to the greater of $250,000 or 5% of the
Companies' annual EBITDA (as defined in the Stock Purchase Agreement). Security
Capital entered into a Third Amendment to Advisory Services Agreement with
Capital Partners, Inc., a Connecticut corporation ("Capital Partners"), pursuant
to which Capital Partners agreed to assist Security Capital in providing the
management advisory services
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in return for an increase in the annual advisory fee payable to Capital Partners
under the Advisory Services Agreement equal to the greater of $250,000 or 5% of
the Companies' annual EBITDA (as defined in the Stock Purchase Agreement). The
advisory fee payable to Capital Partners is subordinate to the rights of the
Lenders.
Item 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial statements of businesses acquired.
Security Capital believes that it is impracticable to provide any of
the required financial statements at the time of filing of this Report on Form
8-K. The required financial statements will be filed as soon as practicable and,
in any event, not later than 60 days following the due date of this Form 8-K.
(b) Pro forma financial information.
Security Capital believes that it is impracticable to provide any of
the required pro forma financial information at the time of filing of this
Report on Form 8-K. The required pro forma financial information will be filed
as soon as practicable and, in any event, not later than 60 days following the
due date of this Form 8-K.
(c) Exhibits.
1. Stock Purchase Agreement, dated as of April 6, 1999, by and among
Primrose Holdings, Inc., a Delaware corporation ("Holdings"), Security Capital
Corporation, a Delaware corporation ("Security Capital"), Paul L. Erwin and The
Paul L. Erwin Grantor Retained Annuity Trust (together with Paul L. Erwin, the
"Shareholders".)
2. Credit Agreement, dated as of April 6, 1997, among Primrose
School Franchising Company ("Primrose"), Holdings, the Lenders referred to
therein and Canadian Imperial Bank of Commerce ("CIBC"), as Administrative
Agent.
3. Warrant Agreement, dated as of April 6, 1999 between Security
Capital and CIBC.
4. Stockholders' Agreement, dated as of April 6, 1999, among
Holdings, Jo Kirchner, Raymond Orgera, Robert Benowitz and Security Capital.
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5. Management Advisory Services Agreement, dated April 6, 1999, by
and among Primrose, Metrocorp, Country Day and Security Capital.
6. Third Amendment to Advisory Services Agreement, dated April 6,
1999, by and between Security Capital and Capital Partners, Inc.
7. Tax Sharing Joinder Agreement, dated April 6, 1999, among
Holdings, Primrose, Metrocorp, Country Day and Security Capital to Consolidated
Income Tax Sharing Agreement, dated as of May 17, 1996, among Possible Dreams,
Ltd., P.D. Holdings, Inc. and Security Capital.
8. Lease Agreement, dated April 6, 1999 by and between Erwin Family
Partnership, LLLP and Primrose.
9. Lease Agreement, dated April 6, 1999 by and between Paul L.
Erwin and Country Day.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
SECURITY CAPITAL CORPORATION
(Registrant)
Dated: April 16, 1999 By: /S/ A. GEORGE GEBAUER
A. George Gebauer
President
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EXHIBIT INDEX
ITEM NO. DESCRIPTION
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1. Stock Purchase Agreement, dated as of April 6, 1999, by and
among Primrose Holdings, Inc., a Delaware corporation ("Holdings"),
Security Capital Corporation, a Delaware corporation ("Security
Capital"), Paul L. Erwin and Paul L. Erwin Grantor Retained Annuity
Trust (together with Paul L. Erwin, the "Shareholders".)
2. Credit Agreement, dated as of April 6, 1997, among Primrose School
Franchising Company ("Primrose"), Holdings, the Lenders referred to
therein and Canadian Imperial Bank of Commerce ("CIBC"), as Agent.
3. Warrant Agreement, dated as of April 6, 1999 between Security
Capital and CIBC.
4. Stockholders' Agreement, dated as of April 6, 1999, among Holdings,
Jo Kirchner, Raymond Orgera, Robert Benowitz and Security Capital.
5. Management Advisory Services Agreement, dated April 6, 1999, by and
among Primrose, Metrocorp, Country Day and Security Capital.
6. Third Amendment to Advisory Services Agreement, dated April 6,
1999, by and between Security Capital and Capital Partners, Inc.
7. Tax Sharing Joinder Agreement, dated April 6, 1999, among Holdings,
Primrose, Metrocorp, Country Day and Security Capital to
Consolidated Income Tax Sharing Agreement, dated as of May 17,
1996, among Possible Dreams, Ltd., P.D. Holdings, Inc. and Security
Capital.
8. Lease Agreement, dated April 6, 1999 by and between Erwin Family
Partnership, LLLP and Primrose.
9. Lease Agreement, dated April 6, 1999 by and between Paul L. Erwin
and Country Day.
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EXHIBIT 1
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this "Agreement") is made and entered into
as of the 6th day of April 1999, by and among SECURITY CAPITAL CORPORATION, a
Delaware corporation ("SCC"), PRIMROSE HOLDINGS, INC., a Delaware corporation
("Purchaser"); PAUL L. ERWIN, a resident of the State of Georgia ("Erwin"); and
THE PAUL L. ERWIN GRANTOR RETAINED ANNUITY TRUST (the "Trust") (Erwin and the
Trust are referred to collectively as the "Shareholders").
WITNESSETH:
WHEREAS, Erwin owns all of the issued and outstanding shares of capital
stock of The Jewel I, Inc. d/b/a Primrose Country Day School ("Country Day") and
Metrocorp Properties, Inc. ("Metrocorp") and Erwin and Trust collectively own
all of the issued and outstanding shares of capital stock of Primrose School
Franchising Company ("Primrose") (Primrose, Country Day and Metrocorp are
referred to individually as a "Company" and collectively as the "Companies")
(the shares of all of the Companies are referred to collectively as the
"Shares"); and
WHEREAS, the Shareholders and Purchaser desire that Purchaser purchase the
Shares from the Shareholders, upon the terms and subject to the conditions set
forth herein.
NOW, THEREFORE, in consideration of the promises, and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto, intending to be legally bound, agree as
follows:
ARTICLE 1.
DEFINITIONS
1.1 CERTAIN DEFINITIONS. The following terms shall, when used in this
Agreement, have the following meanings:
"ADVERSE CONSEQUENCES" mean all actions, suits, proceedings, claims,
injunctions, judgments, orders, damages, costs, losses, amounts paid in
settlement, liabilities, expenses and fees (including court costs and legal
fees, costs and expenses).
"ADVERTISING AND DEVELOPMENT FUND" means those funds collected from
Primrose Franchisees in accordance with the terms of the franchise agreement
between Primrose and each of the Primrose Franchisees for advertising and
development, and maintained on the books of Primrose for payment of expenses in
accordance with the terms of the franchise agreement between Primrose and each
of the Primrose Franchisees.
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"APPLICABLE RATE" means the rate of interest publicly announced by
Canadian Imperial Bank of Commerce ("CIBC") in New York, New York from time to
time as its base rate.
"ASSETS" mean all properties, assets, rights, interests and claims of
every type and description that are owned, leased, held or used in the Business
and in which the Companies have any right, title or interest or in which the
Companies acquire the right, title or interest on or before the Closing Date,
wherever located, and whether or not now or on the Closing Date on the Books and
Records of the Companies, including, without limitation, Books and Records,
Contracts, Intangibles, Intellectual Property and Equipment.
"BEST OF KNOWLEDGE OF THE SHAREHOLDERS" or any similar phrase shall mean
the actual knowledge of Paul L. Erwin and Jo Kirchner, it being understood that
such actual knowledge be established (i) by producing documentation existing
prior to the Closing Date (including in e-mail, computer files and the like)
with respect to the disclosure or omission in question and proof that Erwin or
Kirchner had personally received such documentation or been involved in
producing such documentation, (ii) by documentation created prior to the Closing
Date evidencing that Erwin or Kirchner was informed of the matter that was the
subject of the disclosure or omission prior to the Closing Date, or (iii) by an
admission of Erwin or Kirchner that he or she had actual knowledge of the matter
in question.
"BOOKS AND RECORDS" mean all of the Companies' books and records,
franchise agreements, manuals, invoices, sales materials and records, franchisee
lists, mailing lists, marketing information, personnel records and files,
technical data and records, all other financial records and all books and
records relating to the Companies' formation and capitalization, including
minute books and stock books.
"BUSINESS" means collectively the Primrose Business, the Metrocorp
Business and the Country Day Business.
"BUSINESS DAY" means any day other than Saturday, Sunday or a day on which
banking institutions in Atlanta, Georgia are required or authorized to be
closed.
"CHANGE IN CONTROL" shall be deemed to have taken place if:
(i) there shall be consummated any consolidation or merger of SCC in
which SCC is not the continuing or surviving corporation or pursuant to which
shares of SCC's capital stock are converted into cash, securities or other
property other than a consolidation or merger of SCC in which the holders of
SCC's voting stock immediately prior to the consolidation or merger shall, upon
consummation of the consolidation or merger, own at least 50% of the voting
stock of the surviving corporation, or any sale, lease, exchange or other
transfer (in one transaction or a series of transactions contemplated or
arranged by any party as a single plan) of all or substantially all of the
assets of SCC; or
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(ii) any person (as such term is used in Sections 13(d) and 14
(d)(2) of the Securities Exchange Act of 1934, as amended (the "EXCHANGE ACT")
), shall after the date hereof become the beneficial owner (as defined in Rules
13d-3 and 13d-5 under the Exchange Act), directly or indirectly, of securities
of SCC representing more than 50% of the voting power of all then outstanding
securities of SCC having the right under ordinary circumstances to vote in an
election of the Board of Directors of SCC (the "BOARD")(including, without
limitation, any securities of SCC that any such person has the right to acquire
pursuant to any agreement, or upon exercise of conversion rights, warrants or
options, or otherwise, which shall be deemed beneficially owned by such person).
"CITIZENS FIRST INDEBTEDNESS" means the amount owed Citizens First Bank,
Rome, Georgia as of the Closing Date that has been borrowed by Metrocorp from
Citizens First Bank and utilized for the investigation and/or development of
Primrose Sites under contract or under consideration by Metrocorp as of the
Closing Date or for the payment of earnest money under any contract. Such
Citizens First Indebtedness is personally guaranteed by Erwin (the "Erwin
Guaranty") and Erwin has pledged property owned by him personally to secure such
guaranty (the "Erwin Collateral").
"CODE" means the Internal Revenue Code of 1986, as amended.
"COMPANIES' ACCOUNTANT" means Smith & Howard, P.C.
"COUNTRY DAY BUSINESS" means the operation of Country Day's child care
facility in Marietta, Georgia.
"EBITDA" means earnings before interest, taxes, depreciation, amortization
and any management fees paid by the Companies to SCC and/or Capital Partners,
Inc.
"ELECTION CORPORATION" means any Company that is subject to a Section
338(h)(10) Election (or a similar state or local election).
"EMPLOYEE BENEFIT PLAN" means any: (a) non-qualified deferred compensation
or retirement plan or arrangement that is an Employee Pension Benefit Plan; (b)
qualified defined contribution retirement plan or arrangement that is an
Employee Pension Benefit Plan; (c) qualified defined benefit retirement plan or
arrangement that is an Employee Pension Benefit Plan (including any
Multiemployer Plan); (d) Employee Welfare Benefit Plan or material fringe
benefit plan or program; or (e) other employee benefit arrangement or payroll
practice.
"EMPLOYEE PENSION BENEFIT PLAN" has the meaning set forth in ERISA Section
3(2).
"EMPLOYEE WELFARE BENEFIT PLAN" has the meaning set forth in ERISA Section
3(1).
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"ENCUMBRANCE" means any mortgage, pledge, lien, encumbrance, security
interest, security agreement, conditional sale or other title retention
agreement, but excluding encumbrances for current Taxes not delinquent or being
contested in good faith.
"ENVIRONMENTAL LAW" means any federal, state or local laws, regulations,
statutes, ordinances, orders, codes, common law, rules, judgments or decrees
relating to the protection of health and the environment, worker health and
safety, and/or governing the handling, use, generation, treatment, storage,
transportation, disposal, manufacture or distribution, exposure or release of
Hazardous Substances.
"EQUIPMENT" means the machinery, equipment, furniture, fixtures and
computer equipment owned or leased by the Companies.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"ERWIN EMPLOYMENT AGREEMENT" means an employment agreement for a term of
no more than 12 months for annual compensation of $150,000.00 requiring Erwin to
work for Purchaser and/or one or more of the Companies in a position and with
responsibilities comparable to those he has as of the Closing, and based in
Cartersville, Georgia on a part-time basis (50%), and providing Erwin and his
dependents with hospitalization insurance coverage comparable to that coverage
currently maintained by Primrose, all in the form of EXHIBIT 1 attached hereto.
"ERWIN STREET LEASE" means the lease for the Companies' principal offices
in Cartersville, Georgia between the Erwin Family Partnership, L.L.P., as
Landlord, and Primrose and/or Metrocorp, as Tenant.
"GAAP" means United States generally accepted accounting principles as in
effect from time to time.
"GOVERNMENTAL AUTHORITY" means: (i) the United States of America; (ii) any
state, commonwealth, territory or possession of the United States of America and
any political subdivision thereof (including counties, municipalities and the
like); (iii) any foreign (as to the United States of America) sovereign entity
and any political subdivision thereof; or (iv) any administrative agency,
regulatory authority or instrumentality of any of the foregoing, including any
court, tribunal, department, bureau, commission or board.
"HAZARDOUS SUBSTANCES" means petroleum, petroleum products, petroleum
by-products, asbestos or asbestos-containing materials and polychlorinated
biphenyls, together with and any other chemicals, materials, substances or
wastes in any amount or concentration which are regulated under any
Environmental Law.
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"INTANGIBLES" mean all claims, deposits, prepayments, refunds, causes of
action, choses in action, rights of recovery, rights of set-off and other
intangible assets owned, used or held for use in the Business.
"INTELLECTUAL PROPERTY" means all of the following that are owned or used
in the Business: (i) trademarks, service marks, trade dress, logos, trade names
and corporate names and all applications, registrations and renewals in
connection therewith; (ii) patents, patent applications; (iii) copyrightable
works and copyrights and all applications, registrations and renewals in
connection therewith; (iv) trade secrets and confidential business information
(including research and development, know-how, formulas, technical data,
designs, drawings, specifications, customer and supplier lists, pricing and cost
information and business and marketing plans); (v) all computer software
(including programs, data, files and related documentation); (vi) all franchise
agreements, operating manuals, pre-owning manuals and other training manuals
utilized by the Companies; and (vii) all copies and tangible embodiments of any
of the foregoing (in whatever form or medium).
"LEGAL REQUIREMENT" means any statute, ordinance, law, rule, regulation,
code, injunction, judgment, order, decree, ruling or other requirement, standard
or procedure enacted, adopted or applied by any Governmental Authority,
including judicial decisions applying common law or interpreting any other Legal
Requirement.
"LIABILITY" means any liability or obligation (whether known or unknown,
whether asserted or unasserted, whether absolute or contingent, whether accrued
or unaccrued, and whether liquidated or unliquidated), including any liability
for Taxes.
"LONG TERM BENEFIT AGREEMENT" means the Long Term Benefit Agreement
between Primrose as Employer and Jo Kirchner as Employee dated January 5, 1998.
"MADSP" means the modified aggregate deemed sales price at which an
Election Corporation is deemed to have sold its assets for Tax purposes as a
result of a Section 338(h)(10) Election (or a similar state or local election).
"MATERIAL ADVERSE EFFECT" means an event, change or occurrence which
individually, or together with any other event, change or occurrence, has a
material adverse effect on the financial position, business or results of
operations of the Companies taken as a whole; provided, however, that the term
"Material Adverse Effect" shall be deemed not to include the effect of (i)
changes in laws of general applicability or interpretations thereof by courts or
other governmental authorities; (ii) changes in GAAP; (iii) actions or omissions
of any Company taken with the prior written consent of Purchaser; (iv) the
consummation of the Transaction on the operating performance of any Company; or
(v) the loss of the services of any employee of any of the Companies other than
Jo Kirchner and/or Paul Erwin.
"METROCORP BUSINESS" means the operation of a real estate development
business.
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"MULTIEMPLOYER PLAN" has the meaning set forth in ERISA Section 3(37).
"ORDINARY COURSE" means the ordinary course of business consistent with
past practice.
"PARTIES" means, collectively, the Shareholders, SCC and Purchaser.
"PERMIT" means any license, permit, consent, approval, registration,
authorization, qualification or similar right granted by a Governmental
Authority.
"PERMITTED ENCUMBRANCES" means any lien granted to Citizens First Bank or
any other lending institution by Metrocorp in regard to any Primrose Site or
Primrose Facility as of the date of Closing and shown on SCHEDULE 3.6 hereto.
"PERSON" means any natural Person, corporation, partnership, trust,
unincorporated organization, association, limited liability company,
Governmental Authority or other entity.
"POST-CLOSING PERIOD" means any taxable period or portion thereof
beginning after the Closing Date or, as the context may require, all such
periods. If a taxable period begins on or before the Closing Date and ends after
the Closing Date, then the portion of the taxable period that begins on the day
following the Closing Date shall constitute a Post-Closing Period.
"PRE-CLOSING PERIOD" means any taxable period or portion thereof ending on
or before the Closing Date or, as the context may require, all such periods. If
a taxable period begins on or before the Closing Date and ends after the Closing
Date, then the portion of the taxable period to the end of the Closing Date
shall constitute a Pre-Closing Period.
"PRIMROSE BUSINESS" means the operation of a child care franchising
company.
"PRIMROSE COUNTRY DAY LEASE" means the lease from Erwin as lessor to The
Jewel I, Inc. in regard to the premises in Marietta, Georgia utilized for the
operation of the Primrose Country Day School.
"PRIMROSE FRANCHISEE" means any franchisee of Primrose.
"PRIMROSE SITE" means any tract or parcel of real property under contract
by Metrocorp that is being investigated for use as a Primrose Facility, or that
is being considered as a site for a Primrose Facility though not under contract.
"REPRESENTATIVE" means any director, officer, employee, agent, consultant,
adviser or other representative of a Person, including legal counsel,
accountants and financial advisors.
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"SECTION 338 TAX" means a Tax that is attributable to, or arises or
results from, a Section 338(h)(10) Election (or any similar state or local
election), irrespective of whether such Tax arises in a Pre-Closing Period or a
Post-Closing Period.
1.2 OTHER DEFINITIONS. The following terms shall, when used in this
Agreement, have the meanings assigned to such terms in the Sections indicated.
TERM SECTION
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"CLOSING" 2.6
"CLOSING DATE" 2.6
"CONTRACTS 3.14
"ESCROW AGENT" 2.5
"FINANCIAL STATEMENTS" 3.8
"PREFERRED SHARES" 2.2
"PURCHASE PRICE" 2.2
"SECURITIES ACT" 3.19
"SURVIVAL PERIOD" 11.1
"TAXES" 3.12
"TAX RETURNS" 3.12
"TRANSFER" 5.2
ARTICLE 2.
PURCHASE OF SHARES
2.1 PURCHASE OF SHARES. Subject to the terms and conditions of this
Agreement, and for the consideration hereinafter provided, the Shareholders
hereby agree to sell, convey, assign and transfer the Shares to Purchaser, and
Purchaser hereby agrees to acquire and purchase the Shares from the
Shareholders, on and as of the Closing Date, free and clear of all Encumbrances.
2.2 PURCHASE PRICE. The aggregate Purchase Price for the Shares (the
"PURCHASE PRICE") consists of (i) U.S. $26,650,000, payable $24,650,000 in cash
and $2 million through the delivery to the Shareholders of 500,000 shares (the
"PREFERRED SHARES"), $10 liquidation value per share, of zero coupon Convertible
Preferred Stock of SCC, convertible into 500,000 shares of Class A Common Stock,
par value $.01 per share, of SCC, or redeemable at the greater of liquidation
value or the value specified in the Certificate of Designation in the form of
EXHIBIT 2 hereto at the Shareholders' option either (a) at the end of each of
the third and fourth anniversaries of the Closing Date if the most recently
completed fiscal year combined EBITDA of the Companies was $8.5 million or
higher, provided that none of the Companies is in default under its loan
agreements before and after such redemption or (b) at the end of the fifth
anniversary of the Closing Date at a ratio of actual combined EBITDA of the
Companies for the most recently completed fiscal year over $8.5 million
multiplied by $5 million, provided that none of the Companies is in default
under its loan
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agreements before and after such redemption or (c) at the end of the seventh
anniversary of the Closing Date or (d) upon a Change in Control or (e) in the
event of a public offering by SCC of its Class A Common Stock, provided that
none of the Companies is in default under its loan agreements before and after
such redemption and that the underwriters of such public offering do not object
to such redemption as a use of proceeds; and (ii) the payment by Purchaser
and/or the Companies of the Citizens First Indebtedness. The holders of the
Preferred Shares will be entitled to a preemptive right in certain instances, as
more fully described in the Certificate of Designation in the form of EXHIBIT 2
hereto. The Parties acknowledge and agree that the Preferred Shares will have a
present value of $2,000,000 as of the Closing Date. The Purchase Price shall be
allocated among the Shareholders of the Companies as set forth in SCHEDULE 2.3
hereto.
2.3 PAYMENT OF PURCHASE PRICE. On the Closing Date, Purchaser shall: (a)
pay to the Shareholders the cash portion of the Purchase Price (less the
escrowed amount set forth in Section 2.5), by wire transfer to a bank account
designated in writing by each Shareholder; and (b) deliver to the Shareholders
certificates evidencing the Preferred Shares.
2.4 NET INCOME DISTRIBUTION.
(a) RIGHT TO RECEIVE NET INCOME. The Shareholders shall be entitled
to receive the combined net income of the Companies for the period between
January 1, 1999 and the Closing Date (the "NET INCOME"). If the Closing Date
occurs on other than the final day of any month, the Net Income with respect to
that month will be prorated based on the number of days that elapsed in that
month prior to the Closing Date. The Shareholders may make distributions prior
to the Closing Date of up to a maximum of 85% of the Net Income. Notwithstanding
anything to the contrary contained in this Agreement, the Shareholders shall pay
100% of their expenses referred to in the first sentence of Section 14.11.
(b) ESTIMATED NET INCOME CLOSING STATEMENT. On the Closing Date, the
Shareholders shall deliver to Purchaser a statement (the "ESTIMATED NET INCOME
CLOSING STATEMENT") prepared in accordance with GAAP, consistent with prior
practice, setting forth a calculation of the Shareholders' good faith estimate
of the Net Income (the "ESTIMATED NET INCOME"). On the Closing Date, either the
Purchaser shall pay to the Shareholders an amount equal to 85% of the Estimated
Net Income (as shown on the Estimated Net Income Closing Statement), less all
distributions made to the Shareholders pursuant to this Section or, if the
distributions made to the Shareholders pursuant to this Section are greater than
85% of the Estimated Net Income, the Shareholders shall pay such excess to the
Purchaser on the Closing Date.
(c) NET INCOME CLOSING STATEMENT. Within forty-five days after the
Closing Date, the Shareholders will prepare and deliver to Purchaser an
unaudited income statement of each Company for the period from January 1, 1999
to the Closing Date prepared in accordance with GAAP, consistent with prior
practice, and reviewed by the Companies' Accountant, together with a statement
setting forth a calculation of the Net Income (the "NET INCOME CLOSING
STATEMENT"). The
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calculation of Net Income with respect to the month in which the Closing occurs
shall be made using royalties receivable as paid by the twentieth (20th) day of
the month following the Closing. All fees and expenses incurred and to be
incurred by the Shareholders and the Companies in connection with the
transactions contemplated by this Agreement shall be paid prior to the Closing
or accrued on the Estimated Net Income Closing Statement and on the Net Income
Closing Statement. To the extent the Net Income (as finally determined pursuant
to Section 2.4(d) below) is greater than 85% of the Estimated Net Income,
Purchaser shall promptly pay to the Shareholders the amount equal to the
difference. To the extent the Net Income (as finally determined pursuant to
Section 2.4(d) below) is less than 85% of the Estimated Net Income, the
Shareholders shall promptly pay to the Purchaser the amount equal to the
difference.
(d) NET INCOME CALCULATION.
(i) Purchaser shall be entitled to full access to the relevant
records and working papers prepared by or for the Shareholders
and full access to the employees of the Companies involved in
such preparation to aid in its review of the calculation of
the Net Income as set forth on the Net Income Closing
Statement. If Purchaser believes that the Net Income
calculation set forth therein (the "NET INCOME CALCULATION")
has not been properly calculated in accordance with the
calculation methodologies set forth in this Section 2.4, it
shall, within fifteen (15) days after receipt of the Net
Income Calculation, give written notice ("PURCHASER'S NET
INCOME OBJECTION") to the Shareholders, setting forth the
basis of Purchaser's Net Income Objection in reasonable detail
and, to the extent practicable, the adjustments to the Net
Income Calculation which Purchaser believes should be made.
Failure to so notify the Shareholders within such fifteen (15)
day period shall constitute acceptance and approval of the Net
Income Calculation. If the Shareholders agree that any change
proposed by Purchaser is appropriate, the change shall be made
to the Net Income Calculation, whereupon Purchaser shall be
deemed to have accepted and approved the Net Income
Calculation with respect to such change and any other
non-disputed item of the Net Income Calculation. If the
proposed change is disputed by the Shareholders, then the
Shareholders and Purchaser shall negotiate in good faith to
resolve such dispute as expeditiously as possible. If, after a
period of fifteen (15) days following the date on which
Purchaser gives the Shareholders notice of any such proposed
change, any such proposed change still remains disputed, then:
(ii) A neutral accounting firm (the "Neutral Accounting Firm")
shall be engaged by Purchaser and the Shareholders to resolve
any remaining disputes. The Neutral Accounting Firm shall act
as an arbitrator to determine, based solely on presentations
submitted by the Shareholders and Purchaser, and not by
independent review, only those issues still in dispute. Each
of Purchaser and
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the Shareholders shall have made its complete submission to
the Neutral Accounting Firm within ten (10) days following the
expiration of the fifteen (15) day negotiation period
described in Section 2.4(d)(i). The failure by either the
Shareholders or Purchaser to make a complete submission prior
to the expiration of such ten (10) day period shall be deemed
a waiver of such party's right to make a submission or a
further submission to the Neutral Accounting Firm. The Neutral
Accounting Firm's determination, based upon the calculation
methodologies set forth in this Section 2.4, shall be made
within thirty (30) days following the date on which the
dispute is submitted, shall be set forth in a written
statement delivered to the Shareholders and Purchaser and
shall be final, binding and conclusive. The fees and any
expenses of the Neutral Accounting Firm shall be paid by the
party whose Net Income Calculation was rejected by the Neutral
Accounting Firm. If the Neutral Accounting Firm disagrees with
both calculations, the fees and expenses will be shared
equally by the Shareholders and Purchaser. In the event a
party does not comply with the procedure and time requirements
contained herein, the Neutral Accounting Firm shall render a
decision based solely on the evidence it has which was timely
filed by either the Shareholders or Purchaser.
2.5 ESCROW. There shall be placed in escrow with Synovus Trust Company,
Atlanta, Georgia (the "ESCROW AGENT"), $1,500,000 of the $24,650,000 cash to be
paid by Purchaser to the Shareholders at the Closing as part of the
consideration for the Shares. Such $1,500,000 shall be delivered by Erwin to the
Escrow Agent at the Closing and shall be held and delivered by the Escrow Agent
in accordance with the terms and provisions of the Escrow Agreement in the form
of EXHIBIT 3 hereto (the "ESCROW AGREEMENT"), which Escrow Agreement Purchaser,
Erwin and the Escrow Agent shall execute and deliver at the Closing.
2.6 CLOSING. The closing of the transactions contemplated by this
Agreement (the "CLOSING") shall take place at the offices of Morgan, Lewis &
Bockius LLP, on April 6, 1999, provided that all conditions precedent to the
Closing set forth in Articles 7 and 8 have been satisfied or waived, or on such
other date that the Parties may agree, provided that all such conditions
precedent have been satisfied or waived. The date on which the Closing actually
occurs is referred to as the "CLOSING DATE."
ARTICLE 3.
REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERS
Erwin represents and warrants to Purchaser and SCC, and the Trust (solely
with respect to Sections 3.2, 3.16 and 3.19 and only to the best of the Trust's
knowledge with respect to the representations and warranties set forth in
Section 3.2) represents and warrants to Purchaser and SCC, as follows:
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3.1 ORGANIZATION. Each of the Companies is a corporation duly organized,
validly existing and in good standing under the laws of the State of Georgia,
with all requisite power and authority to own, lease and use its assets as they
are currently owned, leased and used and to conduct its business as it is
currently conducted. Each of the Companies is duly qualified to conduct business
as a foreign corporation and is in good standing in each jurisdiction in which
the nature of its business or the ownership of its properties requires such
qualification, except where the failure to be so qualified and in good standing
would not have a Material Adverse Effect. The jurisdictions in which the
Companies are qualified to conduct business as foreign corporations are set
forth in SCHEDULE 3.1 hereto.
3.2 CAPITALIZATION. Each of the Companies' authorized, issued and
outstanding capital stock is fully and accurately described in SCHEDULE 3.2
hereto. The Shares represent all of the issued and outstanding shares of each of
the Companies and are owned, beneficially and of record, by the Shareholders, in
the amounts set forth in SCHEDULE 3.2 hereto, and no other Person has any right,
title or interest, whether legal, beneficial or equitable, in the Shares. No
Person has any preemptive or other rights with respect to any such capital stock
or securities, and there are no options, warrants, rights, agreements or
commitments of any kind (contingent or otherwise) relating to the issuance,
conversion, registration, sale or transfer of any equity interests or other
securities of the Companies or obligating the Companies or any other Person to
purchase or redeem any such equity interests or other securities. All of the
Shares have been duly authorized and are validly issued and outstanding, fully
paid and nonassessable, have been issued in compliance with applicable
securities laws and other Legal Requirements, and are not subject to any
Encumbrances. None of the Companies has any subsidiaries.
3.3 AUTHORITY AND VALIDITY. The Shareholders have all requisite power to
execute and deliver, to perform their respective obligations under and to
consummate the transactions contemplated by this Agreement. Upon the execution
and delivery of this Agreement by the Shareholders, this Agreement will be the
legal, valid and binding obligation of the Shareholders, enforceable against
each in accordance with its terms. This Agreement has been duly executed and
delivered by the Shareholders.
3.4 NO BREACH OR VIOLATION. Subject to obtaining the consents, approvals,
authorizations and orders of and making the registrations or filings with or
giving notices to Governmental Authorities and Persons set forth in SCHEDULE 3.4
hereto, if any, the execution, delivery and performance by the Shareholders of
this Agreement and the consummation of the transactions contemplated hereby in
accordance with the terms and conditions hereof do not and will not constitute a
violation or breach of, constitute a default (with or without the giving of
notice or right to cure) or give rise to any right of termination or
acceleration of any right or obligation of any Company or Shareholder under, or
result in the creation or imposition of any Encumbrance upon the Companies, the
Assets or the Business by reason of the terms of (i) the articles of
incorporation or by-laws of any Company, (ii) any material contract, agreement,
lease, indenture or other instrument to which any Shareholder or any Company is
a party or by or to which any Shareholder, any
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Company or the Assets may be bound or subject, (iii) any order, judgment,
injunction or decree of any Governmental Authority or any statute, law, rule or
regulation applicable to any Shareholder or any Company or (iv) any Permit of
any Company, which in the case of (ii), (iii) or (iv) above would have a
Material Adverse Effect.
3.5 CONSENTS AND APPROVALS. Except as set forth in SCHEDULE 3.5 hereto, no
consent, approval, authorization or order of, registration or filing with, or
notice to, any Governmental Authority or any other Person is necessary to be
obtained, made or given by any Shareholder or any Company in connection with the
execution, delivery and performance by them of this Agreement or for the
consummation by them of the transactions contemplated hereby.
3.6 TITLE TO ASSETS. None of the Companies owns any real property. Except
as set forth in SCHEDULE 3.6 hereto, the Companies have good and marketable
title to the Assets (or, in the case of leased Assets, a valid leasehold
interest in such Assets), free and clear of any and all Encumbrances except
Permitted Encumbrances. Except as provided by this Agreement, no Person has any
right to acquire, directly or indirectly, any interest in any Company or the
Assets, other than as set forth in SCHEDULE 3.6 hereto, and there is no
agreement to which any Company or Shareholder is a party or is otherwise bound
relating to the direct or indirect sale of the capital stock or Assets of any
Company, other than Primrose Sites and Primrose Facilities, the terms of which
are described in SCHEDULE 3.6 hereto.
3.7 INTELLECTUAL PROPERTY. The Companies own all right, title and interest
in the names "Primrose" and "Primrose School" in the locations where the
Companies do business, free and clear of any and all Encumbrances. To the Best
of Knowledge of the Shareholders, the Companies own all right, title and
interest in, or have valid and subsisting license rights sufficient to use and
to continue to use (as currently used by the Companies), all other Intellectual
Property used in their operation of the Business, free and clear of any and all
Encumbrances. To the Best of Knowledge of the Shareholders, (i) the Companies
have not, in their operation of the Business, infringed upon or misappropriated,
and (ii) the operation of the Business as currently conducted does not violate
or infringe upon, any Intellectual Property rights of third parties, where such
infringement, misappropriation or violation may result in a Material Adverse
Effect, and the Companies have not received any written complaint, claim, demand
or notice alleging any such infringement, misappropriation or violation. To the
Best of Knowledge of the Shareholders, no third party has infringed upon or
misappropriated any Intellectual Property rights of the Companies. To the Best
of Knowledge of the Shareholders, the Companies have no inventions or
discoveries that may be patentable. Except as set forth on SCHEDULE 3.7, all
information systems relating to the Business (including but not limited to,
information technology, embedded systems, or any other electro-mechanical or
processor-based system) licensed from suppliers, owned, sold, licensed or
otherwise made available by the Companies to customers or franchisees, or
otherwise used by the Companies with respect to the Business are free of any
"Year 2000 Problem" such that such information systems do not and will not,
without requiring any modifications, experience any malfunctions, premature
cancellation or expiration of contractual rights or deletion of data, or any
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other problems that would result in a Material Adverse Effect in connection with
(i) the year 2000 (and all subsequent years) as distinct from 1900's years, (ii)
the date February 29, 2000, and all subsequent leap years or (iii) the date
September 9, 1999.
3.8 FINANCIAL INFORMATION. The Companies have delivered to Purchaser the
following financial statements (collectively, the "FINANCIAL STATEMENTS"): (i)
Primrose Audited Financial Statements for the Fiscal Years ended December 31,
1994 through 1998, including Independent Auditor's Report; (ii) Metrocorp
Unaudited Financial Statements for the Fiscal Years ended December 31, 1994
through 1996, Unaudited Income Statement for the Fiscal Year ended December 31,
1997, Audited Balance Sheet as of December 31, 1997, including Independent
Auditor's Report, and Audited Financial Statements for the Fiscal Year ended
December 31, 1998, including Independent Auditor's Report; (iii) Country Day
Unaudited Financial Statements for the Fiscal Years ended December 31, 1994
through 1998, except that the Balance Sheet as of December 31, 1998 is audited
and includes an Independent Auditor's Report; and (iv) Combined Financial
Statements of the Companies for the Years ended December 31, 1994 through 1998,
as compiled by the Companies' Accountants (the "COMBINED FINANCIAL STATEMENTS").
The Financial Statements that are audited are in accordance with the Books and
Records of the Companies, and fairly present the financial position of the
Companies as of such respective dates and the results of their operations for
the respective periods then ended in accordance with GAAP. The Financial
Statements that are unaudited are in accordance with the Books and Records of
the Companies, and fairly present the financial position of the Companies as of
such respective dates and the results of their operations for the respective
periods then ended. Except for obligations and liabilities under the terms of
any contract set forth in SCHEDULE 3.14 hereto, the Companies had no material
(individually or in the aggregate) obligations or liabilities, absolute, accrued
or contingent, as of the date of the December 31, 1998 Combined Balance Sheet of
the Companies included in the Combined Financial Statements (the "DECEMBER 1998
BALANCE SHEET").
3.9 EVENTS SUBSEQUENT TO DECEMBER 31, 1998. Since January 1, 1999, except
as set forth in SCHEDULE 3.9 hereto, none of the Companies has (i) issued any
stock, bonds or other corporate securities; (ii) borrowed any amount or incurred
any liabilities (absolute or contingent) that would be required to be disclosed
on a balance sheet as of the date hereof prepared in accordance with GAAP,
except current liabilities incurred, and liabilities under contracts entered
into, in the Ordinary Course or liabilities for legal fees and accounting fees
incurred in connection with the transactions contemplated hereby and other
liabilities not material in amount; (iii) discharged or satisfied any lien or
paid any obligation or liability (absolute or contingent) other than current
liabilities shown on the December 1998 Balance Sheet, current liabilities
incurred since that date in the Ordinary Course and liabilities for legal fees
incurred in connection with the transactions contemplated hereby; (iv) declared
or made any payment or distribution to shareholders or purchased or redeemed any
shares of its capital stock or other securities; (v) mortgaged, pledged or
subjected to lien any of its assets, tangible or intangible, other than liens of
current real property taxes not yet due and payable; (vi) sold, assigned or
transferred any of its tangible assets or canceled any debts or claims, except
in the Ordinary Course; (vii) sold, assigned or transferred any patents,
trademarks,
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trade names, copyrights, trade secrets or other intangible assets; (viii)
suffered any material losses or waived any rights of substantial value, whether
or not in the Ordinary Course; (ix) received notification of cancellation, or
canceled or waived, any rights which, individually or in the aggregate, are
material with respect to any currently existing agreement, contract, right or
understanding; (x) made any changes in officer compensation or paid any bonuses,
except in the Ordinary Course; (xi) entered into any transaction except in the
Ordinary Course; (xii) been the subject of any claims from the holders of any of
its securities; or (xiii) suffered a material adverse change in its business,
assets, properties, operations or condition (financial or other).
3.10 UNDISCLOSED LIABILITIES. Except as disclosed in this Agreement or in
SCHEDULE 3.10 hereto, each Company has no material Liability, other than (i)
Liabilities that are set forth on the December 1998 Balance Sheet; and (ii)
Liabilities incurred in the Ordinary Course since December 31, 1998.
3.11 LEGAL PROCEEDINGS. Except as set forth in SCHEDULE 3.11 hereto, there
is no order, action, suit, proceeding, claim or arbitration, or any
investigation by or before any person or entity, including, but not limited to,
any Governmental Authority, (i) pending, issued or outstanding with respect to
any Company or the Business; (ii) challenging any Company's or any Shareholder's
right to execute, deliver, perform under or consummate the transactions
contemplated by this Agreement; or (iii) asserting any right with respect to any
of transactions contemplated by this Agreement and, in each such case, to the
Best of Knowledge of the Shareholders, there is no basis for or threat of any
such action, suit, proceeding, claim, arbitration or investigation. Except as
set forth in SCHEDULE 3.11 hereto, to the Best of Knowledge of the Shareholders,
there is no order, action, suit, proceeding, claim or arbitration, or any
investigation by or before any person or entity, including, but not limited to,
any Governmental Authority, pending, issued, outstanding or threatened against
or relating to any Primrose Franchisee or its business that might have a
Material Adverse Effect.
3.12 TAXES.
(a) Each Company has duly and timely filed all returns, reports or
statements (including information statements) ("TAX RETURNS") required to have
been filed with respect to all federal, state, local or foreign net or gross
income, gross receipts, net proceeds, sales, use, AD VALOREM, transfer, value
added, franchise, bank shares, withholding, payroll, employment, disability,
excise, property, alternative or add-on minimum, environmental or other taxes,
assessments, duties, fees, levies or other governmental charges of any nature
whatever, whether disputed or not, together with any interest, penalties,
additions to tax or additional amounts with respect thereto ("TAXES"). Each such
Tax Return correctly and completely reflects the income, franchise or other Tax
liability and all other information required to be reported thereon. All Taxes
due and payable by each Company, whether or not shown on any Tax Return, have
been paid. Each Company has withheld and paid all Taxes required to have been
withheld and paid in connection with amounts paid or owing to any employee,
creditor, independent contractor or other third party.
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(b) Each Company, other than Metrocorp, at all times and for each
taxable year since its incorporation has been, and up to and including the
Closing Date will remain, an "S corporation" within the meaning of Section
1361(a) of the Code. Metrocorp has at all times since January 1, 1991 been, and
up to and including the Closing Date will remain, an "S Corporation" within the
meaning of Section 1361(a) of the Code.
(c) Each Company, other than Metrocorp, at all times and for each
taxable year since its incorporation has been, and up to and including the
Closing Date will remain, an "S corporation" within the meaning of Subsection
(7)(B) of Section 48-7-21 of the Code of Georgia of 1981, as amended. Metrocorp
has at all times since January 1, 1991 been, and up to and including the Closing
Date will remain, an "S Corporation" within the meaning of Subsection (7)(B) of
Section 48-7-21 of the Code of Georgia of 1981, as amended.
(d) Primrose and Metrocorp have been "S corporations" under the tax
laws of Ohio, Florida, North Carolina, Colorado and Alabama since they have been
required to file income tax returns in those states, and they will remain "S
corporations" in those states up to and including the Closing Date.
(e) Each Company has properly and fully accrued on its financial
statements, referred to in Sections 2.4, 2.5 and 3.8 above, all Taxes for any
period from the date of the last reporting period covered by such Tax Returns to
the Closing Date.
(f) None of the Companies is a party to any agreement extending the
time within which to file any Tax Return; provided, however, that the 1998
federal and state Tax Return filing dates may be extended to April 15, 1999. No
claim has ever been made by a jurisdiction in which any of the Companies do not
file Tax Returns that any of the Companies is or may be subject to taxation by
that jurisdiction.
(g) Except as set forth in SCHEDULE 3.12 hereto, none of the Tax
Returns of any of the Companies has been examined by the Internal Revenue
Service or any other similar taxing authority having the responsibility for
auditing Tax Returns for the taxable periods ending on the Closing Date.
Further, no facts exist or have existed which would constitute grounds for the
assessment of any Tax liability for any of the Companies for the taxable periods
ending on the Closing Date which have not been audited by the Internal Revenue
Service. No issue has been raised by the Internal Revenue Service or such other
similar taxing authority having the responsibility for auditing any Tax Returns
for the jurisdictions in which such Tax Returns are filed in any such
examination which, by application of the same or similar principles, reasonably
could be expected to result in a material proposed deficiency for any other
period not so examined. Each Company has delivered to Purchaser complete and
correct copies of all federal, state, local and foreign income Tax Returns filed
by, and all Tax examination reports and statements of deficiencies assessed
against or agreed to by, any of the Companies since January 1, 1995.
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(h) None of the Companies has waived any statute of limitations in
respect of Taxes or agreed to any extension of time with respect to any Tax
assessment or deficiency.
(i) None of the Companies has received any written ruling related to
Taxes or entered into any written and legally binding agreement with a Tax
authority relating to Taxes.
(j) (i) None of the Companies has liability for the Taxes of any
other person (other than the Companies) under Section 1.1502-6 of the Treasury
Regulations, or any similar provision of state, local or foreign law, as a
transferee or successor, by contract or otherwise; (ii) none of the Companies is
a party to any tax sharing agreement or tax indemnity agreement which would
require it to make any payment to any person (other than the Companies) by
reason of any Taxes imposed upon such person; (iii) none of the Companies has
liability for the Taxes of any other person (other than the Companies) as a
"transferee" within the meaning of Section 6901 of the Code; (iv) none of the
Companies has ever had a "change in method of accounting" as defined in Section
1.446-1(e)(2)(ii) of the Treasury Regulations; (v) there is no predecessor
corporation which would be treated as one corporation with any of the Companies
for purposes of Section 1374(c)(1) of the Code; (vi) no asset of any of the
Companies the basis of which is determined in whole or in part by the basis of
such asset in the hands of a "C Corporation" (as such term is defined in Section
1361(a)(2) of the Code) was acquired from any C corporation; (vii) none of the
Companies has any "net unrealized built-in gain," as defined in Section
1374(d)(1) of the Code; and (viii) none of the Companies is a party to any
agreement which would require it to make any payment which would constitute a
"parachute payment" for purposes of Sections 280G and 4999 of the Code.
3.13 EMPLOYEE BENEFITS; EMPLOYEES.
(a) All Employee Benefit Plans maintained or contributed to by any
Company currently, or within the past six years, are set forth in SCHEDULE 3.13
hereto. All such plans have been operated in accordance with their terms and
applicable law, and all required governmental filings have been made with
respect thereto. No such plan is an Employee Pension Benefit Plan, nor does any
such plan provide for any benefits beyond the termination of an employee's
employment, except where required by law. Except with respect to each other, no
Company is, and at no time has been, a member of a controlled group (within the
meaning of Section 412(n)(6)(C) of the Code) with any other entity. No benefit
under any Employee Benefit Plan will become payable or accelerated by reason of
the consummation of the transactions contemplated by this Agreement.
(b) There are no collective bargaining agreements applicable to any
Persons employed by any Company, nor are any such Persons represented by a labor
union or organization. There are not pending any unfair labor practice charges
against any Company, nor is there any demand for recognition, or any other
request or demand from a labor organization for representative status with
respect to any Person employed by any Company. There are no existing or, to the
Best of Knowledge of the Shareholders, threatened labor strikes, disputes,
grievances or other labor controversies affecting any Company, and no such
activities have occurred in the prior 24 months.
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(c) There are not pending or, to the Best of Knowledge of the
Shareholders, threatened unfair labor practice charges, wage payment claims or
discrimination complaints relating to race, color, national origin, sex,
religion, age, marital status or disability against any of the Companies before
any Governmental Authority or court or other Person. None of the Companies is
bound by any court or administrative order, judgment or decree of any kind
affecting employment, compensation or benefits of any employee.
3.14 CONTRACTS. To the Best of Knowledge of the Shareholders, SCHEDULE
3.14 hereto contains a true, correct and complete list of each of the following
written contracts, agreements or commitments to which any Shareholder is a party
that relates to the Business, or to which any Company is a party or that relates
to the Business (collectively, the "CONTRACTS"):
(i) any agreement, note, guaranty or other instrument (or group of
related agreements) under which the Company has created,
incurred, assumed or guaranteed any indebtedness for borrowed
money, or any capitalized lease obligation, or under which a
material amount of the Assets have been made subject to an
Encumbrance, including the Long Term Benefit Agreement, which
the Purchaser agrees to hold in confidence;
(ii) any agreement concerning confidentiality and non-competition;
(iii) any agreement for the employment of any individual on a
full-time, part-time, consulting or other basis;
(iv) any independent contractor agreement;
(v) any agreement concerning any obligation to pay wages,
severance, salaries, commissions or other compensation or
remuneration (other than obligations to make current wage or
salary payments terminable at will without notice) to or on
behalf of any employee, former employee, consultant or
contractor;
(vi) any lease of real property;
(vii) any agreement or commitment for material capital expenditures
or the acquisition of a material amount of fixed assets;
(viii) any agreement with any Primrose Franchisee; and
(ix) any other material agreement.
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The Company has delivered to Purchaser a correct and complete copy of each
written agreement listed in SCHEDULE 3.14 hereto.
3.15 INSURANCE. SCHEDULE 3.15 hereto sets forth the following information
with respect to each insurance policy relating to the Business (including
policies providing property, casualty, liability and workers' compensation
coverage and bond and surety arrangements) to which any Company is a party, a
named insured or otherwise the beneficiary of coverage:
(i) the name of the insurer, the name of the policyholder and the
name of each covered insured;
(ii) the policy number and the period of coverage;
(iii) the scope and amount of coverage; and
(iv) a description of any retroactive premium adjustments or other
loss-sharing arrangements.
3.16 BROKERS OR FINDERS. No broker or finder has acted directly or
indirectly for any Company or any of its Affiliates in connection with the
transactions contemplated by this Agreement, except for the Breckenridge Group,
Inc. and its Affiliate, Breckenridge Securities Corporation. The Shareholders
will pay the fees and expenses of Breckenridge Group, Inc. and such Affiliate.
3.17 COMPLIANCE WITH LAWS, ETC.
(a) Except as set forth on SCHEDULE 3.17, the business and
activities of the Companies and, to the Best of Knowledge of the Shareholders,
the business of the Primrose Franchisees have been and are being conducted in
compliance with all provisions of all applicable Federal, state and local
statutes, ordinances, rules and regulations, the failure to comply with which
would have a Material Adverse Effect. In particular, all of the franchises of
the Companies have been sold in compliance in all material respects with all
applicable federal, state and local franchise disclosure, registration and
relationship requirements. None of the Companies is in violation of or in
default under (i) any order, judgment or decree of any court, arbitration panel
or other tribunal; or (ii) any administrative order, rule making, procedure,
policy or other published declaration of (x) any Federal, state or local
governmental agency or other authority or (y) any professional society, board or
other similar organization, other than such violation or defaults referred to in
clause (ii) above which, in the aggregate, would not have a Material Adverse
Effect.
(b) Each Company holds all governmental licenses, permits,
franchises and other governmental authorizations necessary to the ownership of
its properties or the conduct of its properties or the conduct of its business
as currently conducted, and all such licenses, permits, franchises and other
governmental authorizations will remain in full force and effect immediately
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following the Closing Date and will not in any way be affected by, or terminate
or lapse by reason of, the consummation of the transactions contemplated hereby.
3.18 ENVIRONMENTAL MATTERS. To the Best of Knowledge of the Shareholders,
none of the real property or any of the buildings, improvements, fixtures and
equipment forming a part of the real property owned or leased by the Companies
(the "FACILITIES") is in violation in any respect of or the subject of any
investigation or inquiry or enforcement action by any Governmental Authority
with respect to the presence or release of Hazardous Substances or for the
recovery of environmental response costs or for compliance with remedial
obligations under any applicable Environmental Law. To the Best of Knowledge of
the Shareholders, each of the Companies has obtained and is in compliance in all
respects with all environmental permits required by the applicable Environmental
Laws to construct, occupy, operate, and use the Facilities, no Hazardous
Substances have been disposed of or have otherwise been released on or from the
Facilities during the period of any Company's ownership or operation thereof,
and the uses each Company has made or makes of the Facilities has not resulted,
and will not result, in the generation, storage, disposal, or release of any
Hazardous Substances in violation of the Environmental Laws.
3.19 ACQUISITION FOR INVESTMENT. The Preferred Shares, and the shares of
Class A Common Stock of SCC issuable upon conversion of the Preferred Shares,
are being acquired by the Shareholders for their own accounts for the purpose of
investment and not with a view to the resale or distribution of all or any part
of such securities in violation of the Securities Act of 1933, as amended (the
"SECURITIES ACT"), it being understood that the right to dispose of such
securities shall be entirely within the discretion of the Shareholders. Each of
the Shareholders represents and warrants that it is an "accredited investor" as
such term is defined in Rule 501(a) of Regulation D under the Securities Act.
Each Shareholder understands that the securities to be issued to it have not
been registered under the Securities Act or any state securities laws by reason
of exemptions from the registration requirements of the Securities Act and such
state securities laws which depend upon, among other things, the accuracy of the
representations set forth in this Section 3.19. Such securities shall also be
subject to the transfer restrictions contained in this Agreement. Each
Shareholder understands that (i) the securities to be issued to it hereunder
must be held indefinitely, and such Shareholder must continue to bear the
economic risk of its investment in such securities, until and unless the offer
and sale of such securities are subsequently registered under the Securities Act
and all applicable state securities laws or an exemption from such registration
is available, (ii) there is no established market for the Preferred Shares and
it is not anticipated that there will be any such market for such securities in
the foreseeable future, and there is only a limited market for such shares of
Class A Common Stock and (iii) any offer or sale without registration will
require an exemption under the Securities Act.
ARTICLE 4.
REPRESENTATIONS AND WARRANTIES OF PURCHASER AND SCC
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Purchaser and SCC represent and warrant to the Shareholders as follows:
4.1 ORGANIZATION AND QUALIFICATION. Each of Purchaser and SCC is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware, with all requisite power and authority to own, lease
and use its assets and to conduct its business as it is currently conducted.
Each of Purchaser and SCC is duly qualified to do business as a foreign
corporation and is in good standing in each jurisdiction in which the nature of
its business or the ownership of its properties requires such qualification,
except where the failure to be so qualified and in good standing would have a
material adverse effect on Purchaser or SCC, as the case may be.
4.2 AUTHORITY AND VALIDITY. Each of Purchaser and SCC has all requisite
power and authority to execute and deliver, to perform its obligations under,
and to consummate the transactions contemplated by this Agreement. Upon the
execution and delivery of this Agreement by Purchaser and SCC, this Agreement
will be the legal, valid and binding obligation of each of Purchaser and SCC,
enforceable against it in accordance with its terms, regardless of whether such
enforceability is considered in a proceeding at law or in equity. The execution,
delivery, performance and consummation by each of Purchaser and SCC of the
transactions contemplated by this Agreement have been duly authorized by all
requisite corporate action of each of Purchaser and SCC, and this Agreement has
been duly executed and delivered by each of Purchaser and SCC.
4.3 NO BREACH OR VIOLATION. Subject to obtaining the consents, approvals,
authorizations, and orders of and making the registrations or filings with or
giving notices to Governmental Authorities and Persons set forth in SCHEDULE 4.3
hereto, if any, the execution, delivery and performance by Purchaser and SCC of
this Agreement and the consummation of the transactions contemplated hereby in
accordance with the terms and conditions hereof do not and will not conflict
with, constitute a violation or breach of, constitute a default (with or without
the giving of notice or right to cure) or give rise to any right of termination
or acceleration of any right or obligation of Purchaser or SCC under, or result
in the creation or imposition of any Encumbrance upon the property of Purchaser
or SCC by reason of the terms of (i) Purchaser's Certificate of Incorporation or
By-Laws or SCC's Amended and Restated Certificate of Incorporation or By-Laws;
(ii) any material contract, agreement, lease, indenture or other instrument to
which Purchaser or SCC is a party; (iii) any order, judgment, injunction, award
or decree of any Governmental Authority or any statute, law, rule or regulation
applicable to Purchaser or SCC; or (iv) any Permit of Purchaser or SCC, which in
the case of (ii), (iii) or (iv) above would have a material adverse effect on
the ability of Purchaser or SCC to perform its obligations under this Agreement.
4.4 CONSENTS AND APPROVALS. Except as set forth in SCHEDULE 4.4 hereto, no
consent, approval, authorization or order of, registration or filing with, or
notice to, any Governmental Authority or any other Person is necessary to be
obtained, made or given by Purchaser or SCC in connection with the execution,
delivery and performance by Purchaser or SCC of this Agreement or for the
consummation by Purchaser or SCC of the transactions contemplated hereby.
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4.5 LEGAL PROCEEDINGS. There is no action, suit or proceeding, judicial,
administrative or otherwise, that is pending or, to the best knowledge of
Purchaser or SCC, overtly threatened against Purchaser or SCC that challenges
the validity or propriety of, or may prevent or delay, any of the transactions
contemplated by this Agreement.
4.6 BROKERS OR FINDERS. No broker or finder has acted directly or
indirectly for Purchaser or SCC in connection with the transactions contemplated
by this Agreement, and Purchaser has incurred no obligation to pay any brokerage
or finder's fee or other commission in connection therewith.
ARTICLE 5.
PRE-CLOSING COVENANTS OF THE SHAREHOLDERS
Erwin covenants to Purchaser and SCC, and the Trust covenants (solely as
to Section 5.9) to Purchaser and SCC, as follows:
5.1 ADDITIONAL INFORMATION. The Shareholders shall cause the Companies to
provide to Purchaser and its Representatives (i) reasonable access to all of the
Assets, Liabilities and Books and Records of the Companies; and (ii) such
financial, operating and other documents, data and information relating to the
Companies, the Business, the Assets and the Liabilities of each Company as
Purchaser or its Representatives may reasonably request.
5.2 EXCLUSIVITY. Prior to the termination of this Agreement, the
Shareholders shall not and shall cause the Companies not to (i) solicit or
initiate the submission of any proposal or offer from any Person relating to the
direct or indirect sale or transfer of any of the Company's capital stock or the
Assets (a "SALE"); (ii) participate in any negotiations regarding, furnish any
information with respect to, assist or participate in any effort or attempt by
any Person to do or seek a Sale; (iii) enter into any agreement or understanding
relating to a Sale; or (iv) permit any Representative to engage in the foregoing
on behalf of the Companies or the Shareholders.
5.3 CONTINUITY AND MAINTENANCE OF OPERATIONS.
(a) The Shareholders shall cause each Company between the date
hereof and the Closing Date or termination of this Agreement to use reasonable
efforts to (i) comply with Legal Requirements applicable to each Company; (ii)
fulfill its obligations under the Contracts; (iii) use its reasonable business
judgment to promote, develop and preserve its relationships with its franchisees
and others having business relations with it; (iv) pay in the Ordinary Course
all accounts payable; and (v) not alter the rate of compensation of any of its
officers, directors or employees other than in the Ordinary Course. The
Shareholders shall cause each Company to maintain insurance relating to the
Business as in effect on the date of this Agreement, to continue in the Ordinary
Course
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promotional and other activities with respect to the Business and to keep and
maintain all of the Books and Records in the Ordinary Course.
(b) The Shareholders shall not permit any Company to, without the
prior written consent of Purchaser: (i) sell, lease, transfer, convey or assign
any of the Assets (or enter into any contract to do any of the foregoing) other
than in the Ordinary Course, or in order to satisfy obligations under the Long
Term Benefit Agreement as required by Section 5.7 herein, or to comply with the
provisions of Sections 5.6 and 5.8 herein or to pay fees due as provided in
Section 3.16 herein, or permit the creation of any Encumbrance on any of the
Assets other than a Permitted Encumbrance; (ii) make any change in its
authorized or issued capital stock, grant any stock option or other right to
purchase shares of capital stock or other securities, issue or make any
commitment to issue any security, including any security exercisable for,
convertible into or exchangeable for capital stock; (iii) pay any dividend or
make any distribution on its capital stock or other securities (except as
permitted by Section 2.5); (iv) purchase, redeem, retire or make any other
acquisition of shares of its capital stock or other securities; (v) amend its
articles of incorporation or by-laws or any material agreement; (vi) assume,
create, incur or guarantee any indebtedness for borrowed money except in the
Ordinary Course; or (vii) waive any rights of material value; (viii) make any
changes in officer compensation or pay any bonuses, except in the Ordinary
Course; or (ix) enter into any transaction not in the Ordinary Course.
5.4 CONSENTS AND APPROVALS. As soon as practicable after execution of this
Agreement, the Shareholders shall use and cause each Company to use its
reasonable best efforts to obtain any necessary consent, approval, authorization
or order of, make any registration or filing with or give any notice to any
Governmental Authority or Person as is required to be obtained, made or given by
the Companies to consummate the transactions contemplated by this Agreement,
including, without limitation, any authorizations, consents, approvals, actions,
filings or notices set forth in SCHEDULE 3.5 hereto.
5.5 REMOVAL OF ENCUMBRANCES. Other than as to the Permitted Encumbrances,
the Shareholders shall take and cause the Companies to take all necessary
actions to cause the termination, release and removal, on or prior to the
Closing Date, of all Encumbrances relating to the Assets or the Business or
relating to the Companies which may reasonably be expected to affect the Assets
or the Business.
5.6 REPAYMENT OF INDEBTEDNESS. Prior to the Closing Date, the Shareholders
shall cause the Companies to repay all indebtedness of the Companies, if any,
other than the Citizens First Indebtedness.
5.7 PAYOFF OBLIGATION UNDER LONG TERM BENEFIT AGREEMENT. Prior to the
Closing Date, the Shareholders shall cause the Companies to pay all obligations
and liabilities of the Companies under the Long Term Benefit Agreement, cause
such Long Term Benefit Agreement to
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be terminated and indemnify Purchaser and the Companies as to all claims
relating to the Long Term Benefit Agreement.
5.8 TRANSFERS OF RESTRICTED SECURITIES.
(a) RESTRICTIONS GENERALLY; SECURITIES ACT.
(i) Each Shareholder will not, directly or indirectly, sell, offer
for sale, assign, pledge, hypothecate, grant any option or
other right in respect of or otherwise transfer (collectively,
"TRANSFER") any of the Preferred Shares or the shares of Class
A Common Stock of SCC underlying the Preferred Shares
(collectively, "RESTRICTED SECURITIES"), except in accordance
with the terms of this Agreement. Any attempt by any
Shareholder to Transfer any Restricted Securities not in
accordance with the terms of this Agreement shall be null and
void, and neither the issuer of such securities nor any
transfer agent of such securities shall give any effect to
such attempted Transfer in its stock records.
(ii) Each Shareholder agrees that, in addition to the other
requirements imposed herein relating to Transfer, it will not
Transfer any Restricted Securities except pursuant to an
effective registration statement under the Securities Act, or
upon receipt by SCC of an opinion of counsel reasonably
satisfactory to SCC to the effect that registration is not
required because of the availability of an exemption from
registration under the Securities Act.
(b) LEGEND.
(i) Each certificate representing Restricted Securities held by
any Shareholder shall be endorsed with the following legends
and such other legends as may be required by applicable
securities laws or by SCC's Amended and Restated Certificate
of Incorporation:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT"), OR ANY STATE SECURITIES LAW. THE HOLDER HEREOF MAY NOT
SELL, OFFER FOR SALE, ASSIGN, PLEDGE, HYPOTHECATE, GRANT ANY
OPTION OR OTHER RIGHT IN RESPECT OF OR OTHERWISE TRANSFER
THESE SECURITIES WITHOUT THE CONSENT OF THE ISSUER HEREOF,
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AND UNLESS IN COMPLIANCE WITH THE ACT AND APPLICABLE STATE
SECURITIES LAWS."
(ii) Any certificate issued at any time in exchange or substitution
for any certificate bearing such legend (except a new
certificate issued upon the completion of a Transfer pursuant
to a registered public offering under the Securities Act and
made in accordance with the Securities Act) shall also bear
such legend, unless in the opinion of counsel for SCC, the
Restricted Securities represented thereby are no longer
subject to the provisions of this Agreement or the
restrictions imposed under the Securities Act or state
securities laws, in which case the applicable legend (or
legends) may be removed.
5.9 FIRPTA CERTIFICATE. The Shareholders shall have executed a
certification of non-foreign status pursuant to Section 1.1445-2(b)(2) of the
Treasury Regulations.
5.10 TERMINATION OF TAX AGREEMENTS. The Shareholders shall have caused the
Companies to have terminated each Tax allocation or sharing agreement between
any of the Companies and any third party.
ARTICLE 6.
PRE-CLOSING COVENANTS OF PURCHASER AND SCC
Purchaser and SCC covenant to the Shareholders as follows:
6.1 CONSENTS AND APPROVALS. As soon as practicable after execution of this
Agreement, Purchaser and SCC shall use their best efforts to obtain any
necessary consent, approval, authorization or order of, make any registration or
filing with or give notice to any Governmental Authority or Person as is
required to be obtained, made or given by Purchaser or SCC to consummate the
transactions contemplated by this Agreement, including, without limitation, any
authorizations, consents, approvals, actions, filings or notices set forth in
SCHEDULE 4.4 hereto.
6.2 ERWIN GUARANTY AND ERWIN COLLATERAL. Purchaser will, on or prior to
the Closing Date, either (i) obtain a release of Erwin from the Erwin Guaranty
and obtain a release of the Erwin Collateral; or (ii) pay the Citizens First
Indebtedness. If such Citizens First Indebtedness is paid, such payment shall in
no way reduce the Purchase Price, but shall be a payment in addition to the
Purchase Price.
6.3 FINANCING. Purchaser and SCC will use all reasonable efforts to obtain
the necessary financing to consummate the transactions contemplated hereby.
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ARTICLE 7.
CONDITIONS PRECEDENT TO OBLIGATIONS OF PURCHASER AND SCC
All obligations of Purchaser and SCC under this Agreement shall be subject
to the fulfillment at or prior to Closing of each of the following conditions,
it being understood that Purchaser may, in its sole discretion, to the extent
permitted by applicable Legal Requirements, waive any or all of such conditions
in whole or in part:
7.1 ACCURACY OF REPRESENTATIONS. All representations and warranties of the
Shareholders contained in this Agreement shall be, if specifically qualified by
materiality, true in all respects and, if not so qualified, shall be true in all
material respects, in each case on and as of the Closing Date with the same
effect as if made on and as of the Closing Date. The Shareholders shall have
delivered to Purchaser and SCC a certificate dated the Closing Date to the
foregoing effect.
7.2 COVENANTS. The Shareholders shall, in all material respects, have
performed and complied with each of the covenants, obligations and agreements
contained in this Agreement that are to be performed or complied with by them at
or prior to Closing. The Shareholders shall have delivered to Purchaser and SCC
a certificate dated the Closing Date to the foregoing effect.
7.3 CONSENTS. All consents, approvals, authorizations and orders required
to be obtained from, and all registrations, filings and notices required to be
made with or given to, any Governmental Authority or other Person as provided in
Sections 5.4 and 6.1 shall have been duly obtained, made or given, as the case
may be, and shall be in full force and effect, and any waiting period required
by applicable law or any Governmental Authority in connection with such
transactions shall have expired or have been earlier terminated.
7.4 DELIVERY OF DOCUMENTS. The Shareholders shall have delivered, or
caused to be delivered, to Purchaser and SCC the following documents:
(i) the original stock certificates of the Company evidencing the
Shares, endorsed in blank, with all required transfer stamps,
if any, affixed thereto;
(ii) an opinion of Brinson, Askew, Berry, Seigler, Richardson &
Davis, LLP, counsel to the Company, dated the Closing Date, in
the form attached hereto as EXHIBIT 4;
(iii) if requested by Purchaser, written resignations of the
officers and directors of each of the Companies, effective as
of the Closing;
(iv) the Erwin Employment Agreement, executed by Erwin;
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(v) evidence that the Long Term Benefit Agreement has been
terminated and that the Companies have paid all obligations
and liabilities of the Companies under the Long Term Benefit
Agreement; and
(vi) such other documents and instruments as Purchaser may
reasonably request to otherwise facilitate the consummation or
performance of any of the transactions contemplated by this
Agreement.
7.5 NO LITIGATION. No action, suit or proceeding shall be pending or
threatened before any Governmental Authority or other Person that would prohibit
or materially adversely affect Purchaser's ownership or operation of all or a
material portion of the Business or the Assets or the consummation of the
transactions contemplated hereby.
7.6 FINANCING. Purchaser shall have obtained the necessary financing to
consummate the transactions contemplated hereby.
7.7 OTHER EMPLOYMENT AGREEMENTS. Each of Jo Kirchner, Raymond Orgera and
Robert Benowitz shall have entered into employment agreements with Purchaser
and/ or one or more of the Companies, substantially in the form attached hereto
as EXHIBIT 5.
ARTICLE 8.
CONDITIONS PRECEDENT TO OBLIGATIONS OF THE SHAREHOLDERS
All obligations of the Shareholders under this Agreement shall be subject
to the fulfillment at or prior to Closing of the following conditions, it being
understood that the Shareholders may, in their sole discretion, to the extent
permitted by applicable Legal Requirements, waive any or all of such conditions
in whole or in part:
8.1 ACCURACY OF REPRESENTATIONS. All representations and warranties of
Purchaser and SCC contained in this Agreement shall be, if specifically
qualified by materiality, true and correct in all respects and, if not so
qualified, shall be true and correct in all material respects, in each case on
and as of the Closing Date with the same effect as if made on and as of the
Closing Date. Purchaser and SCC shall have delivered to the Shareholders a
certificate dated the Closing Date to the foregoing effect.
8.2 COVENANTS. Purchaser and SCC shall, in all material respects, have
performed and complied with each obligation, agreement, covenant and condition
contained in this Agreement and required by this Agreement to be performed or
compiled with by Purchaser and SCC at or prior to Closing. Purchaser and SCC
shall have delivered to the Shareholders a certificate dated the Closing Date to
the foregoing effect.
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8.3 CONSENTS. All consents, approvals, authorizations and orders required
to be obtained from, and all registrations, filings and notices required to be
made with or given to, any Governmental Authority or other Person as provided in
Section 6.1 shall have been duly obtained, made or given, as the case may be,
and shall be in full force and effect, and any waiting period required by
applicable law or any Governmental Authority in connection with such
transactions shall have expired or have been earlier terminated.
8.4 DELIVERY OF DOCUMENTS. Purchaser, as applicable, shall have executed
and delivered, or caused to be executed and delivered, to the Shareholders the
following documents:
(i) evidence reasonably satisfactory to the Shareholders that each
of Purchaser and SCC has taken all action necessary to
authorize the execution of this Agreement and the consummation
of the transactions contemplated hereby;
(ii) opinion of Morgan, Lewis & Bockius LLP, counsel to Purchaser,
dated the Closing Date, in the form attached hereto as EXHIBIT
6;
(iii) the Erwin Employment Agreement, as executed by Purchaser
and/or one or more of the Companies; and
(iv) such other documents and instruments as the Shareholders may
reasonably request to otherwise facilitate the consummation or
performance of any of the transactions contemplated by this
Agreement.
8.5 LITIGATION. No action, suit or proceeding shall be pending by or
before any Governmental Authority or other Person that would prevent the
consummation of any of the transactions contemplated by this Agreement.
8.6 LEASES. The Erwin Street Lease and the Primrose Country Day Lease
shall be ratified and affirmed by Purchaser. The term of the Erwin Street Lease
shall be for two (2) years from Closing and the term of the Country Day Lease
shall be for three (3) years from Closing. Each such Lease shall be a triple net
lease at the rent specified in EXHIBIT 7 (which Erwin believes to be a fair
market rent), provide for payments of taxes, insurance and maintenance by Tenant
and otherwise be substantially in the form attached hereto as EXHIBIT 7.
8.7 ERWIN GUARANTY AND COLLATERAL. The matters set forth in Section 6.2
shall be completed to the satisfaction of Erwin.
8.8 PURCHASE PRICE. The Purchase Price shall be delivered to the
Shareholders as provided in Section 2.2.
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ARTICLE 9.
POST-CLOSING COVENANTS
9.1 EMPLOYEE MATTERS. After the Closing, Purchaser will cause the
Companies to provide health insurance coverage to the employees of the Companies
under each Company's existing health insurance plan or a plan maintained by
Purchaser which provides comparable benefits for so long as such employees
remain employed by each Company.
9.2 TRANSFER TAXES, ETC. All sales, use, transfer, real property transfer,
gains, stamp, recording, stock transfer or other similar Taxes incurred in
connection with the transactions contemplated by this Agreement and due with
respect to the states in which the Companies conduct business, including any
interest, penalties, fines, assessments or additions to Tax, whether disputed or
not, imposed in respect of the foregoing, will be borne by the Shareholders. The
Shareholders will, at their own expense, file all necessary Tax Returns and
other documentation with respect to all such transfer Taxes as required by
applicable law, and assume all responsibility for filing such Tax Returns and
documentation on an accurate, complete and timely basis. Purchaser, as
appropriate, will join in the execution of any such Tax Return or other
documentation.
9.3 REPORTING REQUIREMENTS, LEGENDS, ETC. SCC shall use its reasonable
efforts to (i) comply with the current public information requirements set forth
in Rule 144(c) under the Securities Act; and (ii) provide either of the
Shareholders or such Shareholder's prospective transferees with the information,
if any, required to be delivered pursuant to Rule 144A(d)(4) under the
Securities Act. If any shares of Class A Common Stock of SCC held by either of
the Shareholders are or become eligible for sale pursuant to Rule 144(k) under
the Securities Act, then, upon the request of such Shareholder, SCC shall remove
any Securities Act legend from the certificates therefor.
9.4 401(K) PLAN. Within 90 days after the Closing, Purchaser shall
establish a non-contributory plan intended to be qualified under Section 401(k)
of the Code for the benefit of the employees of the Companies (the "Employees").
9.5 EMPLOYEE BENEFITS. Purchaser shall contribute a minimum of $15,000
(the "Minimum Benefit Amount") on an annual basis towards benefits for the
Employees. Purchaser shall (a) for the twelve months ended March 31, 2000,
allocate 20% of EBITDA for the twelve months ended March 31, 2000 in excess of
$4.3 million less the Minimum Benefit Amount toward benefits for the Employees;
and (b) for the twelve months ended March 31, 2001, Purchaser shall allocate
five to 10% of EBITDA for the twelve months ended March 31, 2001 in excess of
the actual EBITDA earned for the twelve months ended March 31, 2000. Purchaser
shall contribute the amounts set forth in (a) and (b) toward benefits for the
Employees to the extent such benefits are in line with the market as determined
by the Board of Directors of Purchaser.
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ARTICLE 10.
TERMINATION
10.1 EVENTS OF TERMINATION. This Agreement may be terminated and the
transactions contemplated by this Agreement may be abandoned at any time prior
to Closing as provided below:
(a) Purchaser and the Shareholders may terminate this Agreement by
mutual written consent at any time prior to Closing.
(b) Purchaser may terminate this Agreement by giving written notice
to the Shareholders at any time prior to Closing if the Shareholders have
breached any material representation, warranty or covenant contained in this
Agreement in any material respect, Purchaser has notified the Shareholders in
writing of the breach, and the breach has continued without cure for a period of
ten (10) days after receipt of the notice of breach.
(c) The Shareholders may terminate this Agreement by giving written
notice to Purchaser at any time prior to Closing if Purchaser has breached any
material representation, warranty or covenant contained in this Agreement in any
respect, the Shareholders have notified Purchaser in writing of the breach, and
the breach has continued without cure for a period of ten (10) days after
receipt of the notice of breach.
(d) Purchaser may terminate this Agreement if the Closing shall not
have occurred on or before April 6, 1999 by reason of the failure of any
condition precedent under Article 7 (unless the failure results primarily from
Purchaser breaching any representation, warranty or covenant contained in this
Agreement).
(e) The Shareholders may terminate this Agreement if the Closing
shall not have occurred on or before April 6, 1999 by reason of the failure of
any condition precedent under Article 8 hereof (unless the failure results
primarily from any of the Shareholders breaching any representation, warranty or
covenant contained in this Agreement).
10.2 LIABILITY IN EVENT OF BREACH. In the event the Closing does not take
place under this Agreement as a result of the breach of this Agreement by either
Purchaser and SCC, on the one hand, or the Shareholders, on the other hand,
after notice of such breach, and failure on the part of the other Party to cure
the same, the non-breaching Party shall be entitled to recover from the
breaching Party, as liquidated damages, the sum of $250,000.00, each Party
hereto acknowledging that such amount is a reasonable estimate of such damages
and that it is impossible to ascertain the exact amount of such damages. The
total liability of the Shareholders to Purchaser and SCC in the aggregate under
this paragraph shall be $250,000.00. The right to pursue liquidated damages as
set forth in this Section 10.2 shall be the sole and exclusive right of the
Parties, and none of the Parties shall have any other remedy at law or equity
under this Section 10.2.
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10.3 PROCEDURE UPON TERMINATION. If this Agreement is terminated by any
Party pursuant to this Article, notice of such termination shall promptly be
given by the terminating Party to the other Parties.
ARTICLE 11.
REMEDIES FOR BREACH OF THIS AGREEMENT
11.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All statements contained
in any certificate or other instrument delivered pursuant to this Agreement
shall be deemed representations and warranties hereunder by the Party delivering
such certificate or instrument. All of the representations and warranties of
Purchaser, SCC and the Shareholders contained in this Agreement shall survive
the Closing and continue in full force and effect for five hundred and forty
(540) days from and after the Closing Date; provided, however, that (i) any
representation or warranty related to Tax matters shall survive until 30 days
from and after the expiration of the applicable Tax statute of limitations; (ii)
any representation or warranty related to environmental matters shall survive
for a period of five years from and after the Closing Date; (iii) the
representations and warranties set forth in Section 3.10 shall survive for a
period of two years from and after the Closing Date; (iv) the representations
and warranties set forth in Section 3.2 shall survive for a period of five years
from and after the Closing Date; and (v) the representations and warranties of
the Trust shall survive for only as long as Joseph M. Seigler, Jr. is trustee of
the Trust; PROVIDED, HOWEVER, that the representations and warranties of Erwin
with respect to the Trust shall survive for the applicable periods set forth in
clauses (i), (ii), (iii) and (iv) of this Section 11.1. The period of survival
prescribed by this Section 11.1 is referred to as the "Survival Period." The
liabilities of Purchaser, SCC and the Shareholders under their respective
representations and warranties will expire as of the expiration of the Survival
Period for such representations and warranties; provided, however, that such
expiration will not include, extend or apply to any representation or warranty,
the breach of which has been asserted by (i) Purchaser or SCC in a written
notice to the Shareholders before such expiration, or (ii) the Shareholders in a
written notice to Purchaser or SCC before such expiration, in each case which
indicates the basis for such claim in reasonable detail.
11.2 INDEMNIFICATION PROVISIONS FOR BENEFIT OF PURCHASER.
(a) If either of the Shareholders breaches any representations and
warranties contained in this Agreement or in any certificate or other instrument
delivered hereto and if Purchaser or SCC makes a written claim for
indemnification against the breaching Party or Parties within the Survival
Period for such representations and warranties, then, subject to the limitations
of subsection (c), Erwin shall indemnify Purchaser, SCC and the shareholders,
directors, officers, employees, successors and assigns of each of Purchaser and
SCC from and against any Adverse Consequences that any such Person may suffer
through and after the date of the claim for indemnification resulting from,
arising out of, relating to or caused by the breach.
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(b) Subject to the limitations of subsection (c), Erwin shall
indemnify Purchaser, SCC and the shareholders, directors, officers, employees,
agents, successors and assigns of each of Purchaser and SCC from and against any
Adverse Consequences that any such Person may suffer resulting from, arising out
of, relating to, in the nature of, or caused by any of the following (i) any
breach of any covenant, agreement or obligation of the Shareholders contained in
this Agreement or in any certificate or other instrument delivered hereto; (ii)
any Liability for Taxes attributable to the use, ownership or operation of the
Assets by any Company or the Business or otherwise imposed on any Company
relating to a Pre-Closing Period and any Section 338 Tax; and (iii) the matters
described on Schedule 11.2(b). Such Persons' rights to indemnity under this
Section 11.2 shall expire after the applicable Survival Period; provided,
however, that such expiration will not include, extend or apply to rights for
indemnity with respect to any claim asserted in good faith in a written notice
to Erwin before such expiration.
(c) Notwithstanding any provision herein to the contrary, (i) no
Person otherwise entitled to indemnification under this Section 11.2 shall be so
entitled until the aggregate amount otherwise payable under this Section 11.2
exceeds $250,000, in which event such Person shall be entitled to
indemnification for the amount in excess of $250,000; and (ii) in no event shall
the liability of Erwin under this paragraph to all Persons in the aggregate
exceed $3,000,000.00, except that the limitations set forth in (i) and (ii) of
this Section 11.2(c) shall not apply to any indemnification relating to breach
of the representations and warranties under Section 3.12, Section 3.18 or
Section 3.2 (relating to stock ownership) or relating to a breach of the
covenants set forth in Section 5.7, Section 5.10, Section 5.11 or Section 9.2,
or any indemnification obligation described in Sections 11.2(b)(ii) and (iii) or
a breach of any obligation set forth in Article 12.
11.3 INDEMNIFICATION PROVISIONS FOR THE BENEFIT OF THE SHAREHOLDERS.
(a) If Purchaser breaches any of its representations and warranties
contained in this Agreement or in any certificate or other instrument delivered
hereto and if the Shareholders make a written claim for indemnification against
Purchaser and SCC within the Survival Period, then Purchaser and SCC shall
indemnify, defend and hold harmless the Shareholders, and the assigns of either
of the Shareholders, from and against any Adverse Consequences that any such
Person may suffer through and after the date of the claim for indemnification
resulting from, arising out of, relating to, or caused by the breach.
(b) Purchaser shall indemnify the Shareholders, and the assigns of
either of the Shareholders against any Adverse Consequences that any such Person
may suffer resulting from, arising out of, relating to, in the nature of, or
caused by any of the following: (i) any breach of any covenant, agreement or
obligation of Purchaser contained in this Agreement or in any certificate or
other instrument delivered hereto; and (ii) any Liability for Taxes attributable
solely to the use, ownership or operation of the Assets or the transferred
Business by Purchaser relating to a Post-Closing Period, excluding any Section
338 Tax.
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(c) SCC shall indemnify the Shareholders, and the assigns of either
of the Shareholders, against any Adverse Consequences that any such Person may
suffer resulting from, arising out of, relating to, in the nature of, or caused
by any breach of any covenant, agreement or obligation of SCC contained in this
Agreement or in any certificate or other instrument delivered hereto.
(d) Notwithstanding any provision herein to the contrary, (i) no
Person otherwise entitled to indemnification under this Section 11.3 shall be so
entitled until the aggregate amount otherwise payable under this Section 11.3
exceeds $250,000, in which event such Person shall be entitled to
indemnification for the amount in excess of $250,000; and in no event shall the
liability of the Purchaser and SCC under this paragraph to all Persons in the
aggregate exceed $3,000,000.00.
11.4 MATTERS INVOLVING THIRD PARTIES.
(a) If any third party shall notify either Purchaser, SCC or the
Shareholders (the "INDEMNIFIED PARTY") with respect to any matter (a "THIRD
PARTY CLAIM") that may give rise to a claim for indemnification against the
other (the "INDEMNIFYING PARTY") under this Article, then the Indemnified Party
shall promptly notify the Indemnifying Party thereof in writing; provided,
however, that no delay on the part of the Indemnified Party in notifying any
Indemnifying Party shall relieve the Indemnifying Party from any obligation
hereunder unless (and then solely to the extent) the Indemnifying Party is
prejudiced thereby.
(b) Any Indemnifying Party shall have the right to defend the
Indemnified Party against the Third Party Claim with counsel of its choice
reasonably satisfactory to the Indemnified Party so long as: (i) the
Indemnifying Party notifies the Indemnified Party in writing within fifteen (15)
days after the Indemnified Party has given notice of the Third Party Claim that
the Indemnifying Party will indemnify the Indemnified Party from and against the
entirety of any Adverse Consequences the Indemnified Party may suffer resulting
from, arising out of, relating to, in the nature of or caused by the Third Party
Claim; (ii) the Indemnifying Party provides the Indemnified Party with evidence
acceptable to the Indemnified Party that the Indemnifying Party will have the
financial resources to defend against the Third Party Claim and fulfill its
indemnification obligations hereunder; (iii) settlement of, or an adverse
judgment with respect to, the Third Party Claim is not, in the good faith
judgment of the Indemnified Party, likely to establish a precedential custom or
practice adverse to the continuing business interests of the Indemnified Party;
and (iv) the Indemnifying Party conducts the defense of the Third Party Claim
actively and diligently.
(c) So long as the Indemnifying Party is conducting the defense of
the Third Party Claim in accordance with subsection (b): (i) the Indemnified
Party may retain separate co-counsel at its sole cost and expense and
participate in the defense of the Third Party Claim; (ii) the Indemnified Party
shall not consent to the entry of any judgment or enter into any settlement with
respect to the Third Party Claim without the prior written consent of the
Indemnifying Party; and (iii) the Indemnifying Party shall not consent to the
entry of any judgment or enter into any
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settlement with respect to the Third Party Claim without the prior written
consent of the Indemnified Party.
(d) If, however, any of the conditions set forth in Section 11.4(b)
above is not or no longer satisfied: (i) the Indemnified Party may defend
against, and consent to the entry of any judgment or enter into any settlement
with respect to, the Third Party Claim in any manner it reasonably may deem
appropriate (and the Indemnified Party need not consult with, or obtain any
consent from, any Indemnifying Party in connection therewith); (ii) the
Indemnifying Party shall reimburse the Indemnified Party promptly and
periodically for the costs of defending against the Third Party Claim (including
attorneys' fees and expenses); and (iii) the Indemnifying Party shall remain
responsible for any Adverse Consequences the Indemnified Party may suffer
resulting from, arising out of, relating to, in the nature of or caused by the
Third Party Claim to the fullest extent provided in this Article 11.
11.5 DETERMINATION OF ADVERSE CONSEQUENCES; SUBROGATION. Purchaser, SCC
and the Shareholders shall take into account the time cost of money (using the
Applicable Rate as the discount rate) in determining Adverse Consequences for
purposes of this Article 11. All indemnification payments under this Article
shall be net of any insurance proceeds received by the Indemnified Party in
respect of the event or circumstance giving rise to the claim for
indemnification and shall be deemed adjustments to the Purchase Price. Upon
payment in full of any indemnification claim, whether such payment is effected
by set-off or otherwise, or the payment of any judgment or settlement with
respect to a Third Party Claim, the Indemnifying Party shall be subrogated to
the extent of such payment to the rights of the Indemnified Party against any
Person with respect to the subject matter of such indemnification claim or Third
Party Claim.
ARTICLE 12.
SECTION 338(H)(10) ELECTIONS AND OTHER TAX MATTERS
12.1 SECTION 338(H)(10) ELECTIONS. At the election of Purchaser, Purchaser
and the Shareholders jointly will make one or more elections under Section
338(h)(10) of the Code (each, a "SECTION 338(H)(10) ELECTION") with respect to
the acquisition of the Companies. At the further election of Purchaser,
Purchaser and the Shareholders jointly will make one or more elections for state
or local Tax purposes similar to a Section 338(h)(10) Election with respect to
the acquisition of the Companies. As provided in Section 11.2(b)(ii), all
Section 338 Taxes will be borne and paid by the Shareholders. With respect to
each Section 338(h)(10) Election (or similar state or local election), the
Shareholders will (i) treat the Section 338(h)(10) Election as valid; (ii) not
take any action inconsistent with such treatment; and (iii) file, or cause to be
filed, all Tax Returns in a manner consistent with the Section 338(h)(10)
Election.
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12.2 ELECTION FORMS AND ALLOCATIONS.
(a) As requested from time to time by Purchaser (whether before, at
or after the Closing), the Shareholders shall assist Purchaser in, and shall
provide the necessary information to Purchaser in connection with, the
preparation of any form or document required to effect a valid and timely
Section 338(h)(10) Election (or similar state or local election), including
Internal Revenue Service Form 8023, any similar form under state or local law
and any schedules or attachments thereto (collectively, "SECTION 338 FORMS").
Upon delivery of any Section 338 Form by Purchaser to the Shareholders, the
Shareholders shall duly and promptly execute such Section 338 Form and shall
deliver such executed Section 338 Form to Purchaser. If Purchaser determines
that any change is to be made in a Section 338 Form previously executed by the
Shareholders and delivered by the Shareholders to Purchaser, then Purchaser may
prepare a new Section 338 Form and deliver such new Section 338 Form to the
Shareholders, and the Shareholders shall duly and promptly execute such Section
338 Form and shall deliver such executed Section 338 Form to Purchaser.
(b) The portion of the Purchase Price allocable to the stock of each
Election Corporation in accordance with SCHEDULE 12.1 attached hereto shall be
further allocated in the manner described in this Section 12.2(b). With respect
to each Section 338(h)(10) Election (or similar state or local election), as
soon as practicable after the Closing Date, Purchaser shall determine (i) MADSP
and (ii) the allocation of MADSP among the assets of the Election Corporation
(collectively, the "ELECTION ALLOCATIONS"), in accordance with Section 338 of
the Code and the applicable Treasury regulations thereunder. For purposes of any
purchase price allocation made under this Article 12, the Purchaser and the
Shareholders agree that the tax basis of the Section 1245 property, as defined
in Section 1245(a)(3) of the Code, of each of the Companies is equal to the fair
market value of such Section 1245 property, as of the date hereof. Except as may
be required by law, the Shareholders will (i) file, or cause to be filed, all
Tax Returns in a manner consistent with the Election Allocations; and (ii) not
take any action inconsistent therewith.
12.3 OTHER TAX MATTERS.
(a) In the case of Taxes arising in a taxable period of any Company
that includes but does not end on the Closing Date, except as provided in the
next sentence, the allocation of such Taxes between the Pre-Closing Period and
the Post-Closing Period shall be made on the basis of an interim closing of the
books as of the end of the Closing Date. In the case of (i) franchise Taxes
based on capitalization, debt or shares of stock authorized, issued or
outstanding; and (ii) AD VALOREM Taxes, in either case attributable to any
taxable period that includes but does not end on the Closing Date, the portion
of such Taxes attributable to the Pre-Closing Period shall be the amount of such
Taxes for the entire taxable period, multiplied by a fraction the numerator of
which is the number of calendar days in such taxable period ending on and
including the Closing Date and the denominator of which is the entire number of
calendar days in such taxable period; PROVIDED, HOWEVER, that if any property,
asset or other right of any Company is sold or otherwise transferred
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prior to the Closing Date, then AD VALOREM Taxes pertaining to such property,
asset or other right shall be attributed entirely to the Pre-Closing Period.
(b) The Shareholders shall file or cause to be filed all Tax Returns
of each Company for all taxable periods that end on or before the Closing Date.
The Shareholders will allow Purchaser an opportunity to review and comment upon
such Tax Returns (including any amended Tax Returns). The Shareholders shall pay
all Tax liabilities shown by such Tax Returns to be due.
(c) Purchaser shall file or cause to be filed all Tax Returns of any
Company that are not described in Section 12.3(b). With respect to any Tax
Return of any Company for a taxable period that begins on or before and ends
after the Closing Date, not later than five Business Days before the due date
(including any extension thereof) for payment of Taxes with respect to such Tax
Return, the Shareholders shall pay to such Company the portion of the Taxes set
forth on such Tax Return that are allocable to the Pre-Closing Period, net of
any payments made prior to the Closing Date in respect of such Taxes, whether as
estimated Taxes or otherwise.
(d) Each Party hereto shall provide to each of the other Parties
hereto such cooperation and information as any of them reasonably may request
relating to Taxes. Each Party will retain all Tax Returns, schedules and work
papers, and all material records and other documents relating to Tax matters of
the Companies for their Tax period first ending after the Closing Date and for
all prior Tax periods until the later of (i) the expiration of the statute of
limitations for the Tax periods to which the Tax Returns and other documents
relate; or (ii) eight years following the due date (without extension) for such
Tax Returns. Thereafter, the Party holding such Tax Returns or other documents
may dispose of them; PROVIDED, that such Party shall give to the other Party
ninety (90) calendar days' prior written notice prior to doing so. Each Party
shall make its employees reasonably available on a mutually convenient basis at
its cost to provide explanation of any documents or information so provided.
ARTICLE 13.
NON-COMPETITION
13.1 PROHIBITED ACTIVITIES. Erwin agrees that he will not, for a period
commencing on the Closing Date and ending on the date that is six (6) years
following the Closing Date, for any reason whatsoever, directly or indirectly,
for himself or on behalf of or in conjunction with any other person, company,
partnership, corporation or business of whatever nature:
(i) engage, as an officer, director, shareholder, owner, partner,
joint venturer, or in a managerial capacity, whether as an
employee, independent contractor, consultant or advisor, in
any business related to child-care or child or adult education
or any reasonable extension thereof (other than instruction
solely in sports or recreational activities) or the
franchising of any operations related
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thereto (the "BUSINESS") within the United States of America
(the "TERRITORY");
(ii) hire, solicit or otherwise encourage or help in any way to
terminate the employment of any employee of the Companies (or
any current or future subsidiary or affiliate thereof) or hire
or solicit any former management employee who was an employee
of the Companies (or of any current or future subsidiary or
affiliate thereof) within six months of the date on which the
Executive attempts to hire or solicit such former management
employee;
(iii) call upon any person or entity which is, at that time, or
which has been, within one (1) year prior to the Closing Date,
a franchisee, proposed franchisee or customer of any of the
Companies (including any subsidiaries thereof), within the
Territory for the purpose of entering into franchise
agreements or otherwise soliciting or selling products or
services in direct competition with any of the Companies (or
any subsidiaries thereof) within the Territory;
(iv) call upon any prospective acquisition or franchise candidate,
on Erwin's own behalf or on behalf of any competitor of the
Business, which candidate, to the Best of Knowledge of the
Shareholders, was called upon by any of the Companies
(including any subsidiaries thereof) or for which, to the Best
of Knowledge of the Shareholders, any of the Companies (or any
subsidiary thereof) made an acquisition analysis for the
purpose of acquiring such entity or contemplated entering into
a franchise agreement with; or
(v) disclose customers, whether in existence or proposed, of any
of the Companies to any person, firm, partnership, corporation
or business for any reason or purpose whatsoever except to the
extent that any of the Companies (including any subsidiary
thereof) has in the past disclosed such information to the
public for valid business reasons.
Notwithstanding the above, the foregoing covenants shall not be deemed to
prohibit Erwin from acquiring as an investment not more than one percent (1%) of
the capital stock of a competing business whose stock is traded on a national
securities exchange or over-the-counter.
13.2 DAMAGES. Because of the difficulty of measuring economic losses to
Purchaser, SCC or any of the Companies as a result of a breach of the foregoing
covenant, and because of the immediate and irreparable damage that could be
caused to any of the Companies for which it would have no other adequate remedy,
Erwin agrees that, in the event of any breach or threatened breach by him, the
foregoing covenant may be enforced by Purchaser, SCC or any of the Companies by
injunctions and restraining orders.
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13.3 REASONABLE RESTRAINT. It is agreed by the parties hereto that the
foregoing covenants in this Section 13 impose a reasonable restraint on Erwin in
light of the activities and business of the Companies on the date of the
execution of this Agreement and the current plans of Purchaser with respect to
the Business, which include the expansion of the Business throughout the United
States of America.
13.4 SEVERABILITY; REFORMATION. The covenants in this Article 13 are
severable and separate, and the unenforceability of any specific covenant shall
not affect the provisions of any other covenant. Moreover, in the event any
court of competent jurisdiction shall determine that the scope, time or
territorial restrictions set forth are unreasonable, then it is the intention of
the Parties that such restrictions be enforced to the fullest extent which the
court deems reasonable, and this Agreement shall thereby be reformed.
13.5 INDEPENDENT COVENANT. All of the covenants in this Article 13 shall
be construed as an agreement independent of any other provision in this
Agreement, and the existence of any claim or cause of action of Erwin against
Purchaser or SCC, whether predicated on this Agreement or otherwise, shall not
constitute a defense to the enforcement by Purchaser, SCC or any of the
Companies of such covenants. It is specifically agreed that the period of six
(6) years stated at the beginning of this Article 13, during which the
agreements and covenants of Erwin made in this Article 13 shall be effective,
shall be computed by excluding from such computation any time during which Erwin
is in violation of any provision of this Article 13. The covenants contained in
Article 13 shall not be affected by any breach of any other provision hereof by
Purchaser or SCC.
13.6 MATERIALITY. Erwin hereby agrees that this covenant is a material and
substantial part of this transaction.
ARTICLE 14.
MISCELLANEOUS
14.1 PARTIES OBLIGATED AND BENEFITED. This Agreement shall be binding upon
the Parties and their respective assigns and successors in interest and shall
inure solely to the benefit of the Parties and their respective assigns and
successors in interest, and no other Person shall be entitled to any of the
benefits conferred by this Agreement. Without the prior written consent of the
other Parties, no Party may assign this Agreement or any of its rights or
interests or delegate any of its duties under this Agreement; provided, however,
that Purchaser may assign this Agreement or any of its rights or interests or
delegate any of its duties hereunder to an Affiliate; provided, however, that
any such assignment or delegation shall not release Purchaser from any of its
obligations hereunder.
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14.2 NOTICES. Any notices and other communications required or permitted
hereunder shall be in writing and shall be effective upon delivery by hand or
upon receipt if sent by certified or registered mail (postage prepaid and return
receipt requested) or by a nationally recognized overnight courier service
(appropriately marked for overnight delivery) or upon transmission if sent by
telex or facsimile (with request for immediate confirmation of receipt in a
manner customary for communications of such respective type and with physical
delivery of the communication being made by one or the other means specified in
this Section as promptly as practicable thereafter).
Notices shall be addressed as follows:
(a) If to Purchaser or SCC:
c/o Capital Partners Inc.
One Pickwick Plaza, Suite 310
Greenwich, Connecticut 06830
Attention: Mr. Brian D. Fitzgerald
Telecopier: 203-625-0423
with a copy to:
Morgan, Lewis & Bockius LLP
101 Park Avenue
New York, New York 10178
Attention: Christopher T. Jensen, Esq.
Telecopier: 212-309-6273
(b) If to the Shareholders:
Mr. Paul L. Erwin
5555 Cave Spring Road, S. W.
Cave Spring, Georgia 30124
Telecopier: 706/295-4561
with a copy to:
Brinson, Askew, Berry, Seigler, Richardson & Davis, LLP
615 West First Street
Post Office Box 5513
Rome, Georgia 30162-5513
Attention: Joe M. Seigler, Jr., Esq.
Telecopier: 706/234-3574
Any Party may change the address to which notices are required to be sent by
giving notice of such change in the manner provided in this Section.
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14.3 HEADINGS. The Article and Section headings of this Agreement are for
convenience only and shall not constitute a part of this Agreement or in any way
affect the meaning or interpretation thereof.
14.4 CHOICE OF LAW. This Agreement and the rights of the Parties under it
shall be governed by and construed in all respects in accordance with the laws
of the State of Georgia.
14.5 FURTHER ACTIONS. The Parties shall execute and deliver to each other,
from time to time at or after Closing, for no additional consideration and at no
additional cost to the requesting party, such further assignments certificates,
instruments, records, or other documents, assurances or things as may be
reasonably necessary to give full effect to this Agreement and to allow each
Party fully to enjoy and exercise the rights accorded and acquired by it under
this Agreement.
14.6 TIME OF THE ESSENCE. Time is of the essence under this Agreement. If
the last day permitted for the giving of any notice or the performance of any
act required or permitted under this Agreement falls on a day which is not a
Business Day, the time for the giving of such notice or the performance of such
act shall be extended to the next succeeding Business Day.
14.7 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, of which shall be deemed an original, but all of which together
shall constitute one and the same instrument.
14.8 ENTIRE AGREEMENT; SEVERABILITY. This Agreement, including the
schedules and exhibits hereto and the documents, certificates and instruments
referred to herein, embodies the entire agreement and understanding of the
parties hereto in respect of the transactions contemplated by this Agreement and
supersedes all prior agreements, representations, warranties, promises,
covenants, arrangements, communications and understandings, oral or written,
express or implied, between the parties with respect to such transactions.
Except for the Confidentiality Agreement, dated September 2, 1998, between
Capital Partners and The Breckenridge Group, Inc. there are no agreements,
representations, warranties, promises, covenants, arrangements or understandings
between the parties with respect to such transactions, other than those
expressly set forth or referred to herein. In case any provision of this
Agreement shall be invalid, illegal or unenforceable, it shall, to the extent
possible, be modified in such manner as to be valid, legal and enforceable but
so as to most nearly retain the intent of the Parties, and if such modification
is not possible, such provision shall be severed from this Agreement, and in
either case the validity, legality and enforceability of the remaining
provisions of this Agreement shall not in any way be affected or impaired
thereby.
14.9 AMENDMENTS AND WAIVERS. No amendment of any provision of this
Agreement shall be valid unless the same shall be in writing and signed by the
Parties. No waiver by any party of any default, misrepresentation or breach of
warranty or covenant hereunder shall be valid unless the same shall be in
writing, and signed by the Person against whom its enforcement is sought, and
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no such waiver whether intentional or not, shall be deemed to extend to any
prior or subsequent default, misrepresentation or breach of warranty or covenant
hereunder or affect in any way any rights arising by virtue of any prior or
subsequent such occurrence.
14.10 CONSTRUCTION. The Parties have participated jointly in the
negotiation and drafting of this Agreement. If an ambiguity or question of
intent or interpretation arises, this Agreement shall be construed as if drafted
jointly by the Parties and no presumption or burden of proof shall arise
favoring or disfavoring any party by virtue of the authorship of any of the
provisions of this Agreement. Any reference to any federal, state, local, or
foreign statute or law shall be deemed also to refer to all rules and
regulations promulgated thereunder, unless the context requires otherwise.
The word "including" shall mean "including without limitation."
14.11 EXPENSES. Except as otherwise in this Agreement, each Party shall
bear its own costs and expenses (including legal fees and expenses and
accountants' fees and expenses) incurred in connection with the negotiation of
this Agreement, the performance of its obligations and the consummation of the
transactions contemplated hereby. To the extent such expenses are incurred by
the Shareholders and the Companies, it is acknowledged that the same may be
allocated to and among the Shareholders and the Companies in such manner as they
deem appropriate.
14.12 ARBITRATION.
(a) ARBITRATION. Except solely for actions for injunctive or other
equitable relief or to enforce a final judgment or arbitral award, the parties
agree that any and all disputes between them, and any claim by either party that
cannot be amicably settled, shall be determined solely and exclusively by
arbitration in accordance with the Commercial Arbitration Rules of the American
Arbitration Association or any successor thereof. Arbitration shall take place
at an appointed time and place in Atlanta, Georgia.
(b) SELECTION OF ARBITRATORS. Each party shall select one (1)
arbitrator (who shall not be counsel for the party), and the two (2) so
designated shall select a third arbitrator. If either party shall fail to
designate an arbitrator within seven (7) days after arbitration is requested, or
if the two (2) arbitrators shall fail to select a third arbitrator within
fourteen (14) days after arbitration is requested, then such arbitrator shall be
selected by the American Arbitration Association or any successor thereto upon
application of either party. Judgment upon any award of the majority of
arbitrators shall be binding and shall be entered in a court of competent
jurisdiction. The award of the arbitrators may grant any relief which might be
granted by a court of general jurisdiction, including, without limitation, by
reason of enumeration, award of damages and/or injunctive relief, and may, in
the discretion of the arbitrators, assess, in addition, the costs of the
arbitration, including the reasonable fees of the arbitrators and reasonable
attorneys' fees, against either or both parties, in such proportions as the
arbitrators shall determine.
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14.13 CONSENT TO JURISDICTION; SERVICE OF PROCESS. The Purchaser and each
of the Shareholders hereby irrevocably submit to the jurisdiction of the state
courts located in Fulton County, Georgia and federal court located in Fulton
County, Georgia in connection with any suit, action or other proceeding arising
out of or relating to this Agreement and the transactions contemplated hereby,
and hereby agree not to assert, by way of motion, as a defense, or otherwise in
any such suit, action or proceeding that the suit, action or proceeding is
brought in an inconvenient forum, that the venue of the suit, action or
proceeding is improper or that this Agreement or the subject matter hereof may
not be enforced by such courts.
14.14 PUBLIC ANNOUNCEMENT. At all times at or before the Closing, none of
the Parties hereto will issue or make any statements or releases to the public
with respect to this Agreement or the transactions contemplated hereby without
the consent of the other Parties hereto, except for such public disclosure as
may be necessary not to be in violation of or default under any applicable
federal or state securities law or any rule or regulation of any national
securities exchange. Copies of such statements or releases by a Party shall be
provided to the other Parties prior to distribution. The Shareholders also will
obtain SCC's prior approval of any press release the Shareholders and the
Companies desire to issue following the Closing announcing the consummation of
the transactions contemplated by this Agreement. SCC will provide a copy to the
Shareholders of any press release SCC desires to issue following the Closing
announcing the consummation of the transactions contemplated by this Agreement
and provide the Shareholders reasonable time to comment on such press release.
14.15 ACCESS TO RECORDS OF COMPANIES. Purchaser agrees after the Closing
and for such surviving period as specified under Section 11.1 herein, to make
available to the Shareholders for inspection and copying all Books and Records
upon reasonable notice by the Shareholders to Purchaser.
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IN WITNESS WHEREOF, the Parties hereto have duly executed this Agreement
as of the day and year first above written.
PURCHASER:
PRIMROSE HOLDINGS, INC.
By:/S/ CALVIN A. NEIDER
Calvin A. Neider, President
SCC:
SECURITY CAPITAL CORPORATION
By: /S/ A. GEORGE GEBAUER
A. George Gebauer, President
SHAREHOLDERS:
/S/ PAUL L. ERWIN
PAUL L. ERWIN
THE PAUL L. ERWIN GRANTOR
RETAINED ANNUITY TRUST
By: /S/ JOSEPH M. SEIGLER, JR.
Joe M. Seigler, Jr., Trustee
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EXHIBIT 2
CREDIT AGREEMENT
AMONG
PRIMROSE HOLDINGS, INC.,
PRIMROSE SCHOOL FRANCHISING COMPANY
THE SEVERAL LENDERS
FROM TIME TO TIME PARTIES HERETO,
AND
CANADIAN IMPERIAL BANK OF COMMERCE,
AS ADMINISTRATIVE AGENT AND A LENDER
DATED AS OF APRIL 6, 1999
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TABLE OF CONTENTS
PAGE
SECTION 1. DEFINITIONS
1.1 Defined Terms....................................................1
1.2 Other Definitional Provisions...................................18
SECTION 2. AMOUNT AND TERMS OF TERM LOAN COMMITMENTS
2.1 Term Loan Commitments...........................................18
2.2 Term Notes......................................................19
2.3 Procedure for Term Loan Borrowing...............................19
SECTION 3. AMOUNT AND TERMS OF REVOLVING CREDIT COMMITMENTS
3.1 Revolving Credit Commitments....................................20
3.2 Revolving Credit Notes..........................................20
3.3 Procedure for Revolving Credit Borrowing........................21
3.4 Commitment Fee..................................................21
3.5 Termination or Reduction of Revolving Credit Commitments........22
SECTION 4. LETTERS OF CREDIT
4.1 L/C Commitment..................................................22
4.2 Procedure for Issuance of Letters of Credit.....................23
4.3 Fees, Commissions and Other Charges.............................23
4.4 L/C Participations..............................................24
4.5 Reimbursement Obligations of the Borrower.......................25
4.6 Obligations Absolute............................................25
4.7 Letter of Credit Payments.......................................26
4.8 Application.....................................................26
SECTION 5. GENERAL PROVISIONS APPLICABLE TO LOANS
5.1 Interest Rates and Payment Dates................................26
5.2 Conversion and Continuation Options.............................26
5.3 Minimum Amounts and Maximum Number of Tranches..................27
5.4 Optional Prepayments............................................27
5.5 Mandatory Prepayments...........................................28
5.6 Computation of Interest and Fees................................29
5.7 Inability to Determine Interest Rate............................29
5.8 Pro Rata Treatment and Payments.................................30
5.9 Illegality......................................................31
5.10 Requirements of Law.............................................31
5.11 Taxes...........................................................32
5.12 Indemnity.......................................................34
5.13 Lending Offices; Change of Lending Office.......................34
SECTION 6. REPRESENTATIONS AND WARRANTIES
6.1 Financial Condition.............................................35
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6.2 No Change.......................................................37
6.3 Existence; Compliance with Law..................................37
6.4 Power; Authorization; Enforceable Obligations...................37
6.5 No Legal Bar....................................................38
6.6 No Material Litigation..........................................38
6.7 No Default......................................................38
6.8 Ownership of Property; Liens....................................38
6.9 Intellectual Property...........................................38
6.10 No Burdensome Restrictions......................................39
6.11 Taxes...........................................................39
6.12 Federal Regulations.............................................39
6.13 ERISA...........................................................39
6.14 Investment Company Act; Other Regulations.......................40
6.15 Subsidiaries; Stockholders......................................40
6.16 Security Documents..............................................40
6.17 Accuracy and Completeness of Information........................40
6.18 Labor Relations.................................................41
6.19 Insurance.......................................................41
6.20 Solvency........................................................41
6.21 Purpose of Loans................................................42
6.22 Environmental Matters...........................................42
6.23 Regulation H....................................................43
6.24 Year 2000 Compliance............................................43
SECTION 7. CONDITIONS PRECEDENT
7.1 Conditions to Initial Loans.....................................43
7.2 Conditions to Each Loan.........................................50
SECTION 8. AFFIRMATIVE COVENANTS
8.1 Financial Statements............................................50
8.2 Certificates; Other Information.................................51
8.3 Payment of Obligations..........................................52
8.4 Conduct of Business and Maintenance of Existence................52
8.5 Maintenance of Property; Insurance..............................53
8.6 Inspection of Property; Books and Records; Discussions..........53
8.7 Notices.........................................................53
8.8 Environmental Laws..............................................54
8.9 Additional Collateral; Additional Guarantors....................54
8.10 Year 2000 Covenants.............................................55
SECTION 9. NEGATIVE COVENANTS
9.1 Financial Condition Covenants...................................55
9.2 Limitation on Indebtedness......................................57
9.3 Limitation on Liens.............................................57
9.4 Limitation on Guarantee Obligations.............................58
9.5 Limitation on Fundamental Changes...............................58
9.6 Limitation on Sale of Assets....................................59
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9.7 Limitation on Leases............................................59
9.8 Limitation on Dividends.........................................59
9.9 Limitation on Capital Expenditures..............................60
9.10 Limitation on Investments, Loans and Advances...................60
9.11 Limitation on Optional Payments and Modifications of
Instruments.....................................................61
9.12 Limitation on Transactions with Affiliates......................61
9.13 Limitation on Sales and Leasebacks..............................61
9.14 Limitation on Changes in Fiscal Year............................61
9.15 Limitation on Negative Pledge Clauses...........................62
9.16 Limitation on Lines of Business.................................62
9.17 Governing Documents.............................................62
9.18 Limitation on Subsidiary Formation..............................62
9.19 Limitation on Securities Issuances..............................62
SECTION 10. EVENTS OF DEFAULT
SECTION 11. THE AGENT
11.1 Appointment.....................................................66
11.2 Delegation of Duties............................................66
11.3 Exculpatory Provisions..........................................66
11.4 Reliance by Administrative Agent................................66
11.5 Notice of Default...............................................67
11.6 Non-Reliance on Administrative Agent and Other Lenders..........67
11.7 Indemnification.................................................68
11.8 Administrative Agent in Its Individual Capacity.................68
11.9 Successor Administrative Agent..................................68
SECTION 12. MISCELLANEOUS
12.1 Amendments and Waivers..........................................68
12.2 Notices.........................................................69
12.3 No Waiver; Cumulative Remedies..................................70
12.4 Survival of Representations and Warranties......................70
12.5 Payment of Expenses and Taxes...................................70
12.6 Successors and Assigns; Participations and Assignments..........71
12.7 Adjustments; Set-off............................................73
12.8 Counterparts....................................................74
12.9 Severability....................................................74
12.10 Integration.....................................................74
12.11 GOVERNING LAW...................................................74
12.12 Submission To Jurisdiction; Waivers.............................74
12.13 Acknowledgements................................................75
12.14 WAIVERS OF JURY TRIAL...........................................75
12.15 Confidentiality.................................................75
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SCHEDULES
Schedule 1.0 Lenders, Commitments, and Applicable Lending Offices
Schedule 2.2 Scheduled Term Loan Repayments
Schedule 6.2 Pre-Closing Distributions
Schedule 6.4 Consents and Filings
Schedule 6.8 Real Property Contracts
Schedule 6.15 Subsidiaries
Schedule 6.16 Filing Jurisdictions
Schedule 6.19 Insurance
Schedule 6.22 Environmental Matters
Schedule 7.1(e) Minimum EBITDA
Schedule 9.2(d) Permitted Existing Indebtedness
Schedule 9.3(f) Permitted Existing Liens
Schedule 9.4(a) Permitted Existing Guarantee Obligations
Schedule 9.10(c) Loans to Officers
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EXHIBITS
Exhibit A-1 Form of Term Note
Exhibit A-2 Form of Term Note Assumption Endorsement
Exhibit A-3 Form of Post-Assumption Term Note
Exhibit B-1 Form of Revolving Credit Note
Exhibit B-2 Form of Revolving Credit Note Assumption Endorsement
Exhibit B-3 Form of Post-Assumption Revolving Credit Note
Exhibit C Form of Borrower Assignment of Life Insurance
Exhibit D Form of Borrower Collateral Assignment of Lease
Exhibit E Form of Borrower Security Agreement
Exhibit F Form of Holdings Pledge Agreement
Exhibit G Form of Holdings Security Agreement
Exhibit H Form of Joinder and Assumption Agreement
Exhibit I Form of Subsidiaries Guarantee
Exhibit J Form of Subsidiaries Collateral Assignment of Lease
Exhibit K Form of Subsidiaries Security Agreement
Exhibit L Form of Non Bank Status Certificate
Exhibit M Form of Borrowing Certificate
Exhibit N-1 Form of Opinion of Counsel to the Loan Parties
Exhibit O Standard Form Franchise Agreement
Exhibit P Form of Assignment and Acceptance
ANNEX
Annex I Form of Notice of Borrowing
Annex II Form of Continuation/Conversion
Annex III Form of Notice of Prepayment
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CREDIT AGREEMENT
CREDIT AGREEMENT, dated as of April 6, 1999, among PRIMROSE
HOLDINGS, INC., a Delaware corporation ("HOLDINGS"), from and after the
Assumption (as hereinafter defined) PRIMROSE SCHOOL FRANCHISING COMPANY, a
Georgia corporation (the "BORROWER"), the lenders from time to time parties to
this Agreement (the "LENDERS") and CANADIAN IMPERIAL BANK OF COMMERCE, as
administrative agent for the Lenders hereunder.
RECITALS
WHEREAS, Holdings has requested that (a) the Lenders make term loans
to Holdings in an aggregate principal amount of $13,150,000, the proceeds of
which term loans would be used in part to refinance certain existing
indebtedness of the Borrower, to finance the Acquisition (as defined below) on
the Closing Date and to pay fees and expenses incurred in connection therewith
and herewith, and (b) the Lenders make available to Holdings and, after the
effectiveness of the Assumption, the Borrower, revolving credit loans in an
aggregate principal amount at any one time outstanding not to exceed $2,500,000,
the proceeds of which would be used to finance the working capital requirements
of the Borrower and certain other subsidiaries of Holdings after the
consummation of the Acquisition in the ordinary course of business and to pay
fees and expenses incurred in connection herewith.
The parties hereto hereby agree as follows:
SECTION 1. DEFINITIONS
1.1 Defined Terms. As used in this Agreement, the following terms
shall have the following meanings:
"ACQUISITION": acquisition of all of the Capital Stock of the
Borrower, Metrocorp and Jewel by Holdings pursuant to the terms of the
Acquisition Documents.
"ACQUISITION DOCUMENTS": the Stock Purchase Agreement and all other
agreements, instruments and documents delivered in connection with the
consummation thereof (including, without limitation, any equity financing
documents related thereto).
"ADMINISTRATIVE AGENT": Canadian Imperial Bank of Commerce, together
with its affiliates, as the administrative agent for the Lenders under this
Agreement and the other Loan Documents.
"AFFILIATE": as to any Person, any other Person (other than a
Subsidiary) which, directly or indirectly, is in control of, is controlled by,
or is under common control with, such Person. For purposes of this definition,
"CONTROL" of a Person (including, with its correlative meanings, "CONTROLLED BY"
and "UNDER COMMON CONTROL WITH") means the power, directly or indirectly, either
to (a) vote 10% or more of the securities having ordinary voting power for the
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election of directors of such Person or (b) direct or cause the direction of the
management and policies of such Person, whether by contract or otherwise.
"AGREEMENT": this Credit Agreement, as amended, supplemented or
otherwise modified from time to time.
"AGGREGATE OUTSTANDING RC EXTENSIONS OF CREDIT": as to any Lender at
any time, an amount equal to the sum of (a) the aggregate principal amount of
all Revolving Credit Loans made by such Lender then outstanding and (b) such
Lender's Revolving Credit Commitment Percentage of the L/C Obligations then
outstanding.
"APPLICABLE LENDING OFFICE": for each Lender and for each Type of
Loan, the lending office of such Lender designated for such Type of Loan on
Schedule I hereto (or any other lending office from time to time notified to the
Administrative Agent by such Lender ) as the office at which its Loans of such
Type are to be made and maintained.
"APPLICABLE MARGIN":
(a) for any Term Loan of any Type at any time the Leverage Ratio, as
most recently determined pursuant to Section 8.2(b), is within any of the ranges
set forth below, the rate per annum set forth under the relevant column heading
opposite the applicable range below:
EURODOLLAR
LEVERAGE RATIO BASE RATE LOANS LOANS
- -------------- --------------- ----------
Greater than or equal to 3.0 to 1 ............. 2.00% 3.50%
Less than 3.0 ................................. 1.50% 3.00%
PROVIDED that from the Closing Date to the first date on which the Leverage
Ratio is determined pursuant to Section 8.2(b), the highest rate per annum set
forth above.
(b) for any Revolving Credit Loan of any Type at any time the
Leverage Ratio, as most recently determined pursuant to Section 8.2(b), is
within any of the ranges set forth below, the rate per annum set forth under the
relevant column heading opposite the applicable range below:
EURODOLLAR
LEVERAGE RATIO BASE RATE LOANS LOANS
- -------------- --------------- ----------
Greater than or equal to 3.0 to 1 ............. 2.00% 3.50%
Less than 3.0 ............................... 1.50% 3.00%
PROVIDED that from the Closing Date to the first date on which the Leverage
Ratio is determined pursuant to Section 8.2(b), the highest rate per annum set
forth above.
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"APPLICATION": an application, in such form as the Issuing Lender
may specify from time to time, requesting the Issuing Lender to open a Letter of
Credit.
"APPROVED ESCROW ARRANGEMENT": an escrow arrangement, in form and
substance satisfactory to the Administrative Agent, between SCC and Holdings in
which funds of Holdings or its Subsidiaries that are paid to SCC pursuant to the
terms of the Tax Sharing Agreement are held for the sole purpose of (i) paying
any future tax liability of Holdings or its Subsidiaries; or (ii) returning such
funds to Holdings or its Subsidiaries, as the case may by.
"ARRANGER": CIBC Oppenheimer, as arranger.
"ASSIGNED POLICY": any life insurance policy assigned to the
Administrative Agent pursuant to an Assignment of Life Insurance.
"ASSIGNEE": as defined in Section 12.6(c).
"ASSIGNMENT AND ACCEPTANCE": as defined in Section 12.6(c).
"ASSIGNMENT OF LIFE INSURANCE": the Assignment of Life Insurance to
be executed and delivered by the Borrower substantially in the form of Exhibit
C, as the same may be amended, supplemented or otherwise modified from time to
time.
"ASSUMPTION": the assumption by the Borrower, immediately following
the consummation of the Acquisition, of the Obligations pursuant to the Joinder
and Assumption Agreement.
"AVAILABLE RC COMMITMENT": as to any Lender at any time, an amount
equal to the excess, if any, of (a) the amount of such Lender's Revolving Credit
Commitment at such time OVER (b) the Aggregate Outstanding RC Extensions of
Credit by such Lender at such time.
"BASE RATE": for any day, the rate per annum (rounded upward, if
necessary, to the next 1/16 of 1%) equal to the greater of (a) the Prime Rate in
effect on such day and (b) the Federal Funds Effective Rate in effect on such
day plus 1/2 of 1%. For purposes hereof: "PRIME RATE" shall mean the rate of
interest publicly announced by CIBC in New York, New York from time to time as
its base rate (the base rate not being intended to be the lowest rate of
interest charged by CIBC in connection with extensions of credit to debtors).
"BASE RATE LOANS": Loans the rate of interest applicable to which is
based upon the Base Rate.
"BORROWER": as defined in the heading to this Agreement.
"BORROWER COLLATERAL ASSIGNMENT LEASE": each Collateral Assignment
of Tenant's Interest in Lease to be executed and delivered by the Borrower,
substantially in the form of Exhibit D, as the same may be amended, supplemented
or otherwise modified from time to time.
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"BORROWER SECURITY AGREEMENT": the Security Agreement to be executed
and delivered by the Borrower, substantially in the form of Exhibit F, as the
same may be amended, supplemented or otherwise modified from time to time.
"BORROWER SECURITY DOCUMENTS": the collective reference to the
Assignment of Life Insurance, the Borrower COLLATERAL ASSIGNMENT LEASEs and the
Borrower Security Agreement, and any pledge agreement entered into by the
Borrower pursuant to Section 8.9.
"BORROWING DATE": any Business Day specified in a notice pursuant to
Section 2.3 or 3.3 as a date on which the Borrower requests the Lenders to make
Loans hereunder.
"BUSINESS": as defined in Section 6.22.
"BUSINESS DAY": a day other than a Saturday, Sunday or other day on
which commercial banks in New York City are authorized or required by law to
close, and, if such day relates to a borrowing of, a payment or prepayment of
principal of or interest on, or a Conversion of or into, or an Interest Period
for, a Eurodollar Loan or a notice by Holdings or the Borrower with respect to
any such borrowing, payment, prepayment, Conversion or Interest Period, which is
also a day on which dealings in Dollar deposits are carried out in the London
interbank market.
"CAPITAL STOCK": any and all shares, interests, participations or
other equivalents (however designated) of capital stock of a corporation, any
and all similar ownership interests in a Person (other than a corporation) and
any and all warrants or options to purchase any of the foregoing.
"CASH EQUIVALENTS": (a) securities with maturities of 90 days or
less from the date of acquisition issued or fully guaranteed or insured by the
United States Government or any agency thereof, (b) certificates of deposit and
eurodollar time deposits with maturities of 90 days or less from the date of
acquisition and overnight bank deposits of any Lender or of any commercial bank
having capital and surplus in excess of $500,000,000, (c) repurchase obligations
of any Lender or of any commercial bank satisfying the requirements of clause
(b) of this definition, having a term of not more than seven days with respect
to securities issued or fully guaranteed or insured by the United States
Government, (d) commercial paper of a domestic issuer rated at least A-1 or the
equivalent thereof by Standard and Poor's Ratings Group ("S&P") or P-1 or the
equivalent thereof by Moody's Investors Service, Inc. ("MOODY'S") and in either
case maturing within 90 days after the day of acquisition, (e) securities with
maturities of 90 days or less from the date of acquisition issued or fully
guaranteed by any state, commonwealth or territory of the United States, by any
political subdivision or taxing authority of any such state, commonwealth or
territory or by any foreign government, the securities of which state,
commonwealth, territory, political subdivision, taxing authority or foreign
government (as the case may be) are rated at least A by S&P or A by Moody's, (f)
securities with maturities of 90 days or less from the date of acquisition
backed by standby letters of credit issued by any Lender or any commercial bank
satisfying the requirements of clause (b) of this definition or (g) shares of
money market mutual or similar funds which invest exclusively in assets
satisfying the requirements of clauses (a) through (f) of this definition.
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"CERTIFICATE RE NON-BANK STATUS:" as defined in Section
5.11(b)(i)(B)
"CIBC": Canadian Imperial Bank of Commerce.
"CIBC OPPENHEIMER": CIBC Oppenheimer Inc.
"CLOSING DATE": the date on which the conditions precedent set forth
in Section 7.1 shall be satisfied.
"CODE": the Internal Revenue Code of 1986, as amended from time to
time.
"COLLATERAL": all property and interests in property of the Loan
Parties, now owned or hereinafter acquired, upon which a Lien is purported to be
created by any Security Document.
"COLLATERAL ASSIGNMENTS": the collective reference to the Borrower
Collateral Assignment of Lease and the Subsidiaries Collateral Assignment of
Lease.
"COMMITMENTS": the collective reference to the Revolving Credit
Commitments and the Term Loan Commitments.
"COMMONLY CONTROLLED ENTITY": an entity, whether or not
incorporated, which is under common control with Holdings or the Borrower within
the meaning of Section 4001 of ERISA or is part of a group which includes
Holdings or the Borrower and which is treated as a single employer under Section
414 of the Code.
"CONSOLIDATED CURRENT ASSETS": with respect to any Person at a
particular date, all amounts which would, in conformity with GAAP, be included
under current assets on a consolidated balance sheet of such Person and its
Subsidiaries as at such date; PROVIDED, HOWEVER, that such amounts shall not
include (a) any amounts for any Indebtedness owing by an Affiliate of such
Person, unless such Indebtedness arose in connection with the sale of goods or
other property in the ordinary course of business and would otherwise constitute
current assets in conformity with GAAP, (b) any shares of stock issued by an
Affiliate of such Person, or (c) the cash surrender value of any life insurance
policy.
"CONSOLIDATED CURRENT LIABILITIES": with respect to any Person at a
particular date, all amounts which would, in conformity with GAAP, be included
under current liabilities on a consolidated balance sheet of such Person and its
Subsidiaries as at such date, but excluding to the extent otherwise included
therein the Revolving Credit Loans and the current portion of the Term Loans.
"CONSOLIDATED EBITDA": with respect to any Person for any period,
the sum for such period of (a) Consolidated Net Income of such Person for such
period, (b) to the extent deducted in calculating Consolidated Net Income, the
sum of provisions for such period for income taxes (including payments to SCC
under the Tax Sharing Agreement), interest expense, and depreciation and
amortization expense used in determining such Consolidated Net Income, (c)
amounts deducted in such period in respect of non-cash expenses of such Person
in accordance with GAAP, (d) the amount of any aggregate net loss (or minus the
amount of any
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gain) during such period arising from the sale, exchange or other disposition of
capital assets by such Person, (e) non-cash expenses of such Person deducted in
such period in connection with any earn-out agreements, stock appreciation
rights, "phantom" stock plans, employment agreements, non-competition
agreements, subscription and stockholders agreements and other incentive and
bonus plans and similar arrangements made in connection with acquisitions of
Persons or businesses by such Person or its Subsidiaries or the retention of
executives, officers or employees by such Person or its Subsidiaries, including
(but without duplication) any Person that has become a Subsidiary of such Person
during such period, and (f) to the extent deducted in calculating such
Consolidated Net Income, management fees paid under the Management Fee Agreement
which are subordinated to the Obligations in a manner satisfactory to the
Administrative Agent; PROVIDED, that Consolidated EBITDA of such Person shall in
any event exclude, from and after the Closing Date, (x) the effect of any
write-up of any assets acquired in the Acquisition and (y) the amount of any
non-cash income of such Person recognized during any period for which
Consolidated EBITDA is determined.
"CONSOLIDATED FIXED CHARGES": with respect to any Person for any
period, the sum of (i) the amounts deducted for the cash portion of Consolidated
Interest Expense in determining Consolidated Net Income of such Person for such
period, (ii) the amount of scheduled payments of principal of Indebtedness
during such period, (iii) all amounts of capital expenditures made during such
period (other than capital expenditures in respect of Financing Leases to the
extent the same are included in clauses (i) or (ii) of this definition) and (iv)
the amount of cash income taxes paid during such period, excluding payments made
to SCC pursuant to the Tax Sharing Agreement to the extent such payments are (A)
applied to the repayment of the Loans or (B) placed in escrow pursuant to an
Approved Escrow Arrangement.
"CONSOLIDATED INTEREST EXPENSE": with respect to any Person for any
period, the amount which, in conformity with GAAP, would be set forth opposite
the caption "interest expense" or any like caption (including without
limitation, imputed interest included in payments under Financing Leases) on a
consolidated income statement of such Person and its Subsidiaries for such
period excluding the amortization of any original issue discount.
"CONSOLIDATED LEASE EXPENSE": with respect to any Person for any
period, the aggregate amount of fixed or contingent rentals payable by such
Person and its Subsidiaries, determined on a consolidated basis in accordance
with GAAP, for such period with respect to leases of real and personal property.
"CONSOLIDATED NET INCOME": with respect to any Person for any
period, the consolidated net income (or deficit) of such Person and its
Subsidiaries for such period (taken as a cumulative whole), determined in
accordance with GAAP; PROVIDED that there shall be excluded (a) the income (or
deficit) of any Person accrued prior to the date it becomes a Subsidiary of such
Person or is merged into or consolidated with such Person or any Subsidiary of
such Person, (b) the income (or deficit) of any Person (other than a Subsidiary)
in which such Person or any Subsidiary of such Person has an ownership interest,
except to the extent that any such income has been actually received by such
Person or such Subsidiary in the form of dividends or similar distributions, (c)
the undistributed earnings of any Subsidiary of such Person to the extent that
the declaration or payment of dividends or similar distributions by such
Subsidiary is not at the time permitted by the terms of any Contractual
Obligation, Governing
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Document or Requirement of Law applicable to such Subsidiary, (d) any
restoration to income of any contingency reserve, except to the extent that
provision for such reserve was made out of income accrued during such period,
(e) any aggregate net gain (but not any aggregate net loss) during such period
arising from the sale, exchange or other disposition of capital assets (such
term to include all fixed assets, whether tangible or intangible, all inventory
sold in conjunction with the disposition of fixed assets and all securities),
(f) any write-up of any asset, (g) any net gain from the collection of the
proceeds of life insurance policies, (h) any gain arising from the acquisition
of any securities, or the extinguishment, under GAAP, of any Indebtedness, of
such Person or any Subsidiary of such Person, (i) in the case of a successor to
such Person or any Subsidiary of such Person by consolidation or merger or as a
transferee of its assets, any earnings of the successor corporation prior to
such consolidation, merger or transfer of assets, and (j) any deferred credit
representing the excess of equity in any Subsidiary of such Person at the date
of acquisition over the cost of the investment in such Subsidiary.
"CONSOLIDATED TOTAL INDEBTEDNESS": with respect to any Person at any
time, the aggregate principal amount (including, with respect to any
Indebtedness originally issued at a discount, the accreted portion thereof) of
Indebtedness of such Person and its Subsidiaries at such time, determined on a
consolidated basis in accordance with GAAP.
"CONTINUE", "CONTINUATION" and "CONTINUED" shall refer to the
continuation of a Eurodollar Loan from one Interest Period to the next Interest
Period.
"CONTRACTUAL OBLIGATION": as to any Person, any provision of any
security issued by such Person or of any agreement, instrument or other
undertaking to which such Person is a party or by which it or any of its
property is bound.
"CONVERT", CONVERSION" and "CONVERTED" shall refer to a conversion
of Base Rate Loans into Eurodollar Loans or of Eurodollar Loans into Base Rate
Loans or Eurodollar Loans, which may be accompanied by the transfer by a Lender
(at its sole discretion) of a Loan from one Applicable Lending Office to
another.
"CP": Capital Partners, Inc., a Connecticut corporation.
"CREDIT EXPOSURE": as to any Lender at any time, the sum of (a) its
Revolving Credit Commitment (or, if the Revolving Credit Commitments shall have
expired or been terminated, the aggregate unpaid principal amount of its
Revolving Credit Loans) and (b) the unpaid principal amount of its Term Loan.
"CREDIT EXPOSURE PERCENTAGE": as to any Lender at any time, the
fraction (expressed as a percentage), the numerator of which is the Credit
Exposure of such Lender at such time and the denominator of which is the
aggregate Credit Exposures of all of the Lenders at such time.
"DEFAULT": any of the events specified in Section 10, whether or not
any requirement for the giving of notice, the lapse of time, or both, or any
other condition, has been satisfied.
"DOLLARS" and "$": dollars in lawful currency of the United States
of America.
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"ENVIRONMENTAL LAWS": any and all foreign, Federal, state, local or
municipal laws, rules, orders, regulations, statutes, ordinances, codes,
decrees, requirements of any Governmental Authority or other Requirements of Law
(including common law) regulating, relating to or imposing liability or
standards of conduct concerning protection of human health or the environment,
as now or may at any time hereafter be in effect.
"ERISA": the Employee Retirement Income Security Act of 1974, as
amended from time to time.
"EUROCURRENCY RESERVE REQUIREMENTS": for any day as applied to a
Eurodollar Loan, the aggregate (without duplication) of the rates (expressed as
a decimal fraction) of reserve requirements in effect on such day (including,
without limitation, basic, supplemental, marginal and emergency reserves under
any regulations of the Board of Governors of the Federal Reserve System or other
Governmental Authority having jurisdiction with respect thereto) dealing with
reserve requirements prescribed for eurocurrency funding (currently referred to
as "Eurocurrency Liabilities" in Regulation D of such Board) maintained by a
member bank of such System.
"EURODOLLAR BASE RATE": with respect to each day during each
Interest Period pertaining to a Eurodollar Loan, the rate per annum equal to the
corresponding rate appearing at page 3750 of the Dow Jones Telerate Service at
or about 11:00 a.m., London time, two Business Days prior to the beginning of
such Interest Period, or if such rate no longer so appears, the rate per annum
at which CIBC is offered Dollar deposits at or about 10:00 a.m., New York City
time, two Business Days prior to the beginning of such Interest Period in the
interbank eurodollar market where the eurodollar and foreign currency and
exchange operations in respect of its Eurodollar Loans are then being conducted
for delivery on the first day of such Interest Period for the number of days
comprised therein and in an amount comparable to the amount of its Eurodollar
Loan to be outstanding during such Interest Period.
"EURODOLLAR LOANS": Loans the rate of interest applicable to which
is based upon the Eurodollar Rate.
"EURODOLLAR RATE": with respect to each day during each Interest
Period pertaining to a Eurodollar Loan, a rate per annum determined for such day
in accordance with the following formula (rounded upward to the nearest 1/100th
of 1%):
EURODOLLAR BASE RATE
----------------------------------------
1.00 - Eurocurrency Reserve Requirements
"EVENT OF DEFAULT": any of the events specified in Section 10;
PROVIDED that any requirement for the giving of notice, the lapse of time, or
both, or any other condition, has been satisfied.
"EXCESS CASH FLOW": as to any Person for each fiscal year:
(a) Consolidated EBITDA of such Person for such fiscal year;
PLUS (b) the decrease (if any) in the amount of the excess of
Consolidated Current Assets of such Person (excluding cash and cash equivalents)
over Consolidated Current
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Liabilities of such Person at the end of such fiscal year COMPARED TO the amount
of the excess of Consolidated Current Assets of such Person (excluding cash and
cash equivalents) over Consolidated Current Liabilities of such Person at the
end of the immediately preceding fiscal year of such Person;
MINUS (c) the sum of (i) the amount of all regularly scheduled
payments of principal of the Term Loan actually made during such fiscal
year and the amount of any voluntary prepayment of principal of the Term
Loans made during such fiscal year, (ii) the amount of all interest
payments actually made in cash during such fiscal year by such Person and
its consolidated Subsidiaries, (iii) management fees paid to CP pursuant
to the terms of the Management Fee Agreement during such fiscal year, (iv)
the amount of capital expenditures actually made during such fiscal year
to the extent permitted by Section 9.8, (v) cash income taxes actually
paid during such fiscal year pursuant to the Tax Sharing Agreement, and
(vi) the increase (if any) in the amount of the excess of Consolidated
Current Assets of such Person (excluding cash and cash equivalents) over
Consolidated Current Liabilities of such Person at the end of such fiscal
year compared to the amount of the excess of Consolidated Current Assets
of such Person (excluding cash and cash equivalents) over Consolidated
Current Liabilities of such Person at the end of the immediately preceding
fiscal year of such Person.
"EXISTING CREDITOR(S)": Citizens First Bank.
"EXISTING FINANCING DOCUMENTS": all credit agreements, indentures,
notes, guarantees and other financing documents, in each case as amended to the
extent permitted hereunder, evidencing or governing the Indebtedness listed on
Schedule 7.1(c).
"EXISTING INDEBTEDNESS": all Indebtedness of the Borrower,
Metrocorp, Jewel and their respective Subsidiaries outstanding immediately prior
to the Closing Date pursuant to the Existing Financing Documents.
"FEDERAL FUNDS EFFECTIVE RATE": for any day, the weighted average of
the rates on overnight federal funds transactions with members of the Federal
Reserve System arranged by federal funds brokers, as published on the next
succeeding Business Day by the Federal Reserve Bank of New York, or, if such
rate is not so published for any day which is a Business Day, the average of the
quotations for the day of such transactions received by the Administrative Agent
from three federal funds brokers of recognized standing selected by it.
"FEE LETTER": that certain Fee Letter, dated March 16, 1999, among
CIBC, CIBC Oppenheimer and CP, as amended, supplemented or otherwise modified
from time to time.
"FINANCING LEASE": any lease of property, real or personal, the
obligations of the lessee in respect of which are required in accordance with
GAAP to be capitalized on a balance sheet of the lessee.
"GAAP": generally accepted accounting principles in the United
States of America in effect from time to time.
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"GOVERNING DOCUMENTS": as to any Person, its articles or certificate
of incorporation and by-laws, its partnership agreement, its certificate of
formation and operating agreement, and/or the other organizational or governing
documents of such Person.
"GOVERNMENTAL AUTHORITY": any nation or government, any state or
other political subdivision thereof and any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government.
"GUARANTEE OBLIGATION": as to any Person (the "GUARANTEEING
PERSON"), any obligation of (a) the guaranteeing person or (b) another Person
(including, without limitation, any bank under any letter of credit) to induce
the creation of which the guaranteeing person has issued a reimbursement,
counterindemnity or similar obligation, in either case guaranteeing or in effect
guaranteeing any Indebtedness, leases, dividends or other obligations (the
"PRIMARY OBLIGATIONS") of any other third Person (the "PRIMARY OBLIGOR") in any
manner, whether directly or indirectly, including, without limitation, any
obligation of the guaranteeing person, whether or not contingent, (i) to
purchase any such primary obligation or any property constituting direct or
indirect security therefor, (ii) to advance or supply funds (1) for the purchase
or payment of any such primary obligation or (2) to maintain working capital or
equity capital of the primary obligor or otherwise to maintain the net worth or
solvency of the primary obligor, (iii) to purchase property, securities or
services primarily for the purpose of assuring the owner of any such primary
obligation of the ability of the primary obligor to make payment of such primary
obligation or (iv) otherwise to assure or hold harmless the owner of any such
primary obligation against loss in respect thereof; PROVIDED, HOWEVER, that the
term Guarantee Obligation shall not include endorsements of instruments for
deposit or collection in the ordinary course of business. The terms "GUARANTEE"
and "GUARANTEED" used as a verb shall have a correlative meaning. The amount of
any Guarantee Obligation of any guaranteeing person shall be deemed to be the
lower of (a) an amount equal to the stated or determinable amount of the primary
obligation in respect of which such Guarantee Obligation is made and (b) the
maximum amount for which such guaranteeing person may be liable pursuant to the
terms of the instrument embodying such Guarantee Obligation, unless such primary
obligation and the maximum amount for which such guaranteeing person may be
liable are not stated or determinable, in which case the amount of such
Guarantee Obligation shall be such guaranteeing person's maximum reasonably
anticipated liability in respect thereof as determined by the Borrower in good
faith.
"GUARANTEES": the collective reference to the Subsidiaries Guarantee
and of other guarantees of the Obligations in favor of the Administrative Agent
executed in connection with this Agreement.
"GUARANTOR": any Person delivering a Guarantee pursuant to this
Agreement.
"HOLDINGS": as defined in the heading to this Agreement.
"HOLDINGS PLEDGE AGREEMENT": the Pledge Agreement to be executed and
delivered by Holdings, substantially in the form of Exhibit G as the same may be
amended, supplemented or otherwise modified from time to time.
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"HOLDINGS SECURITY AGREEMENT": the Security Agreement to be executed
and delivered by Holdings, substantially in the form of Exhibit H, as the same
may be amended, supplemented or otherwise modified from time to time.
"HOLDINGS SECURITY DOCUMENTS": the collective reference to the
Holdings Pledge Agreement and the Holdings Security Agreement.
"INDEBTEDNESS": of any Person at any date, without duplication, (a)
all indebtedness of such Person for borrowed money (whether by loan or the
issuance and sale of debt securities) or for the deferred purchase price of
property or services (other than current trade liabilities incurred in the
ordinary course of business and payable in accordance with customary practices),
(b) any other indebtedness of such Person which is evidenced by a note, bond,
debenture or similar instrument, (c) all obligations of such Person under
Financing Leases, (d) all obligations of such Person in respect of letters of
credit, acceptances or similar instruments issued or created for the account of
such Person and (e) all liabilities secured by any Lien on any property owned by
such Person even though such Person has not assumed or otherwise become liable
for the payment thereof. In any event, the term Indebtedness will not include
the Zero Coupon Convertible Preferred Stock.
"INSOLVENCY": with respect to any Multiemployer Plan, the condition
that such Plan is insolvent within the meaning of Section 4245 of ERISA.
"INSOLVENT": pertaining to a condition of Insolvency.
"INTEREST PAYMENT DATE": (a) as to any Base Rate Loan, the last day
of each March, June, September and December, (b) as to any Eurodollar Loan
having an Interest Period of three months or less, the last day of such Interest
Period, and (c) as to any Eurodollar Loan having an Interest Period longer than
three months (i) each day which is three months or a whole multiple thereof,
after the first day of such Interest Period, and (ii) the last day of such
Interest Period.
"INTEREST PERIOD": with respect to any Eurodollar Loan:
(i) initially, the period commencing on the borrowing or Conversion
date, as the case may be, with respect to such Eurodollar Loan and ending one,
two, three or six months thereafter, as selected by the Borrower in its notice
of borrowing or notice of Conversion, as the case may be, given with respect
thereto; and
(ii) thereafter, each period commencing on the last day of the next
preceding Interest Period applicable to such Eurodollar Loan and ending one,
two, three or six months thereafter, as selected by the Borrower by irrevocable
notice to the Administrative Agent not less than three Business Days prior to
the last day of the then current Interest Period with respect thereto;
PROVIDED that, all of the foregoing provisions relating to Interest Periods are
subject to the following:
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(1) if any Interest Period pertaining to a Eurodollar Loan would
otherwise end on a day that is not a Business Day, such
Interest Period shall be extended to the next succeeding
Business Day unless the result of such extension would be to
carry such Interest Period into another calendar month in
which event such Interest Period shall end on the immediately
preceding Business Day;
(2) any Interest Period that would otherwise extend beyond the
Termination Date or beyond the date final payment is due on
the Term Loans shall end on the Termination Date or such date
of final payment, as the case may be;
(3) any Interest Period pertaining to a Eurodollar Loan that
begins on the last Business Day of a calendar month (or on a
day for which there is no numerically corresponding day in the
calendar month at the end of such Interest Period) shall end
on the last Business Day of a calendar month; and
(4) the Borrower shall select Interest Periods so as not to
require a payment or prepayment of any Eurodollar Loan during
an Interest Period for such Loan.
"ISSUING LENDER": CIBC, in its capacity as issuer of any Letter of
Credit and/or NationsBank, in its capacity as issuer of any Letter of Credit.
"JEWEL": The Jewel I, Inc., a Georgia corporation, d/b/a Country Day
School.
"JOINDER AND ASSUMPTION AGREEMENT": the Joinder and Assumption
Agreement to be made by the Borrower pursuant to Sections 2.1(b) and 3.1(b),
substantially in the form of Exhibit I, as the same may be amended, supplemented
or otherwise modified from time to time.
"KEY PERSON": Jo Kirchner and such other members of the management
of the Borrower as the Administrative Agent may designate from time to time.
"L/C COMMITMENT": $500,000.
"L/C FEE PAYMENT DATE": the last Business Day of each March, June,
September and December.
"L/C OBLIGATIONS": at any time, an amount equal to the sum of (a)
the aggregate then undrawn amount of the then outstanding Letters of Credit and
(b) the aggregate amount of drawings under Letters of Credit which have not then
been reimbursed.
"L/C PARTICIPANTS": the collective reference to all the Lenders
other than the Issuing Lender.
"LETTERS OF CREDIT": as defined in Section 4.1(a).
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"LEVERAGE RATIO": for any period of twelve-consecutive calendar
months, the ratio of Consolidated Total Indebtedness of Holdings as of the last
day of such twelve-month period to Consolidated EBITDA of Holdings for such
twelve-month period.
"LIEN": any mortgage, pledge, hypothecation, assignment, deposit
arrangement, encumbrance, lien (statutory or other), charge or other security
interest or any preference, priority or other security agreement or preferential
arrangement of any kind or nature whatsoever (including, without limitation, any
conditional sale or other title retention agreement and any Financing Lease
having substantially the same economic effect as any of the foregoing), and the
filing of any financing statement under the Uniform Commercial Code or
comparable law of any jurisdiction in respect of any of the foregoing.
"LOAN": any loan made by any Lender pursuant to this Agreement.
"LOAN DOCUMENTS": this Agreement, the Notes, the Guarantees, the
Security Documents and the Joinder and Assumption Agreement.
"LOAN PARTIES": the Borrower, Holdings, Metrocorp, Jewel and each
Subsidiary of Holdings, the Borrower, Metrocorp or Jewel which is a party to a
Loan Document.
"MAJORITY LENDERS": at any time, Lenders the Credit Exposure
Percentages of which aggregate more than 50%.
"Management Fee Agreement": the Management Advisory Services
Agreement dated as of April 6, 1999 among Jewel, Metrocorp, the Borrower and
SCC.
"MATERIAL ADVERSE EFFECT": a material adverse effect on (a) the
business, operations, property, condition (financial or otherwise) or prospects
of, (x) prior to the consummation of the Acquisition, any of Holdings, or the
Borrower, Metrocorp, and Jewel, taken as a whole, and (y) from and after the
consummation of the Acquisition, Holdings and its Subsidiaries taken as a whole
or (b) the validity or enforceability of this or any of the other Loan Documents
or the rights or remedies of the Administrative Agent or the Lenders hereunder
or thereunder.
"MATERIAL ENVIRONMENTAL AMOUNT": an amount payable by the Borrower
and/or its Subsidiaries in excess of $50,000 for remedial costs, compliance
costs, compensatory damages, punitive damages, fines, penalties or any
combination thereof.
"MATERIALS OF ENVIRONMENTAL CONCERN": any gasoline or petroleum
(including crude oil or any fraction thereof) or petroleum products or any
hazardous or toxic substances, materials or wastes, defined or regulated as such
in or under any Environmental Law, including, without limitation, asbestos,
polychlorinated biphenyls and urea-formaldehyde insulation.
"METROCORP": Metrocorp Properties, Inc., a Georgia corporation.
"MULTIEMPLOYER PLAN": a Plan which is a multiemployer plan as
defined in Section 4001(a)(3) of ERISA.
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"NET PROCEEDS": (i) the aggregate cash consideration received by
Holdings, the Borrower, Metrocorp, Jewel or a Subsidiary of any thereof in
connection with any transaction referred to in Section 5.5(c) less (ii) the
expenses (including out-of-pocket expenses) incurred by such Person in
connection with such transaction (including, in the case of any issuance of debt
or equity securities, underwriters' commissions and fees) and the amount of any
federal and state taxes incurred in connection with such transaction, in each
case as certified by a Responsible Officer to the Administrative Agent at the
time of such transaction.
"NON-EXCLUDED TAXES": as defined in Section 5.11.
"NOTES": the collective reference to the Revolving Credit Notes and
the Term Notes.
"OBLIGATIONS": the unpaid principal amount of, and interest
(including, without limitation, interest accruing after the maturity of the
Loans and interest accruing after the filing of any petition in bankruptcy, or
the commencement of any insolvency, reorganization or like proceeding, relating
to Holdings or the Borrower, whether or not a claim for post-filing or
post-petition interest is allowed in such proceeding) on the Loans, and all
other obligations and liabilities of the Loan Parties to the Administrative
Agent and the Lenders, whether direct or indirect, absolute or contingent, due
or to become due, or now existing or hereafter incurred, which may arise under,
or out of or in connection with this Agreement, the Notes, the Guarantees, the
Security Documents and any other Loan Documents and any other document made,
delivered or given in connection therewith or herewith, whether on account of
principal, interest, reimbursement obligations, fees, indemnities, costs,
expenses (including, without limitation, all fees and disbursements of counsel
to the Administrative Agent or to the Lenders that are required to be paid by a
Loan Party pursuant to the terms of the Loan Documents) or otherwise.
"PARTICIPANT": as defined in Section 12.6(b).
"PBGC": the Pension Benefit Guaranty Corporation established
pursuant to Subtitle A of Title IV of ERISA.
"PERSON": an individual, partnership, corporation, limited liability
company, business trust, joint stock company, trust, unincorporated association,
joint venture, Governmental Authority or other entity of whatever nature.
"PLAN": at a particular time, any employee benefit plan which is
covered by ERISA and in respect of which the Borrower or a Commonly Controlled
Entity is (or, if such plan were terminated at such time, would under Section
4069 of ERISA be deemed to be) an "employer" as defined in Section 3(5) of
ERISA.
"PLEDGE AGREEMENTS": collectively, the Holdings Pledge Agreement and
any pledge agreement delivered pursuant to Section 8.9.
"PRO FORMA BALANCE SHEET": as defined in Section 6.1(b).
"PROPERTIES": as defined in Section 6.22.
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"REFINANCING": the refinancing of the credit facilities under the
Existing Financing Documents with the Loans and Commitments hereunder,
including, without limitation, the transactions described in Section 7.1 (c)
hereof.
"REGISTER": as defined in Section 12.6(d).
"REGULATION U": Regulation U of the Board of Governors of the
Federal Reserve System as in effect from time to time.
"REIMBURSEMENT OBLIGATION": the obligation of Holdings and the
Borrower to reimburse the Issuing Bank pursuant to Section 4.5(a) for amounts
drawn under a Letter of Credit.
"REORGANIZATION": with respect to any Multiemployer Plan, the
condition that such plan is in reorganization within the meaning of Section 4241
of ERISA.
"REPORTABLE EVENT": any of the events set forth in Section 4043(c)
of ERISA, other than those events as to which the thirty day notice period is
waived under Sections .21, .22, .23, .26, .27 or .28 of PBGC Reg.ss. 4043.
"REQUIRED LENDERS": at any time, Lenders the Credit Exposure
Percentages of which aggregate at least 66 2/3 %.
"REQUIREMENT OF LAW": as to any Person, the certificate of
incorporation and by-laws or other organizational or Governing Documents of such
Person, and any law, treaty, rule or regulation or determination of an
arbitrator or a court or other Governmental Authority, in each case applicable
to or binding upon such Person or any of its property or to which such Person or
any of its property is subject.
"RESPONSIBLE OFFICER": the chief executive officer and the president
of Holdings or the Borrower, as applicable, or, with respect to financial
matters, the chief financial officer of Holdings or the Borrower, as applicable.
"RESTRICTED PAYMENTS": as defined in Section 9.8.
"REVOLVING CREDIT COMMITMENT": as to any Lender, the obligation of
such Lender to make Revolving Credit Loans to, prior to the effectiveness of the
Assumption, Holdings only and, after the effectiveness of the Assumption, the
Borrower only, pursuant to Section 3.1 and/or to issue or participate in Letters
of Credit issued on behalf of the Borrower hereunder in an aggregate principal
and/or face amount at any one time outstanding not to exceed the amount set
forth opposite such Lender's name on Schedule I under the caption "Revolving
Credit Commitment " or in an Assignment and Acceptance, as such amount may be
reduced from time to time in accordance with the provisions of this Agreement.
"REVOLVING CREDIT COMMITMENT PERCENTAGE": as to any Lender at any
time, the percentage which such Lender's Revolving Credit Commitment then
constitutes of the aggregate Revolving Credit Commitments (or, at any time after
the Revolving Credit Commitments shall have expired or terminated, the
percentage which the aggregate principal amount of such
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Lender's Revolving Credit Loans then outstanding constitutes of the aggregate
principal amount of the Revolving Credit Loans then outstanding).
"REVOLVING CREDIT COMMITMENT PERIOD": the period from and including
the date hereof to but not including the Termination Date or such earlier date
on which the Revolving Credit Commitments shall terminate as provided herein.
"REVOLVING CREDIT LOANS": as defined in Section 3.1.
"REVOLVING CREDIT NOTE": as defined in Section 3.2.
"REVOLVING CREDIT NOTE ASSUMPTION ENDORSEMENT": as defined in
Section 3.2.
"SCC": Security Capital Corporation, a Delaware corporation
"SECURITY AGREEMENTS": the collective reference to the Holdings
Security Agreement, the Borrower Security Agreement and the Subsidiaries
Security Agreement, and any security agreement delivered pursuant to Section
8.9.
"SECURITY DOCUMENTS": the collective reference to the Assignment of
Life Insurance, the Collateral Assignments, the Security Agreements, the Pledge
Agreements and all other security documents hereafter delivered to the
Administrative Agent granting a Lien on any asset or assets of any Person to
secure any of the Obligations or to secure any guarantee of any such
Obligations.
"SINGLE EMPLOYER PLAN": any Plan which is covered by Title IV of
ERISA, but which is not a Multiemployer Plan.
"STOCKHOLDERS AGREEMENT": the Stockholders Agreement dated as of
April 6, 1999 among Holdings, SCC, Jo Kirchner, Robert Benowitz and Raymond
Orgera.
"STOCK OPTION PLAN": the Primrose Holdings, Inc. Stock Option Plan
as in effect on the Closing Date.
"SUBSIDIARIES COLLATERAL ASSIGNMENT OF LEASE": each Collateral
Assignment of Tenant's Interest in Lease to be executed and delivered by Jewel,
substantially in the form of Exhibit K, as the same may be amended, supplemented
or otherwise modified from time to time.
"SUBSIDIARIES GUARANTEE": the Guarantee to be executed and delivered
by Metrocorp, Jewel, any other Subsidiary of Holdings (except the Borrower), and
each Subsidiary thereof and of the Borrower, substantially in the form of
Exhibit J, as the same may be amended, supplemented or otherwise modified from
time to time.
"SUBSIDIARIES SECURITY AGREEMENT": the Security Agreement to be
executed and delivered by Metrocorp, Jewel, any other Subsidiary of Holdings
(except the Borrower), and each Subsidiary thereof and of the Borrower in favor
of the Administrative Agent, substantially in the form of Exhibit M, as the same
may be amended, supplemented or otherwise modified from time to time.
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"SUBSIDIARIES SECURITY DOCUMENTS": the collective reference to the
Subsidiaries Collateral Assignment of Lease and the Subsidiaries Security
Agreement.
"SUBSIDIARY": as to any Person, a corporation, partnership or other
entity of which shares of stock or other ownership interests having ordinary
voting power (other than stock or such other ownership interests having such
power only by reason of the happening of a contingency) to elect a majority of
the board of directors or other managers of such corporation, partnership or
other entity are at the time owned, or the management of which is otherwise
controlled, directly or indirectly through one or more intermediaries, or both,
by such Person. Unless otherwise qualified, all references to a "Subsidiary" or
to "Subsidiaries" in this Agreement shall refer to a Subsidiary or Subsidiaries
of Holdings.
"SUBSIDIARY GUARANTOR": any Person party to the Subsidiaries
Guarantee as a guarantor.
"TAX SHARING AGREEMENT": the Consolidated Income Tax Sharing
Agreement dated May 17, 1996 among SCC and Possible Dreams, Ltd., as amended,
and, pursuant to the Tax Sharing Joinder Agreement dated as of April 6, 1999,
between SCC and Holdings, Holdings.
"TERMINATION DATE": April 6, 2005
"TERM LOAN": as defined in Section 2.1.
"TERM LOAN COMMITMENT": as to any Lender, its obligation to make a
Term Loan to Holdings pursuant to Section 2.1 in the amount set forth opposite
such Lender's name on Schedule I under the caption "Term Loan". The aggregate
principal amount of the Term Loan Commitment as of the Closing Date was
$13,150,000.
"TERM LOAN COMMITMENT PERCENTAGE": as to any Lender, the percentage
equal to the quotient of such Lender's Term Loan Commitment divided by the
aggregate Term Loan Commitments.
"TERM NOTE": as defined in Section 2.2.
"TERM NOTE ASSUMPTION ENDORSEMENT": as defined in Section 2.2.
"TRANCHE": the collective reference to Eurodollar Loans the then
current Interest Periods with respect to all of which begin on the same date and
end on the same later date (whether or not such Loans shall originally have been
made on the same day);
"TRANSFEREE": as defined in Section 12.6(f).
"TYPE": as to any Loan, its nature as a Base Rate Loan or a
Eurodollar Loan.
"UNIFORM CUSTOMS": the Uniform Customs and Practice for Documentary
Credits (1993 Revision), International Chamber of Commerce Publication No. 500,
as the same may be amended from time to time.
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"WARRANT AGREEMENT": collectively, the Warrant Agreement, dated as
of the date hereof, made by Holdings in favor of CIBC Oppenheimer and/or any of
its Affiliates or Subsidiaries, and the Warrant Agreement, dated as of the date
hereof, made by SCC in favor of CIBC Oppenheimer and/or any of its Affiliates or
Subsidiaries, as the same may be amended, supplemented or otherwise modified
from time to time.
"WARRANTS": the warrants to purchase Capital Stock of Holdings or
SCC, as applicable issued pursuant to the Warrant Agreements.
"YEAR 2000 PROBLEM": the risk that computer applications used by the
Borrower and its Subsidiaries may be unable to recognize and perform properly
date-sensitive functions involving certain dates prior to, and any date on or
after, December 31, 1999.
"ZERO COUPON CERTIFICATE OF DESIGNATIONS": the Certificate of Voting
Power, Designations, Preferences and Relative, Optional or Other Special Rights,
and Qualifications, Limitations or Restrictions thereof, of Zero Coupon
Convertible Preferred Stock of SCC, adopted April 6, 1999.
"ZERO COUPON CONVERTIBLE PREFERRED STOCK": the Zero Coupon
Convertible Preferred Stock, par value $0.01 per share, of Holdings.
1.2 OTHER DEFINITIONAL PROVISIONS.
(a) Unless otherwise specified therein, all terms defined in this
Agreement shall have the defined meanings when used in any Notes or any
certificate or other document made or delivered pursuant hereto.
(b) As used herein and in any Notes, and any certificate or other
document made or delivered pursuant hereto, accounting terms relating to
Holdings, the Borrower and their respective Subsidiaries not defined in Section
1.1 and accounting terms partly defined in Section 1.1, to the extent not
defined, shall have the respective meanings given to them under GAAP.
(c) The words "hereof", "herein" and "hereunder" and words of
similar import when used in this Agreement shall refer to this Agreement as a
whole and not to any particular provision of this Agreement, and Section,
Schedule and Exhibit references are to this Agreement unless otherwise
specified.
(d) The meanings given to terms defined herein shall be equally
applicable to both the singular and plural forms of such terms.
SECTION 2. AMOUNT AND TERMS OF TERM LOAN COMMITMENTS
2.1 TERM LOAN COMMITMENTS.
(a) Subject to the terms and conditions hereof, each Lender
severally agrees to make a term loan (a "TERM LOAN") to Holdings on the Closing
Date in an amount not to exceed the amount of the Term Loan Commitment of such
Lender then in effect; PROVIDED, that the
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Term Loan Commitments shall terminate at 3:00 p.m., New York City time, on April
6, 1999, if the Term Loans have not been made prior to that time.
(b) On the Closing Date, immediately upon the consummation of the
Acquisition, the Borrower shall assume and become directly liable for, pursuant
to the Joinder and Assumption Agreement, the Term Loans and all of the
Obligations with respect to the Term Loans, and thereupon Holdings and the
Borrower shall be jointly and severally liable therefor.
(c) The Term Loans may from time to time be (i) Eurodollar Loans,
(ii) Base Rate Loans, or (iii) a combination thereof, as determined by the
Borrower and notified to the Administrative Agent in accordance with Sections
2.3 and 5.2.
2.2 TERM NOTES. The Term Loan of each Lender shall be evidenced by a
promissory note of Holdings, substantially in the form of Exhibit A-1 (or, with
respect to any Term Note issued after the effectiveness of the Assumption,
substantially in the form of Exhibit A-3) with appropriate insertions as to
payee, date and principal amount (each, including as the same may have been
amended by a Term Note Assumption Endorsement, a "Term Note"), payable to the
order of such Lender and representing the obligation of Holdings (or, after the
effectiveness of the Assumption and after giving effect to the applicable Term
Note Assumption Endorsement, Holdings and the Borrower, jointly and severally)
to pay the amount of the Term Loan made by such Lender. Concurrently with the
effectiveness of the Assumption, each of Holdings and the Borrower shall execute
and deliver to the Administrative Agent, for the account of each Lender, an
endorsement to each Term Note, substantially in the form of Exhibit A-2 with
appropriate insertions as to payee, date and principal amount (a "Term Note
Assumption Endorsement"). Each Lender is hereby authorized to record the date,
Type and amount of its Term Loan and the date and amount of each payment or
prepayment of principal thereof and each Conversion of all or a portion thereof
to another Type and, and in the case of Eurodollar Loans, the Interest Period
with respect thereto, on the schedule annexed to and constituting a part of its
Term Note, and any such recordation shall constitute prima facie evidence of the
accuracy of the information so recorded; provided, that the failure of such
Lender to make any such recordation shall not impair or otherwise affect the
validity or enforceability of its Term Note. Each Term Note shall (a) be dated
the Closing Date, (b) be stated to mature in installments in amounts equal to
such Lender's Term Loan Commitment Percentage of the amounts, and payable on the
dates, set forth on Schedule 2.2, and (c) bear interest for the period from the
date thereof on the unpaid principal amount thereof at the applicable interest
rates per annum specified in Section 5.1. Interest on the Term Notes shall be
payable on the dates specified in Section 5.1(e).
2.3 PROCEDURE FOR TERM LOAN BORROWING. Holdings shall give the
Administrative Agent irrevocable notice (which notice must be received by the
Administrative Agent prior to 10:00 a.m., New York City time, (a) three Business
Days prior to the Closing Date, if all or any part of the Term Loans are to be
initially Eurodollar Loans, or (b) one Business Day prior to the Closing Date,
otherwise) requesting that the Lenders make the Term Loans on the Closing Date
and specifying (i) the Closing Date, (ii) the amount to be borrowed, (iii)
whether the Term Loans are to be initially Eurodollar Loans, Base Rate Loans, or
a combination thereof, and (iv) if the Term Loans are to be entirely or partly
Eurodollar Loans or, the respective amounts of each such Type of Loan and the
respective lengths of the initial
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Interest Periods therefor. Upon receipt of such notice the Administrative Agent
shall promptly notify each Lender thereof. Not later than 11:00 a.m. on the
Closing Date each Lender shall make available to the Administrative Agent at its
office specified in Section 12.2 the amount of such Lender's pro rata share of
such borrowing in immediately available funds. The Administrative Agent shall on
such date credit the account of Holdings on the books of such office of the
Administrative Agent with the aggregate of the amounts made available to the
Administrative Agent by the Lenders and in like funds as received by the
Administrative Agent.
SECTION 3. AMOUNT AND TERMS OF REVOLVING CREDIT COMMITMENTS
3.1 REVOLVING CREDIT COMMITMENTS.
(a) Subject to the terms and conditions hereof, each Lender
severally agrees to make revolving credit loans ("REVOLVING CREDIT LOANS") to,
prior to the effectiveness of the Assumption, Holdings only, and from and after
the effectiveness of the Assumption, the Borrower only from time to time during
the Revolving Credit Commitment Period in an aggregate principal amount at any
one time outstanding not to exceed the amount of such Lender's Revolving Credit
Commitment then in effect; PROVIDED, that the Revolving Credit Commitments shall
terminate at 3:00 p.m., New York City time, on the Termination Date, if the Term
Loans have not been made prior to that time. During the Revolving Credit
Commitment Period Holdings or the Borrower, as applicable, may use the Revolving
Credit Commitments by borrowing, prepaying the Revolving Credit Loans in whole
or in part, and reborrowing, all in accordance with the terms and conditions
hereof.
(b) On the Closing Date, immediately upon the consummation of the
Acquisition, the Borrower shall assume and become directly liable for, pursuant
to the Joinder and Assumption Agreement, the Revolving Credit Loans, the
Revolving Credit Commitments and all of the Obligations with respect to the
Revolving Credit Loans and the Revolving Credit Commitments, and thereupon
Holdings and the Borrower shall be jointly and severally liable therefor.
(c) The Revolving Credit Loans may from time to time be (i)
Eurodollar Loans, (ii) Base Rate Loans, or (iii) a combination thereof, as
determined by the Borrower and notified to the Administrative Agent in
accordance with Sections 3.3 and 5.2, PROVIDED that no Revolving Credit Loan
shall be made as a Eurodollar Loan after the day that is one month, prior to the
Termination Date.
3.2 REVOLVING CREDIT NOTES. The Revolving Credit Loans made by each
Lender shall be evidenced by a promissory note of Holdings, substantially in the
form of Exhibit B-1 (or, with respect to any Revolving Credit Note issued after
the effectiveness of the Assumption, substantially in the form of Exhibit B-3)
with appropriate insertions as to payee, date and principal amount (each,
including as the same may have been amended by a Revolving Credit Note
Assumption Endorsement, a "Revolving Credit Note"), payable to the order of such
Lender and evidencing the obligation of Holdings (or, after the effectiveness of
the Assumption and after giving effect to the applicable Revolving Credit Note
Assumption Endorsement, Holdings and the Borrower, jointly and severally) to pay
a principal amount equal to the lesser of
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(a) the amount of the Revolving Credit Commitment of such Lender and (b) the
aggregate unpaid principal amount of all Revolving Credit Loans made by such
Lender. Concurrently with the effectiveness of the Assumption, each of Holdings
and the Borrower shall execute and deliver to the Administrative Agent, for the
account of each Lender, an endorsement to each Revolving Credit Note,
substantially in the form of Exhibit B-2 with appropriate insertions as to
payee, date and principal amount (a "Revolving Credit Note Assumption
Endorsement"). Each Lender is hereby authorized to record the date, Type and
amount of each Revolving Credit Loan made or Converted by such Lender, the date
and amount of each payment or prepayment of principal thereof, and, in the case
of Eurodollar Loans, the Interest Period with respect thereto, on the schedule
annexed to and constituting a part of its Revolving Credit Note, and any such
recordation shall constitute prima facie evidence of the accuracy of the
information so recorded. Each Revolving Credit Note shall (x) be dated the
Closing Date, (y) be stated to mature on the Termination Date and (z) bear
interest on the unpaid principal amount thereof from time to time outstanding at
the applicable interest rate per annum determined as provided in Section 5.1.
Interest on each Revolving Credit Note shall be payable on the dates specified
in Section 5.1(e).
3.3 PROCEDURE FOR REVOLVING CREDIT BORROWING. Prior to the
effectiveness of the Assumption, Holdings, and after the effectiveness of the
Assumption, the Borrower, may borrow under the Revolving Credit Commitments
during the Revolving Credit Commitment Period on any Business Day in an
aggregate principal amount not exceeding the aggregate Available RC Commitments
then in effect, provided that Holdings or the Borrower, as applicable, shall
give the Administrative Agent irrevocable notice (which notice must be received
by the Administrative Agent prior to 10:00 a.m., New York City time, (a) three
Business Days prior to the requested Borrowing Date, if all or any part of the
requested Revolving Credit Loans are to be initially Eurodollar Loans or (b) one
Business Day prior to the requested Borrowing Date, otherwise), specifying (i)
the amount to be borrowed, (ii) the requested Borrowing Date, (iii) whether the
borrowing is to be of Eurodollar Loans, Base Rate Loans, or a combination
thereof and (iv) if the borrowing is to be entirely or partly of Eurodollar
Loans or, the respective amounts of each such Type of Loan and the respective
lengths of the initial Interest Periods therefor. Each borrowing under the
Revolving Credit Commitments shall be in an amount equal to (x) in the case of
Base Rate Loans, $100,000 or a whole multiple thereof (or, if the then Available
RC Commitments are less than $100,000, such lesser amount) and (y) in the case
of Eurodollar Loans, $500,000 or a whole multiple of $100,000 in excess thereof.
Upon receipt of any such notice from Holdings or the Borrower, the
Administrative Agent shall promptly notify each Lender thereof. Each Lender will
make the amount of its pro rata share of each borrowing available to the
Administrative Agent for the account of Holdings or the Borrower, as applicable,
at the office of the Administrative Agent specified in Section 12.2 prior to
11:00 a.m., New York City time, on the Borrowing Date requested by Holdings or
the Borrower in funds immediately available to the Administrative Agent. Such
borrowing will then be made available to Holdings or the Borrower, as
applicable, by the Administrative Agent crediting the account of Holdings or the
Borrower, as applicable, on the books of such office with the aggregate of the
amounts made available to the Administrative Agent by the Lenders and in like
funds as received by the Administrative Agent.
3.4 COMMITMENT FEE. Holdings and, after the effectiveness of the
Assumption, Holdings and the Borrower jointly and severally, agrees to pay to
the Administrative Agent for the account of each Lender a commitment fee for the
period from and
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including the first day of the Revolving Credit Commitment Period to the
Termination Date, computed at the rate of 1/2 of 1% per annum on the average
daily amount of the Available RC Commitment of such Lender during the period for
which payment is made, payable quarterly in arrears on the last day of each
March, June, September and December and on the Termination Date or such earlier
date as the Revolving Credit Commitments shall terminate as provided herein,
commencing on the first of such dates to occur after the date hereof.
3.5 TERMINATION OR REDUCTION OF REVOLVING CREDIT COMMITMENTS. The
Borrower shall have the right, upon not less than five Business Days' notice to
the Administrative Agent, to terminate the Revolving Credit Commitments or, from
time to time, to reduce the amount of the Revolving Credit Commitments;
provided, that no such termination or reduction shall be permitted if, after
giving effect thereto and to any prepayments of the Revolving Credit Loans made
on the effective date thereof, the Aggregate Outstanding RC Extensions of Credit
would exceed the Revolving Credit Commitments then in effect. Any such reduction
shall be in an amount equal to $100,000 or a whole multiple thereof and shall
reduce permanently the Revolving Credit Commitments then in effect.
SECTION 4. LETTERS OF CREDIT
4.1 L/C COMMITMENT.
(a) Subject to the terms and conditions hereof, the Issuing Lender,
in reliance on the agreements of the other Lenders set forth in Section 4.4(a),
agrees to issue letters of credit ("LETTERS OF CREDIT") for the account of the
Borrower on any Business Day during the Revolving Credit Commitment Period in
such form as may be approved from time to time by the Issuing Lender; PROVIDED
that the Issuing Lender shall have no obligation to issue any Letter of Credit
if, after giving effect to such issuance, (1) the L/C Obligations would exceed
the L/C Commitment or (2) the aggregate Available Commitments would be less than
zero.
(b) Each Letter of Credit shall:
(1) be denominated in Dollars and shall be a standby letter of
credit issued to support obligations of the Borrower,
Metrocorp, Jewel, and/or their respective Subsidiaries,
contingent or otherwise, (A) in respect of insurance
obligations, (B) to workman's compensation board or similar
Governmental Authority for workman's compensation liabilities
of the Borrower, Metrocorp, Jewel, and/or their respective
Subsidiaries, (C) in respect of performance bonds or to
otherwise support performance by the Borrower, Metrocorp,
Jewel, and/or their respective Subsidiaries under contracts
and (D) for such other purposes as may be approved by the
Issuing Lender and the Administrative Agent (such consent not
to be unreasonably withheld), and
(2) expire no later than the earlier of (i) five (5) Business Days
prior to the Termination Date and (ii) 364 days from the date
of issuance (subject to renewal).
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(c) Each Letter of Credit shall be subject to the Uniform Customs
and, to the extent not inconsistent therewith, the laws of the
State of New York.
(d) The Issuing Lender shall not at any time be obligated to issue
any Letter of Credit hereunder if such issuance would conflict
with, or cause the Issuing Lender or any L/C Participant to
exceed any limits imposed by, any applicable Requirement of
Law.
4.2 PROCEDURE FOR ISSUANCE OF LETTERS OF CREDIT. The Borrower may
from time to time after the effectiveness of the Assumption request that the
Issuing Lender issue a Letter of Credit by delivering to the Issuing Lender at
its address for notices specified herein an Application therefor, completed to
the reasonable satisfaction of the Issuing Lender, and such other certificates,
documents and other papers and information as the Issuing Lender may reasonably
request. Upon receipt of any Application, the Issuing Lender will process such
Application and the certificates, documents and other papers and information
delivered to it in connection therewith in accordance with its customary
procedures and shall promptly issue the Letter of Credit requested thereby (but
in no event shall the Issuing Lender be required to issue any Letter of Credit
earlier than three Business Days after its receipt of the Application therefor
and all such other certificates, documents and other papers and information
relating thereto) by issuing the original of such Letter of Credit to the
beneficiary thereof or as otherwise may be agreed by the Issuing Lender and the
Borrower. The Issuing Lender shall furnish a copy of such Letter of Credit to
the Borrower promptly following the issuance thereof and the Issuing Lender
shall notify the Administrative Agent of the issuance of such Letter of Credit
and the Administrative Agent will in turn provide notice to each L/C Participant
indicating the amount of such Letter of Credit to be allocated to such L/C
Participant.
4.3 FEES, COMMISSIONS AND OTHER CHARGES.
(a) Holdings and the Borrower shall, jointly and severally, pay to
the Administrative Agent, for the account of the Issuing Lender and the L/C
Participants, a letter of credit commission with respect to each Letter of
Credit, computed for the period from the date of such payment to the date upon
which the next such payment is due hereunder at a rate equal to the Applicable
Margin for Revolving Credit Loan Eurodollar Loans then in effect plus
one-quarter of one percent (0.25%), calculated on the basis of the actual days
elapsed over a 360 day year, of the aggregate amount available to be drawn under
such Letter of Credit on the date on which such fee is calculated. One-quarter
of one percent (0.25%) of such fee shall be payable to the Issuing Lender, and
the remainder of such fee shall be payable to the L/C Participants and the
Issuing Lender to be shared ratably among them in accordance with their
respective Revolving Credit Commitment Percentages. Such commissions shall be
payable in arrears on each L/C Fee Payment Date to occur after the issuance of
each Letter of Credit and shall be nonrefundable.
(b) In addition to the foregoing fees and commissions, Holdings and
the Borrower shall, jointly and severally, pay or reimburse the Issuing Lender
for such normal and customary costs and expenses as are incurred or charged by
the Issuing Lender in issuing, effecting payment under, amending or otherwise
administering any Letter of Credit.
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(c) The Administrative Agent shall, promptly following its receipt
thereof, distribute to the Issuing Lender and the L/C Participants all fees and
commissions received by the Administrative Agent for their respective accounts
pursuant to this subsection.
4.4 L/C PARTICIPATIONS.
(a) The Issuing Lender irrevocably agrees to grant and hereby grants
to each L/C Participant, and, to induce the Issuing Lender to issue Letters of
Credit hereunder, each L/C Participant irrevocably agrees to accept and purchase
and hereby accepts and purchases from the Issuing Lender, on the terms and
conditions hereinafter stated, for such L/C Participant's own account and risk,
an undivided interest equal to such L/C Participant's Revolving Credit
Commitment Percentage in the Issuing Lender's obligations and rights under each
Letter of Credit issued hereunder and the amount of each draft paid by the
Issuing Lender thereunder. Each L/C Participant unconditionally and irrevocably
agrees with the Issuing Lender that, if a draft is paid under any Letter of
Credit for which the Issuing Lender is not reimbursed in full by the Borrower in
accordance with the terms of this Agreement, such L/C Participant shall pay to
the Issuing Lender upon demand at the Issuing Lender's address for notices
specified herein an amount equal to such L/C Participant's Revolving Credit
Commitment Percentage of the amount of such draft, or any part thereof, which is
not so reimbursed.
(b) If any amount required to be paid by any L/C Participant to the
Issuing Lender pursuant to Section 4.4(a) in respect of any unreimbursed portion
of any payment made by the Issuing Lender under any Letter of Credit is paid to
the Issuing Lender within three Business Days after the date such payment is
due, such L/C Participant shall pay to the Issuing Lender on demand an amount
equal to the product of (1) such amount, times (2) the daily average Federal
funds rate, as quoted by the Issuing Lender, during the period from and
including the date such payment is required (or, if such demand for payment from
such L/C Participant is made after 3:00 p.m. New York City time on such date,
the next Business Day) to the date on which such payment is immediately
available to the Issuing Lender, times (3) a fraction the numerator of which is
the number of days that elapse during such period and the denominator of which
is 360. If any such amount required to be paid by any L/C Participant pursuant
to Section 4.4(a) is not in fact made available to the Issuing Lender by such
L/C Participant within three Business Days after the date such payment is due,
the Issuing Lender shall be entitled to recover from such L/C Participant, on
demand, such amount with interest thereon calculated from such due date at the
rate per annum applicable to Base Rate Loans hereunder. A certificate of the
Issuing Lender submitted to any L/C Participant with respect to any amounts
owing under this Section shall be conclusive in the absence of manifest error.
(c) Whenever, at any time after the Issuing Lender has made payment
under any Letter of Credit and has received from any L/C Participant its pro
rata share of such payment in accordance with Section 4.4(a), the Issuing Lender
receives any payment related to such Letter of Credit (whether directly from the
Borrower or otherwise, including proceeds of collateral applied thereto by the
Issuing Lender), or any payment of interest on account thereof, the Issuing
Lender will distribute to such L/C Participant its pro rata share thereof;
PROVIDED, HOWEVER, that in the event that any such payment received by the
Issuing Lender shall be required to be returned by the Issuing Lender, such L/C
Participant shall return to the Issuing Lender the portion thereof previously
distributed by the Issuing Lender to it.
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4.5 REIMBURSEMENT OBLIGATIONS OF THE BORROWER.
(a) Holdings and the Borrower agree, jointly and severally, to
reimburse the Issuing Lender on each date on which the Issuing Lender notifies
the Borrower of the date and amount of a draft presented under any Letter of
Credit and paid by the Issuing Lender or, if later, on each date on which such
draft is paid by the Issuing Lender for the amount of (1) such draft so paid and
(2) any taxes and any reasonable fees, charges or other costs or expenses
incurred by the Issuing Lender at its address for notices specified herein in
lawful money of the United States of America and in immediately available funds.
(b) Interest shall be payable on any and all amounts remaining
unpaid by Holdings and the Borrower under this Section from the date such
amounts become payable (whether at stated maturity, by acceleration or
otherwise) until payment in full at the rate which would be payable on any
outstanding Base Rate Loans which were then overdue.
(c) Each drawing under any Letter of Credit shall constitute a
request by the Borrower to the Administrative Agent for a borrowing pursuant to
Section 4.3 of Base Rate Loans in the amount of such drawing. The Borrowing Date
with respect to such borrowing shall be the date of such drawing.
4.6 OBLIGATIONS ABSOLUTE.
(a) Holdings' and the Borrower's obligations under this Section 4
shall be absolute and unconditional under any and all circumstances and
irrespective of any set-off, counterclaim or defense to payment which Holdings
or the Borrower may have or have had against the Issuing Lender or any
beneficiary of a Letter of Credit.
(b) Holdings and the Borrower also agree with the Issuing Lender
that the Issuing Lender shall not be responsible for, and Holdings' and the
Borrower's Reimbursement Obligations under Section 4.5(a) shall not be affected
by, among other things, (1) the validity or genuineness of documents or of any
endorsements thereon, even though such documents shall in fact prove to be
invalid, fraudulent or forged, or (2) any dispute between or among Holdings or
the Borrower and any beneficiary of any Letter of Credit or any other party to
which such Letter of Credit may be transferred or (3) any claims whatsoever of
Holdings or the Borrower against any beneficiary of such Letter of Credit or any
such transferee.
(c) The Issuing Lender shall not be liable for any error, omission,
interruption or delay in transmission, dispatch or delivery of any message or
advice, however transmitted, in connection with any Letter of Credit, except for
errors or omissions caused by the Issuing Lender's gross negligence or willful
misconduct.
(d) Holdings and the Borrower agree that any action taken or omitted
by the Issuing Lender under or in connection with any Letter of Credit or the
related drafts or documents, if done in the absence of gross negligence or
willful misconduct and in accordance with the standards of care specified in the
Uniform Commercial Code of the State of New York, shall be binding on Holdings
and the Borrower and shall not result in any liability of the Issuing Lender to
Holdings or the Borrower.
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4.7 LETTER OF CREDIT PAYMENTS. If any draft shall be presented for
payment under any Letter of Credit, the Issuing Lender shall promptly notify the
Borrower of the date and amount thereof. The responsibility of the Issuing
Lender to Holdings and the Borrower in connection with any draft presented for
payment under any Letter of Credit shall, in addition to any payment obligation
expressly provided for in such Letter of Credit, be limited to determining that
the documents (including each draft) delivered under such Letter of Credit in
connection with such presentment are in conformity with such Letter of Credit.
4.8 APPLICATION. To the extent that any provision of any Application
related to any Letter of Credit is inconsistent with the provisions of this
Section 4, the provisions of this Section 4 shall apply.
SECTION 5. GENERAL PROVISIONS APPLICABLE TO LOANS
5.1 INTEREST RATES AND PAYMENT DATES.
(a) Each Eurodollar Loan shall bear interest for each day during
each Interest Period with respect thereto at a rate per annum equal to the
Eurodollar Rate determined for such day plus the Applicable Margin.
(b) Each Base Rate Loan shall bear interest at a rate per annum
equal to the Base Rate plus the Applicable Margin.
(c) If all or a portion of (i) any principal of any Loan, (ii) any
interest payable thereon, (iii) any commitment fee or (iv) any other amount
payable hereunder shall not be paid when due (whether at the stated maturity, by
acceleration or otherwise), the principal of the Loans and any such overdue
interest, commitment fee or other amount shall bear interest at a rate per annum
which is (x) in the case of principal, the rate that would otherwise be
applicable thereto pursuant to the foregoing provisions of this Section plus 2%
or (y) in the case of any such overdue interest, commitment fee or other amount,
the rate described in paragraph (b) of this Section plus 2%, in each case from
the date of such non-payment until such overdue principal, interest, commitment
fee or other amount is paid in full (as well after as before judgment).
(d) Interest shall be payable in arrears on each Interest Payment
Date, PROVIDED that interest accruing pursuant to paragraph (c) of this Section
shall be payable from time to time on demand.
5.2 CONVERSION AND CONTINUATION OPTIONS.
(a) Holdings or the Borrower, as applicable, may elect from time to
time to Convert Eurodollar Loans to Base Rate Loans by giving the Administrative
Agent at least two Business Days' prior irrevocable notice of such election,
PROVIDED that any such Conversion of Eurodollar Loans may only be made on the
last day of an Interest Period with respect thereto. Holdings or the Borrower,
as applicable, may elect from time to time to Convert Base Rate Loans to
Eurodollar Loans by giving the Administrative Agent at least three Business
Days' prior irrevocable notice of such election. Any such notice of Conversion
to Eurodollar Loans shall specify the length of the initial Interest Period or
Interest Periods therefor. Upon receipt of
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any such notice the Administrative Agent shall promptly notify each Lender
thereof. All or any part of outstanding Eurodollar Loans and Base Rate Loans may
be Converted as provided herein, PROVIDED that (i) no Loan may be Converted into
a Eurodollar Loan when any Event of Default has occurred and is continuing and
the Administrative Agent has or the Required Lenders have determined that such a
Conversion is not appropriate, (ii) any such Conversion may only be made if,
after giving effect thereto, Section 5.3 shall not have been contravened, and
(iii) no Loan may be converted into a Eurodollar Loan after the date that is one
month prior to the Termination Date (in the case of Conversions of Revolving
Credit Loans) or the date of the final installment of principal (in the case of
Conversions of Term Loans).
(b) Any Eurodollar Loans may be Continued as such upon the
expiration of the then current Interest Period with respect thereto by Holdings
or the Borrower, as applicable, giving notice to the Administrative Agent, in
accordance with the applicable provisions of the term "Interest Period" set
forth in Section 1.1, of the length of the next Interest Period to be applicable
to such Loans, PROVIDED that no Eurodollar Loan may be Continued as such (i)
when any Event of Default has occurred and is continuing and the Administrative
Agent has or the Required Lenders have determined that such a Continuation is
not appropriate, (ii) if, after giving effect thereto, Section 5.3 would be
contravened or (iii) after the date that is one month prior to the Termination
Date (in the case of Continuations of Revolving Credit Loans) or the date of the
final installment of principal (in the case of Continuations of Term Loans) and
PROVIDED, FURTHER, that if Holdings or the Borrower, as applicable, shall fail
to give such notice or if such Continuation is not permitted such Loans shall be
automatically converted to Base Rate Loans on the last day of such then expiring
Interest Period.
5.3 MINIMUM AMOUNTS AND MAXIMUM NUMBER OF TRANCHES. All borrowings,
conversions and continuations of Loans hereunder and all selections of Interest
Periods hereunder shall be in such amounts and be made pursuant to such
elections so that, after giving effect thereto, the aggregate principal amount
of the Loans comprising each Eurodollar Tranche shall be equal to $400,000 or a
whole multiple of $100,000 in excess thereof. In no event shall there be more
than four (4) Eurodollar Tranches outstanding at any time.
5.4 OPTIONAL PREPAYMENTS. Holdings or the Borrower may on the last
day of any Interest Period with respect thereto, in the case of Eurodollar
Loans, or at any time and from time to time, in the case of Base Rate Loans,
prepay the Loans, in whole or in part, without premium or penalty, upon at least
four Business Days' irrevocable notice to the Administrative Agent, specifying
the date and amount of prepayment and whether the prepayment is of Eurodollar
Loans, Base Rate Loans or a combination thereof, and, if of a combination
thereof, the amount allocable to each. Upon receipt of any such notice the
Administrative Agent shall promptly notify each Lender thereof. If any such
notice is given, the amount specified in such notice shall be due and payable on
the date specified therein, together with any amounts payable pursuant to
Section 5.12 and, in the case of prepayments of the Term Loans only, accrued
interest to such date on the amount prepaid. Partial prepayments of the Term
Loans pursuant to this Section shall be applied to the installments of principal
thereof in the inverse order of their scheduled maturities. Amounts prepaid on
account of the Term Loans may not be reborrowed. Partial prepayments pursuant to
this Section shall be in an aggregate principal amount of $100,000 or a whole
multiple thereof.
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5.5 MANDATORY PREPAYMENTS.
(a) Subject to Section 5.12, if on any date the Aggregate
Outstanding Extensions of Credit exceeds the Revolving Credit Commitments,
Holdings and the Borrower shall, jointly and severally, immediately prepay the
Revolving Credit Loans and/or cash collateralize or replace Letters of Credit in
an amount equal to the amount of such excess.
(b) Unless the Required Lenders otherwise agree, Holdings and the
Borrower shall, jointly and severally, prepay the Loans and reduce the
Commitments in an amount equal to (i) 100% of the Net Proceeds of any sale or
issuance of debt securities, and 100% of the Net Proceeds of any sale or
issuance of any equity securities, in either case by Holdings, the Borrower,
Metrocorp, Jewel or any Subsidiary of any thereof, whether in a public offering,
a private placement or otherwise, (ii) 100% of the Net Proceeds of any sale,
lease, assignment, exchange or other disposition for cash of any asset or group
of assets (including, without limitation, but subject to clause (d) of this
Section 5.5, insurance proceeds paid as a result of any destruction, casualty or
taking of any property of Holdings, the Borrower, Metrocorp, Jewel or any
Subsidiary of any thereof), not made in the ordinary course of business, by
Holdings, the Borrower, Metrocorp, Jewel, or any Subsidiary of any thereof, and
(iii) 100% of the cash proceeds received in respect of any Assigned Policy upon
the death of any Key Person, but subject to clause (e) of this Section 5.5, in
any such case no later than three Business Days following receipt by Holdings,
the Borrower, Metrocorp, Jewel, or such Subsidiary of such proceeds, together
with accrued interest to such date on the amount prepaid. Amounts prepaid
pursuant to this Section 5.5(b) shall be applied FIRST to installments of
principal of the Term Loans until paid in full, and SECOND to the reduction of
the Revolving Credit Commitments and the prepayment of the Revolving Credit
Loans and/or to cash collateralize or replace Letters of Credit. Prepayments of
installments of Term Loans shall be applied in the inverse order of maturity and
such amounts so prepaid may not be reborrowed. Nothing in this Section 5.5(b)
shall be construed to derogate any restriction or limitation contained in any
Loan Document imposed on any transaction of the types described in this Section
5.5(b), including without limitation the restrictions set forth in Sections 9.2,
9.5 and 9.6 hereof.
(c) On or before the earlier of the date on which the financial
statements referred to in Section 8.1(a) are required to be delivered in respect
of a fiscal year of Holdings, beginning with the fiscal year ending December 31,
1999, and the date on which such financial statements are actually delivered,
Holdings and the Borrower shall, jointly and severally, prepay the Term Loans
and permanently reduce the Commitments in the amount of 75% of Excess Cash Flow
for the period between the Closing Date and December 31, 1999 and each fiscal
year thereafter covered by such financial statements, together with accrued
interest to such date on the amount prepaid. Amounts prepaid pursuant to this
Section 5.5(c) shall be applied FIRST to installments of principal of the Term
Loans until paid in full, and SECOND to the reduction of the Revolving Credit
Commitments and the prepayment of the Revolving Credit Loans and/or to cash
collateralize or replace Letters of Credit. Prepayments of installments of Term
Loans shall be applied in the inverse order of maturity and such amounts so
prepaid may not be reborrowed.
(d) Net Proceeds received by Holdings or any Subsidiary as proceeds
of insurance upon any destruction, casualty or taking with respect to any
property of Holdings or any Subsidiary need not be applied as set forth in
Section 5.5(b) to the extent that no Default or
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Event of Default has occurred and is continuing and such Net Proceeds are
applied to the repair, rebuilding or replacement of the property which was the
subject of such destruction, casualty or taking within 60 days after the receipt
of such Net Proceeds. If required by the Administrative Agent, such Net Proceeds
shall be held in a special collateral account, subject to the sole dominion and
control of the Administrative Agent and in a manner reasonably satisfactory to
the Administrative Agent, as additional Collateral for the Obligations and the
Guarantees, until such time as it is to be applied to such repair, rebuilding or
replacement.
(e) A portion of the cash proceeds received by Holdings or any
Subsidiary in respect of any Assigned Policy upon the death of any Key Person
not in excess of $500,000 need not be applied as set forth in Section 5.5(b) to
the extent that no Default or Event of Default has occurred and is continuing
and such portion of such cash proceeds are applied to the recruitment of an
officer to replace such deceased Key Person within 60 days after the receipt of
such cash proceeds. If required by the Administrative Agent, such cash proceeds
shall be held in a special collateral account, subject to the sole dominion and
control of the Administrative Agent and in a manner reasonably satisfactory to
the Administrative Agent, as additional Collateral for the Obligations and the
Guarantees, until such time as it is to be applied to the recruitment of such
replacement officer.
5.6 COMPUTATION OF INTEREST AND FEES.
(a) Commitment fees and, whenever it is calculated on the basis of
the Prime Rate, interest shall be calculated on the basis of a 365- (or 366-, as
the case may be) day year for the actual days elapsed; and, otherwise, interest
shall be calculated on the basis of a 360-day year for the actual days elapsed.
The Administrative Agent shall as soon as practicable notify the Borrower and
the Lenders of each determination of a Eurodollar Rate. Any change in the
interest rate on a Loan resulting from a change in the Base Rate or the
Eurocurrency Reserve Requirements shall become effective as of the opening of
business on the day on which such change becomes effective. The Administrative
Agent shall as soon as practicable notify the Borrower and the Lenders of the
effective date and the amount of each such change in interest rate.
(b) Each determination of an interest rate by the Administrative
Agent pursuant to any provision of this Agreement shall be conclusive and
binding on Holdings and the Borrower and the Lenders in the absence of manifest
error. The Administrative Agent shall, at the request of the Borrower, deliver
to the Borrower a statement showing the quotations used by the Administrative
Agent in determining any interest rate pursuant to Section 5.1(a) or (c).
5.7 INABILITY TO DETERMINE INTEREST RATE. If prior to the first day
of any Interest Period:
(a) the Administrative Agent shall have determined (which
determination shall be conclusive and binding upon Holdings and the Borrower)
that, by reason of circumstances affecting the relevant market, adequate and
reasonable means do not exist for ascertaining the Eurodollar Rate or the for
such Interest Period, or
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(b) the Administrative Agent shall have received notice from the
Majority Lenders that the Eurodollar Rate determined or to be determined for
such Interest Period will not adequately and fairly reflect the cost to such
Lenders (as conclusively certified by such Lenders) of making or maintaining
their affected Loans during such Interest Period,
the Administrative Agent shall give telecopy or telephonic notice thereof to the
Borrower and the Lenders as soon as practicable thereafter. If such notice is
given (x) any Eurodollar Loans, as the case may be, requested to be made on the
first day of such Interest Period shall be made as Base Rate Loans, (y) any
Loans that were to have been Converted on the first day of such Interest Period
to Eurodollar Loans, as the case may be, shall be Converted to or Continued as
Base Rate Loans and (z) any outstanding Eurodollar Loans, as the case may be,
shall be Converted, on the first day of such Interest Period, to Base Rate
Loans. Until such notice has been withdrawn by the Administrative Agent, no
further Eurodollar Loans, as the case may be, shall be made or Continued as
such, nor shall Holdings or the Borrower have the right to Convert Loans to
Eurodollar Loans, as the case may be.
5.8 PRO RATA TREATMENT AND PAYMENTS.
(a) Each borrowing by Holdings or the Borrower from the Lenders
hereunder, each payment by Holdings or the Borrower on account of any commitment
fee hereunder and any reduction of the Term Loan Commitments or the Revolving
Credit Commitments of the Lenders shall be made pro rata according to the
respective Term Loan Commitment Percentages or Revolving Credit Commitment
Percentages, as applicable, of the Lenders. Each payment (including each
prepayment) by Holdings or the Borrower on account of principal of and interest
on the Term Loans or the Revolving Credit Loans shall be made pro rata according
to the respective outstanding principal amounts of the Term Loans or the
Revolving Credit Loans, as applicable, then held by the Lenders. All payments
(including prepayments) to be made by Holdings or the Borrower hereunder,
whether on account of principal, interest, fees or otherwise, shall be made
without set-off or counterclaim and shall be made prior to 12:00 noon, New York
City time, on the due date thereof to the Administrative Agent, for the account
of the Lenders, at the Administrative Agent's office specified in Section 12.2,
in Dollars and in immediately available funds. The Administrative Agent shall
distribute such payments to the Lenders promptly upon receipt in like funds as
received. If any payment hereunder (other than payments on Eurodollar Loans)
becomes due and payable on a day other than a Business Day, such payment shall
be extended to the next succeeding Business Day, and, with respect to payments
of principal, interest thereon shall be payable at the then applicable rate
during such extension. If any payment on a Eurodollar Loan becomes due and
payable on a day other than a Business Day, the maturity thereof shall be
extended to the next succeeding Business Day unless the result of such extension
would be to extend such payment into another calendar month in which event such
payment shall be made on the immediately preceding Business Day.
(b) Unless the Administrative Agent shall have been notified in
writing by any Lender prior to a borrowing that such Lender will not make the
amount that would constitute its Term Loan Commitment Percentage or Revolving
Credit Commitment Percentage, as applicable, of such borrowing available to the
Administrative Agent, the Administrative Agent may assume that such Lender is
making such amount available to the Administrative Agent, and the Administrative
Agent may, in reliance upon such assumption, make available to Holdings or
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the Borrower, as applicable, a corresponding amount. If such amount is not made
available to the Administrative Agent by the required time on the Borrowing Date
therefor, such Lender shall pay to the Administrative Agent, on demand, such
amount with interest thereon at a rate equal to the daily average Federal Funds
Effective Rate for the period until such Lender makes such amount immediately
available to the Administrative Agent. A certificate of the Administrative Agent
submitted to any Lender with respect to any amounts owing under this Section
shall be conclusive in the absence of manifest error. If such Lender's Term Loan
Commitment Percentage or Revolving Credit Commitment Percentage, as applicable,
of such borrowing is not made available to the Administrative Agent by such
Lender within three Business Days of such Borrowing Date, the Administrative
Agent shall also be entitled to recover such amount with interest thereon at the
rate per annum applicable to Base Rate Loans hereunder, on demand, from Holdings
and the Borrower.
5.9 ILLEGALITY. Notwithstanding any other provision herein, if the
adoption of or any change in any Requirement of Law or in the interpretation or
application thereof shall make it unlawful for any Lender to make or maintain
Eurodollar Loans as contemplated by this Agreement, (a) the commitment of such
Lender hereunder to make Eurodollar Loans, Continue Eurodollar Loans as such and
Convert Domestic Dollar Loans to Eurodollar Loans shall forthwith be cancelled
and (b) such Lender's Loans then outstanding as Eurodollar Loans, if any, shall
be Converted automatically to Base Rate Loans on the respective last days of the
then current Interest Periods with respect to such Loans or within such earlier
period as required by law. If any such Conversion of a Eurodollar Loan occurs on
a day which is not the last day of the then current Interest Period with respect
thereto, Holdings and the Borrower shall, jointly and severally, pay to such
Lender such amounts, if any, as may be required pursuant to Section 5.12.
5.10 REQUIREMENTS OF LAW.
(a) If the adoption of or any change in any Requirement of Law or in
the interpretation or application thereof or compliance by any Lender with any
request or directive (whether or not having the force of law) from any central
bank or other Governmental Authority made subsequent to the date hereof:
(i) shall subject any Lender to any tax of any kind whatsoever
with respect to this Agreement, any Note or any Eurodollar Loan made
by it, or change the basis of taxation of payments to such Lender in
respect thereof (except for Non-Excluded Taxes covered by Section
5.11 and changes in the rate of tax on the overall net income of
such Lender);
(ii) shall impose, modify or hold applicable any reserve,
special deposit, compulsory loan or similar requirement against
assets held by, deposits or other liabilities in or for the account
of, advances, loans or other extensions of credit by, or any other
acquisition of funds by, any office of such Lender which is not
otherwise included in the determination of the Eurodollar hereunder;
or
(iii) shall impose on such Lender any other condition;
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and the result of any of the foregoing is to increase the cost to such Lender,
by an amount which such Lender deems to be material, of making, Converting into,
Continuing or maintaining Eurodollar Loans or to reduce any amount receivable
hereunder in respect thereof, then, in any such case, Holdings and the Borrower
shall, jointly and severally, promptly pay such Lender such additional amount or
amounts as will compensate such Lender for such increased cost or reduced amount
receivable.
(b) If any Lender shall have determined that the adoption of or any
change in any Requirement of Law regarding capital adequacy or in the
interpretation or application thereof or compliance by such Lender or any
corporation controlling such Lender with any request or directive regarding
capital adequacy (whether or not having the force of law) from any Governmental
Authority made subsequent to the date hereof shall have the effect of reducing
the rate of return on such Lender's or such corporation's capital as a
consequence of its obligations hereunder to a level below that which such Lender
or such corporation could have achieved but for such adoption, change or
compliance (taking into consideration such Lender's or such corporation's
policies with respect to capital adequacy) by an amount deemed by such Lender to
be material, then from time to time, Holdings and the Borrower shall, jointly
and severally, promptly pay to such Lender such additional amount or amounts as
will compensate such Lender for such reduction.
(c) If any Lender becomes entitled to claim any additional amounts
pursuant to this Section, it shall promptly notify the Borrower (with a copy to
the Administrative Agent) of the event by reason of which it has become so
entitled. A certificate as to any additional amounts payable pursuant to this
Section submitted by such Lender to the Borrower (with a copy to the
Administrative Agent) shall be conclusive in the absence of manifest error. The
agreements in this Section shall survive the termination of this Agreement and
the payment of the Loans and all other amounts payable hereunder.
5.11 TAXES.
(a) All payments made by Holdings or the Borrower under this
Agreement and any Notes shall be made free and clear of, and without deduction
or withholding for or on account of, any present or future income, stamp or
other taxes, levies, imposts, duties, charges, fees, deductions or withholdings,
now or hereafter imposed, levied, collected, withheld or assessed by any
Governmental Authority, excluding net income taxes and franchise taxes (imposed
in lieu of net income taxes) imposed on the Administrative Agent or any Lender
as a result of a present or former connection between the Administrative Agent
or such Lender and the jurisdiction of the Governmental Authority imposing such
tax or any political subdivision or taxing authority thereof or therein (other
than any such connection arising solely from the Administrative Agent or such
Lender having executed, delivered or performed its obligations or received a
payment under, or enforced, this Agreement or any Note). If any such
non-excluded taxes, levies, imposts, duties, charges, fees deductions or
withholdings ("NON-EXCLUDED TAXES") are required to be withheld from any amounts
payable to the Administrative Agent or any Lender hereunder or under any Note,
the amounts so payable to the Administrative Agent or such Lender shall be
increased to the extent necessary to yield to the Administrative Agent or such
Lender (after payment of all Non-Excluded Taxes) interest or any such other
amounts payable hereunder at the rates or in the amounts specified in this
Agreement, PROVIDED, HOWEVER, that
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neither Holdings nor the Borrower shall be required to increase any such amounts
payable to any Lender that is not organized under the laws of the United States
of America or a state thereof if such Lender fails to comply with the
requirements of clause (b) of this Section. Whenever any Non-Excluded Taxes are
payable by Holdings or the Borrower, as promptly as possible thereafter the
Borrower shall send to the Administrative Agent for its own account or for the
account of such Lender, as the case may be, a certified copy of an original
official receipt received by Holdings or the Borrower showing payment thereof.
If Holdings or the Borrower fails to pay any Non-Excluded Taxes when due to the
appropriate taxing authority or fails to remit to the Administrative Agent the
required receipts or other required documentary evidence, Holdings and the
Borrower shall, jointly and severally, indemnify the Administrative Agent and
the Lenders for any incremental taxes, interest or penalties that may become
payable by the Administrative Agent or any Lender as a result of any such
failure. The agreements in this Section shall survive the termination of this
Agreement and the payment of the Loans and all other amounts payable hereunder.
(b) Each Lender that is not incorporated under the laws of the
United States of America or a state thereof shall:
(i) (A) if such Lender is a "bank" within the meaning of
Section 881(c)(3)(A) of the Code, deliver to the Borrower and the
Administrative Agent (x) two duly completed copies of United States
Internal Revenue Service Form 1001 or 4224, or successor applicable
form, as the case may be, and (y) an Internal Revenue Service Form
W-8 or W-9, or successor applicable form, as the case may be, or (B)
if such Lender is not a "bank" within the meaning of Section
881(c)(3)(A) of the Code and cannot deliver either Internal Revenue
Service Form 1001 or 4224, deliver (x) a certificate substantially
in the form of Exhibit L (a "CERTIFICATE OF NON-BANK STATUS") and
(y) two completed and signed copies of Internal Revenue Service Form
W-8 or successor applicable form;
(ii) deliver to the Borrower and the Administrative Agent two
further copies of any such form or certification on or before the
date that any such form or certification expires or becomes obsolete
and after the occurrence of any event requiring a change in the most
recent form previously delivered by it to the Borrower; and
(iii) obtain such extensions of time for filing and complete
such forms or certifications as may reasonably be requested by the
Borrower or the Administrative Agent;
unless in any such case an event (including, without limitation, any change in
treaty, law or regulation) has occurred prior to the date on which any such
delivery would otherwise be required which renders all such forms inapplicable
or which would prevent such Lender from duly completing and delivering any such
form with respect to it and such Lender so advises the Borrower and the
Administrative Agent. Such Lender shall certify (i) in the case of a Form 1001
or 4224, that it is entitled to receive payments under this Agreement without
deduction or withholding of any United States federal income taxes, (ii) in the
case of a Certificate of Non-Bank Status, that it is not a "bank" as such term
is defined in Section 881(c)(3)(A) of the
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Code, and (iii) in the case of a Form W-8 or W-9, that it is entitled to an
exemption from United States backup withholding tax. Each Person that shall
become a Lender or a Participant pursuant to Section 12.6 shall, upon the
effectiveness of the related transfer, be required to provide all of the forms
and statements required pursuant to this Section, PROVIDED that in the case of a
Participant such Participant shall furnish all such required forms and
statements to the Lender from which the related participation shall have been
purchased.
5.12 INDEMNITY. Holdings and the Borrower agree, jointly and
severally, to indemnify each Lender and to hold each Lender harmless from any
loss or expense which such Lender may sustain or incur as a consequence of (a)
default by Holdings or the Borrower in making a borrowing of, Conversion into or
Continuation of Eurodollar Loans after Holdings or the Borrower has given a
notice requesting the same in accordance with the provisions of this Agreement,
(b) default by Holdings or the Borrower in making any prepayment after Holdings
or the Borrower has given a notice thereof in accordance with the provisions of
this Agreement or (c) the making of a prepayment of Eurodollar Loans on a day
which is not the last day of an Interest Period with respect thereto. Such
indemnification may include an amount equal to the excess, if any, of (i) the
amount of interest which would have accrued on the amount so prepaid, or not so
borrowed, Converted or Continued, for the period from the date of such
prepayment or of such failure to borrow, Convert or Continue to the last day of
such Interest Period (or, in the case of a failure to borrow, Convert or
Continue, the Interest Period that would have commenced on the date of such
failure) in each case at the applicable rate of interest for such Loans provided
for herein (excluding, however, the Applicable Margin included therein, if any)
over (ii) the amount of interest (as reasonably determined by such Lender) which
would have accrued to such Lender on such amount by placing such amount on
deposit for a comparable period with leading banks in the interbank eurodollar
market. This covenant shall survive the termination of this Agreement and the
payment of the Loans and all other amounts payable hereunder.
5.13 LENDING OFFICES; CHANGE OF LENDING OFFICE.
(a) Loans of each Type made by any Lender shall be made and
maintained at such Lender's Applicable Lending Office for Loans of such Type.
(b) Each Lender agrees that if it makes any demand for payment under
Section 5.10 or 5.11(a), or if any adoption or change of the type described in
Section 5.9 shall occur with respect to it, it will use reasonable efforts
(consistent with its internal policy and legal and regulatory restrictions and
so long as such efforts would not be disadvantageous to it, as determined in its
sole discretion) to designate a different lending office if the making of such a
designation would reduce or obviate the need for Holdings and the Borrower to
make payments under Section 5.10 or 5.11(a), or would eliminate or reduce the
effect of any adoption or change described in Section 5.9.
SECTION 6. REPRESENTATIONS AND WARRANTIES
To induce the Administrative Agent and the Lenders to enter into
this Agreement and to make the Loans, Holdings and, from and after the
effectiveness of the Assumption, the Borrower hereby represents and warrants to
the Administrative Agent and each Lender that:
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6.1 FINANCIAL CONDITION.
(a) The balance sheet of the Borrower as at December 31, 1998 and
the related statements of income and of cash flows for the fiscal year ended on
such date, reported on by Smith & Howard, P.C., copies of which have heretofore
been furnished to each Lender, are complete and correct and present fairly the
financial condition of the Borrower as at such date, and the results of its
operations and cash flows for the fiscal year then ended. All such financial
statements, including the related schedules and notes thereto, have been
prepared in accordance with GAAP applied consistently throughout the periods
involved (except as approved by such accountants or Responsible Officer, as the
case may be, and as disclosed therein). The Borrower did not have, at the date
of the most recent balance sheet referred to above, any material Guarantee
Obligation, contingent liability or liability for taxes, or any long-term lease
or unusual forward or long-term commitment, including, without limitation, any
interest rate or foreign currency swap or exchange transaction or other
financial derivative, which is not reflected in the foregoing statements or in
the notes thereto. During the period from December 31, 1998 to and including the
date hereof there has been no sale, transfer or other disposition by the
Borrower of any material part of its business or property and no purchase or
other acquisition of any business or property (including any Capital Stock of
any other Person) material in relation to the financial condition of the
Borrower at December 31, 1998.
(b) The balance sheet of Metrocorp as at December 31, 1998 and the
related statements of income and of cash flows for the fiscal year ended on such
date, reported on by Smith & Howard, P.C., copies of which have heretofore been
furnished to each Lender, present fairly the financial condition of Metrocorp as
at such date, and the results of its operations and cash flows for the fiscal
year then ended. All such financial statements, including the related schedules
and notes thereto, have been prepared in accordance with GAAP applied
consistently throughout the periods involved (except as approved by such
accountants or Responsible Officer, as the case may be, and as disclosed
therein). Metrocorp did not have, at the date of the most recent balance sheet
referred to above, any material Guarantee Obligation, contingent liability or
liability for taxes, or any long-term lease or unusual forward or long-term
commitment, including, without limitation, any interest rate or foreign currency
swap or exchange transaction or other financial derivative, which is not
reflected in the foregoing statements or in the notes thereto. During the period
from December 31, 1998 to and including the date hereof there has been no sale,
transfer or other disposition by Metrocorp of any material part of its business
or property and no purchase or other acquisition of any business or property
(including any Capital Stock of any other Person) material in relation to the
financial condition of Metrocorp at December 31, 1998.
(c) The balance sheet of Jewel as at December 31, 1998 and the
related statements of income and of cash flows for the fiscal year ended on such
date, reported on by Smith & Howard, P.C., copies of which have heretofore been
furnished to each Lender, present fairly the financial condition of Jewel as at
such date, and the results of its operations and cash flows for the fiscal year
then ended. All such financial statements, including the related schedules and
notes thereto, have been prepared in accordance with GAAP applied consistently
throughout the periods involved (except as approved by such accountants or
Responsible Officer, as the case may be, and as disclosed therein). Jewel did
not have, at the date of the most recent balance sheet referred to above, any
material Guarantee Obligation, contingent liability or
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liability for taxes, or any long-term lease or unusual forward or long-term
commitment, including, without limitation, any interest rate or foreign currency
swap or exchange transaction or other financial derivative, which is not
reflected in the foregoing statements or in the notes thereto. During the period
from December 31, 1998 to and including the date hereof there has been no sale,
transfer or other disposition by Jewel of any material part of its business or
property and no purchase or other acquisition of any business or property
(including any Capital Stock of any other Person) material in relation to the
financial condition of Jewel at December 31, 1998.
(d) The unaudited balance sheet of Holdings as at April 6, 1999,
copies of which have heretofore been furnished to each Lender, is complete and
correct and presents fairly the financial condition of Holdings as at such date.
Such balance sheet, including the related schedules and notes thereto, has been
prepared in accordance with GAAP applied consistently throughout the periods
involved (except as approved by such accountants or Responsible Officer, as the
case may be, and as disclosed therein). Holdings did not have, at the date of
the balance sheet referred to above, any material Guarantee Obligation,
contingent liability or liability for taxes, or any long-term lease or unusual
forward or long-term commitment, including, without limitation, any interest
rate or foreign currency swap or exchange transaction or other financial
derivative, which is not reflected in the foregoing statements or in the notes
thereto. During the period from April 6, 1999 to and including the date hereof
there has been no sale, transfer or other disposition by Holdings of any
material part of its business or property and no purchase or other acquisition
of any business or property (including any Capital Stock of any other Person)
material in relation to the financial condition of Holdings at April 6, 1999.
(e) The PRO FORMA consolidated balance sheet of Holdings and its
consolidated Subsidiaries as at December 31, 1998, certified by a Responsible
Officer of Holdings (the "PRO FORMA BALANCE SHEET"), a copy of which has been
provided to the Administrative Agent and each Lender, is the unaudited
consolidated balance sheet of Holdings and its consolidated Subsidiaries
adjusted to give effect (as if such events had occurred on such date) to (i) the
Refinancing, (ii) the Acquisition, (iii) the making of the Term Loans, (iv) the
making of the Revolving Credit Loans to be made on the Closing Date, (v) the
application of the proceeds of the foregoing in accordance with the terms of the
Loan Documents, (vi) the Assumption and (vii) the payment of all fees and
expenses related to the foregoing transactions, as estimated in good faith as of
the date of the Pro Forma Balance Sheet. The Pro Forma Balance Sheet, together
with the notes thereto, presents fairly, on a pro forma basis, the consolidated
financial position of Holdings and its Subsidiaries as at December 31, 1998,
assuming that the events specified in the preceding sentence had actually
occurred on such date.
(f) The operating forecast and cash flow projections of Holdings and
its consolidated Subsidiaries, copies of which have heretofore been furnished to
the Lenders, have been prepared in good faith under the direction of a
Responsible Officer of Holdings, and in accordance with GAAP except that such
forecast and projections do not include footnotes and other disclosures which
may be required pursuant to GAAP. Neither Holdings nor, after the effectiveness
of the Assumption, the Borrower, has any reason to believe that as of the date
of delivery thereof such operating forecast and cash flow projections are
materially incorrect or misleading in any material respect, or omit to state any
material fact which would render them misleading in any material respect.
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(g) The Tax Sharing Agreement is in full force and effect, and has
not been modified except in accordance with Section 9.11. SCC has taken all
action, and has caused each of its Subsidiaries to take all action, necessary to
maintain the net operating loss carryforwards of SCC contemplated by the
business plan delivered to the Administrative Agent pursuant to Section 7.1(d).
None of SCC or any of its Subsidiaries has taken any action, or taken any
position, relative to its tax matters which would result in the disallowance or
restriction of, or which would be inconsistent with such maintenance and usage
of, such net operating loss carryforwards. Any escrow arrangement into which any
proceeds of any amount paid by Holdings, or paid to Holdings by SCC, pursuant to
the Tax Sharing Agreement, or any portion of any tax refund payable to Holdings
in accordance with the Tax Sharing Agreement, are deposited in an Approved
Escrow Arrangement.
6.2 NO CHANGE. (a) Since December 31, 1998, there has been no
development or event which has had or could have a Material Adverse Effect, and
(b) except as described on Schedule 6.2, during the period from December 31,
1998 to and including the date hereof no dividends or other distributions have
been declared, paid or made upon the Capital Stock of the Borrower, Metrocorp or
Jewel, nor has any of the Capital Stock of the Borrower, Metrocorp or Jewel,
been redeemed, retired, purchased or otherwise acquired for value by the
Borrower, Metrocorp or Jewel.
6.3 EXISTENCE; COMPLIANCE WITH LAW. Each of Holdings, the Borrower,
Metrocorp, Jewel and their respective Subsidiaries (a) is duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
organization, (b) has the corporate power and authority, and the legal right, to
own and operate its property, to lease the property it operates as lessee and to
conduct the business in which it is currently engaged, (c) is duly qualified as
a foreign corporation and in good standing under the laws of each jurisdiction
where its ownership, lease or operation of property or the conduct of its
business requires such qualification and (d) is in compliance with all
Requirements of Law except to the extent that the failure to comply therewith
could not, in the aggregate, have a Material Adverse Effect.
6.4 POWER; AUTHORIZATION; ENFORCEABLE OBLIGATIONS. Each of Holdings
and the Borrower has the corporate power and authority, and the legal right, to
make, deliver and perform the Loan Documents to which it is a party and to
borrow hereunder and has taken all necessary corporate action to authorize the
borrowings on the terms and conditions of this Agreement and any Notes and to
authorize the execution, delivery and performance of the Loan Documents to which
it is a party. No consent or authorization of, filing with, notice to or other
act by or in respect of, any Governmental Authority or any other Person is
required in connection with the borrowings hereunder or with the execution,
delivery, performance, validity or enforceability of the Loan Documents to which
Holdings or the Borrower is a party other than those consents, authorizations,
filings, notices or other acts set forth on Schedule 6.4. This Agreement has
been, and each other Loan Document to which it is a party will be, duly executed
and delivered on behalf of Holdings. Upon the execution and delivery of the
Joinder and Assumption Agreement, each of this Agreement and the Joinder and
Assumption Agreement shall have been, and each other Loan Document to which it
is a party will be, duly executed and delivered on behalf of the Borrower. This
Agreement constitutes (or with respect to the Borrower will constitute, upon the
execution and delivery of the Joinder and Assumption Agreement), and each other
Loan Document to which it is a party when executed and delivered
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will constitute, a legal, valid and binding obligation of Holdings and the
Borrower enforceable against Holdings and the Borrower in accordance with its
terms, subject to the effects of bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and other similar laws relating to or affecting
creditors' rights generally, general equitable principles (whether considered in
a proceeding in equity or at law) and an implied covenant of good faith and fair
dealing.
6.5 NO LEGAL BAR. The execution, delivery and performance of the
Loan Documents to which Holdings or the Borrower is a party, the borrowings
hereunder and the use of the proceeds thereof will not violate any Requirement
of Law or Contractual Obligation of Holdings, the Borrower, Metrocorp, Jewel or
any of their respective Subsidiaries and will not result in, or require, the
creation or imposition of any Lien on any of their or their respective
properties or revenues pursuant to any such Requirement of Law or Contractual
Obligation (other than Liens created by the Security Documents in favor of the
Administrative Agent).
6.6 NO MATERIAL LITIGATION. No litigation, investigation or
proceeding of or before any arbitrator or Governmental Authority is pending or,
to the knowledge of Holdings and, after the effectiveness of the Assumption, the
Borrower, threatened by or against Holdings, the Borrower, Metrocorp, Jewel or
any of their respective Subsidiaries or against any of their or their respective
properties or business (a) with respect to any of the Loan Documents or any of
the transactions contemplated hereby or thereby, or (b) which could have a
Material Adverse Effect.
6.7 NO DEFAULT. Neither Holdings, the Borrower, Metrocorp, Jewel nor
any of their respective Subsidiaries is in default under or with respect to any
of its Contractual Obligations in any respect which could have a Material
Adverse Effect. No Default or Event of Default has occurred and is continuing.
6.8 OWNERSHIP OF PROPERTY; LIENS. Each of Holdings, the Borrower,
Metrocorp, Jewel and their respective Subsidiaries has good record and
marketable title in fee simple to, or a valid leasehold interest in, all its
real property, and good title to, or a valid leasehold interest in, all its
other property, and none of such property is subject to any Lien except as
permitted by Section 9.3. Except as set forth on Schedule 6.8, none of Holdings,
the Borrower, Metrocorp, Jewel or any of their respective Subsidiaries owns, or
is under any Contractual Obligation to acquire, any fee interest in real
property.
6.9 INTELLECTUAL PROPERTY. Each of Holdings, the Borrower,
Metrocorp, Jewel and each of their respective Subsidiaries owns, or is licensed
to use, all trademarks, tradenames, copyrights, technology, know-how and
processes necessary for the conduct of its business as currently conducted
except for those the failure to own or license which could not have a Material
Adverse Effect (the "Intellectual Property"). No claim has been asserted and is
pending by any Person challenging or questioning the use of any such
Intellectual Property or the validity or effectiveness of any such Intellectual
Property, nor does Holdings or, after the effectiveness of the Assumption, the
Borrower, know of any valid basis for any such claim. The use of such
Intellectual Property by Holdings, the Borrower, Metrocorp, Jewel and their
respective Subsidiaries does not infringe on the rights of any Person, except
for such claims and infringements that, in the aggregate, do not have a Material
Adverse Effect.
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6.10 NO BURDENSOME RESTRICTIONS. No Requirement of Law or
Contractual Obligation of the Borrower or any of its Subsidiaries has a Material
Adverse Effect.
6.11 TAXES. Each of Holdings, the Borrower, Metrocorp, Jewel and
their Subsidiaries has filed or caused to be filed all tax returns which, to the
knowledge of Holdings or, after the effectiveness of the Assumption, the
Borrower, are required to be filed and has paid all taxes shown to be due and
payable on said returns or on any assessments made against it or any of its
property and all other taxes, fees or other charges imposed on it or any of its
property by any Governmental Authority (other than any the amount or validity of
which are currently being contested in good faith by appropriate proceedings and
with respect to which reserves in conformity with GAAP have been provided on the
books of Holdings, the Borrower, Metrocorp, Jewel or their respective
Subsidiaries, as the case may be); no tax Lien has been filed, and, to the
knowledge of Holdings or, after the effectiveness of the Assumption, the
Borrower, no claim is being asserted, with respect to any such tax, fee or other
charge.
6.12 FEDERAL REGULATIONS. No part of the proceeds of any Loans will
be used for "purchasing" or "carrying" any "margin stock" within the respective
meanings of each of the quoted terms under Regulation U of the Board of
Governors of the Federal Reserve System as now and from time to time hereafter
in effect, or for any purpose which violates, or which would be inconsistent
with, the provisions of the regulations of such Board of Governors. If requested
by any Lender or the Administrative Agent, the Borrower will furnish to the
Administrative Agent and each Lender a statement to the foregoing effect in
conformity with the requirements of FR Form G-3 or FR Form U-1 referred to in
said Regulation U.
6.13 ERISA. Neither a Reportable Event nor an "accumulated funding
deficiency" (within the meaning of Section 412 of the Code or Section 302 of
ERISA) has occurred during the five-year period prior to the date on which this
representation is made or deemed made with respect to any Plan, and each Plan
has complied in all material respects with the applicable provisions of ERISA
and the Code. No termination of a Single Employer Plan has occurred, and no Lien
in favor of the PBGC or a Plan has arisen, during such five-year period. The
present value of all accrued benefits under each Single Employer Plan (based on
those assumptions used to fund such Plans) did not, as of the last annual
valuation date prior to the date on which this representation is made or deemed
made, exceed the value of the assets of such Plan allocable to such accrued
benefits. Neither the Borrower nor any Commonly Controlled Entity has had a
complete or partial withdrawal from any Multiemployer Plan, and neither the
Borrower nor any Commonly Controlled Entity would become subject to any
liability under ERISA if the Borrower or any such Commonly Controlled Entity
were to withdraw completely from all Multiemployer Plans as of the valuation
date most closely preceding the date on which this representation is made or
deemed made. No such Multiemployer Plan is in Reorganization or Insolvent. The
present value (determined using actuarial and other assumptions which are
reasonable in respect of the benefits provided and the employees participating)
of the liability of the Borrower and each Commonly Controlled Entity for post
retirement benefits to be provided to their current and former employees under
Plans which are welfare benefit plans (as defined in Section 3(1) of ERISA) does
not, in the aggregate, exceed the assets under all such Plans allocable to such
benefits.
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6.14 INVESTMENT COMPANY ACT; OTHER REGULATIONS. Neither Holdings nor
the Borrower is an "investment company", or a company "controlled" by an
"investment company", within the meaning of the Investment Company Act of 1940,
as amended. Neither Holdings nor the Borrower is subject to regulation under any
Federal or State statute or regulation (other than Regulation X of the Board of
Governors of the Federal Reserve System) which limits its ability to incur
Indebtedness.
6.15 SUBSIDIARIES; STOCKHOLDERS. Schedule 6.15 sets forth the name
of each direct or indirect Subsidiary of Holdings, the Borrower, Metrocorp and
Jewel, its form of organization, its jurisdiction of organization, the total
number of issued and outstanding shares or other interests of Capital Stock
thereof, the classes and number of issued and outstanding shares or other
interests of Capital Stock of each such class, the name of each holder of
Capital Stock thereof and of Holdings, the Borrower, Metrocorp and Jewel (prior
to and after giving effect to the Acquisition and the other transactions
contemplated hereby), and the number of shares or other interests of such
Capital Stock held by each such holder and the percentage of all outstanding
shares or other interests of such class of Capital Stock held by such holders.
6.16 SECURITY DOCUMENTS.
(a) The provisions of each Security Document are effective to create
in favor of the Administrative Agent for the ratable benefit of the Lenders a
legal, valid and enforceable security interest in all right, title and interest
of the Loan Party party thereto in the "Collateral" described therein.
(b) (i) When financing statements have been filed in the offices in
the jurisdictions listed in Schedule 6.16, the Security Agreements shall each
constitute a fully perfected first Lien on, and security interest in, all right,
title and interest of Holdings, the Borrower, Metrocorp, Jewel and their
respective Subsidiaries in the "Collateral" described therein, which can be
perfected by such filing.
(ii) When certificates representing the Pledged Stock (as defined in
the Pledge Agreements) are delivered to the Administrative Agent, together
with stock powers endorsed in blank by a duly authorized officer of the
pledgors thereof, the Pledge Agreements shall constitute a fully perfected
first Lien on, and security interest in, all right, title and interest of
the pledgors parties thereto in the "Collateral" described therein.
(c) Neither Holdings, the Borrower, Metrocorp, Jewel nor any
Subsidiary of any thereof owns any property, or has any interest in any
property, that is not subject to a fully perfected first priority Lien on, or
security interest in, such property in favor of the Administrative Agent, other
than any such property having an aggregate fair market value at any one time not
exceeding $10,000.
6.17 ACCURACY AND COMPLETENESS OF INFORMATION.
(a) All factual information, reports and other papers and data with
respect to the Loan Parties and, prior to the effectiveness of the Assumption,
the Borrower, Metrocorp and Jewel (other than projections) furnished, and all
factual statements and representations made, to the Administrative Agent or the
Lenders by a Loan Party, or on behalf of a Loan Party, were, at
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the time the same were so furnished or made, when taken together with all such
other factual information, reports and other papers and data previously so
furnished and all such other factual statements and representations previously
so made, complete and correct in all material respects, to the extent necessary
to give the Administrative Agent and the Lenders true and accurate knowledge of
the subject matter thereof in all material respects, and did not, as of the date
so furnished or made, contain any untrue statement of a material fact or omit to
state any material fact necessary in order to make the statements contained
therein not misleading in light of the circumstances in which the same were
made.
(b) All projections with respect to the Loan Parties and prior to
the effectiveness of the Assumption, the Borrower, Metrocorp and Jewel,
furnished by or on behalf of a Loan Party to the Administrative Agent or the
Lenders were prepared and presented in good faith by or on behalf of such Loan
Party. No fact is known to a Loan Party which materially and adversely affects
or in the future is reasonably likely (so far as such Loan Party can reasonably
foresee) to have a Material Adverse Effect which has not been set forth in the
financial statements referred to in Section 6.1 or in such information, reports,
papers and data or otherwise disclosed in writing to the Administrative Agent or
the Lenders prior to the Closing Date.
6.18 LABOR RELATIONS. No Loan Party is, nor, prior to the
effectiveness of the Assumption, is the Borrower, Metrocorp or Jewel, engaged in
any unfair labor practice which could reasonably be expected to have a Material
Adverse Effect. There is (a) no unfair labor practice compliant pending or, to
the best knowledge of each Loan Party and each of the Subsidiaries, threatened
against a Loan Party or, prior to the effectiveness of the Assumption, the
Borrower, Metrocorp or Jewel, before the National Labor Relations Board which
could reasonably be expected to have a Material Adverse Effect and no grievance
or arbitration proceeding arising out of or under a collective bargaining
agreement is so pending or threatened; (b) no strike, labor dispute, slowdown or
stoppage pending or, to the best knowledge of each Loan Party, threatened
against a Loan Party or, prior to the effectiveness of the Assumption, the
Borrower, Metrocorp or Jewel; and (c) no union representation question existing
with respect to the employees of a Loan Party or, prior to the effectiveness of
the Assumption, the Borrower, Metrocorp or Jewel, and no union organizing
activities are taking place with respect to any thereof.
6.19 INSURANCE. Each Loan Party and, prior to the effectiveness of
the Assumption, each of the Borrower, Metrocorp and Jewel, has, with respect to
its properties and business, insurance covering the risks, in the amounts, with
the deductible or other retention amounts, and with the carriers, listed on
Schedule 6.19, which insurance meets the requirements of Section 8.5 hereof and
Section 5(m) of the Security Agreements of the date hereof and the Closing Date.
6.20 SOLVENCY. On the Closing Date, after giving effect to the
consummation of the Refinancing and the Acquisition, to the incurrence of all
indebtedness and obligations being incurred on or prior to such date in
connection herewith and therewith, and to the Assumption, (i) the amount of the
"present fair saleable value" of the assets of Holdings, the Borrower and of
Holdings and its Subsidiaries, taken as a whole, will, as of such date, exceed
the amount of all "liabilities of Holdings, the Borrower and of Holdings and its
Subsidiaries, taken as a whole, contingent or otherwise", as of such date, as
such quoted terms are determined in
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accordance with applicable federal and state laws governing determinations of
the insolvency of debtors, (ii) the present fair saleable value of the assets of
Holdings, the Borrower and of Holdings and its Subsidiaries, taken as a whole,
will, as of such date, be greater than the amount that will be required to pay
the liabilities of Holdings, the Borrower and of Holdings and its Subsidiaries,
taken as a whole, on their respective debts as such debts become absolute and
matured, (iii) neither Holdings, the Borrower nor Holdings and its Subsidiaries,
taken as a whole, will have, as of such date, an unreasonably small amount of
capital with which to conduct their respective businesses, and (iv) each of
Holdings, the Borrower and Holdings and its Subsidiaries, taken as a whole, will
be able to pay their respective debts as they mature. For purposes of this
Section 5.20, "debt" means "liability on a claim", "claim" means any (x) right
to payment, whether or not such a right is reduced to judgment, liquidated,
unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed,
legal, equitable, secured or unsecured, and (y) right to an equitable remedy for
breach of performance if such breach gives rise to a right to payment, whether
or not such right to an equitable remedy is reduced to judgment, fixed,
contingent, matured or unmatured, disputed, undisputed, secured or unsecured.
6.21 PURPOSE OF LOANS. The proceeds of the Loans shall be used by
Holdings to partially finance the Acquisition and pay related transaction fees
and expenses and by the Borrower to support on-going working capital needs of
the Borrower, Metrocorp, Jewel and their respective Subsidiaries in the ordinary
course of their respective businesses.
6.22 ENVIRONMENTAL MATTERS. Except as set forth on Schedule 6.22:
(a) The facilities and properties owned, leased or operated by
Holdings or any of its Subsidiaries subject to a Collateral Assignment (the
"PROPERTIES") do not contain, and have not previously contained, any Materials
of Environmental Concern in amounts or concentrations which (i) constitute or
constituted a violation of, or (ii) could reasonably be expected to give rise to
liability under, any Environmental Law except in either case insofar as such
violation or liability, or any aggregation thereof, is not reasonably likely to
result in the payment of a Material Environmental Amount.
(b) The Properties and all operations at the Properties are in
compliance, and have in the last three (3) years been in compliance, in all
material respects with all applicable Environmental Laws, and there is no
contamination at, under or about the Properties or violation of any
Environmental Law with respect to the Properties or the business operated by
Holdings or any of its Subsidiaries (the "BUSINESS") which could materially
interfere with the continued operation of the Properties or materially impair
the fair saleable value thereof.
(c) Neither Holdings nor any of its Subsidiaries has received any
notice of violation, alleged violation, non-compliance, liability or potential
liability regarding environmental matters or compliance with Environmental Laws
with regard to any of the Properties or the Business, nor does Holdings or the
Borrower have knowledge or reason to believe that any such notice will be
received or is being threatened except insofar as such notice or threatened
notice, or any aggregation thereof, does not involve a matter or matters that is
or are reasonably likely to result in the payment of a Material Environmental
Amount.
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(d) Materials of Environmental Concern have not been transported or
disposed of from the Properties in violation of, or in a manner or to a location
which could give rise to liability under, any Environmental Law, nor have any
Materials of Environmental Concern been generated, treated, stored or disposed
of at, on or under any of the Properties in violation of, or in a manner that
could give rise to liability under, any applicable Environmental Law except
insofar as any such violation or liability referred to in this paragraph, or any
aggregation thereof, is not reasonably likely to result in the payment of a
Material Environmental Amount.
(e) No judicial proceeding or governmental or administrative action
is pending or, to the knowledge of Holdings or the Borrower, threatened, under
any Environmental Law to which Holdings or any Subsidiary is or will be named as
a party with respect to the Properties or the Business, nor are there any
consent decrees or other decrees, consent orders, administrative orders or other
orders, or other administrative or judicial requirements outstanding under any
Environmental Law with respect to the Properties or the Business except insofar
as such proceeding, action, decree, order or other requirement, or any
aggregation thereof, is not reasonably likely to result in the payment of a
Material Adverse Amount.
(f) There has been no release or threat of release of Materials of
Environmental Concern at or from the Properties, or arising from or related to
the operations of Holdings or any Subsidiary in connection with the Properties
or otherwise in connection with the Business, in violation of or in amounts or
in a manner that could reasonably give rise to liability under Environmental
Laws except insofar as any such violation or liability referred to in this
paragraph, or any aggregation thereof, is not reasonably likely to result in the
payment of a Material Environmental Amount.
(g) To the best knowledge of Holdings or the Borrower, each of the
representations and warranties set forth in Sections 6.22(a) through (f) is true
and correct with respect to each parcel of real property owned or operated by
Holdings or any of its Subsidiaries (other than the Properties) except to the
extent that the facts and circumstances giving rise to any such failure to be so
true and correct is not reasonably likely to result in the payment of a Material
Environmental Amount.
6.23 REGULATION H. No Collateral Assignment encumbers improved real
property which is located in an area that has been identified by the Secretary
of Housing and Urban Development as an area having special flood hazards and in
which flood insurance has been made available under the National Flood Insurance
Act of 1968.
6.24 YEAR 2000 COMPLIANCE. Holdings and the Borrower believe that,
during the period from the Closing Date forward, the Year 2000 Problem could not
reasonably be expected to have a Material Adverse Effect on Holdings or its
Subsidiaries.
SECTION 7. CONDITIONS PRECEDENT
7.1 CONDITIONS TO INITIAL LOANS. The agreement of each Lender to
make the initial Loan requested to be made by it is subject to the satisfaction,
immediately prior to or
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concurrently with the making of such Loan on the Closing Date, of the following
conditions precedent:
(a) LOAN DOCUMENTS. The Administrative Agent shall have received
(or, with respect to clauses (vi) though (xiv), the Administrative Agent shall
have received concurrently with or immediately following the consummation of the
Acquisition):
(i) this Agreement, executed and delivered by a duly authorized
officer of Holdings, with a counterpart for each Lender,
(ii) for the account of each Lender having a Term Loan Commitment, a
Term Loan Note of Holdings conforming to the requirements hereof and
executed by a duly authorized officer of Holdings,
(iii) for the account of each Lender having a Revolving Credit
Commitment, a Revolving Credit Note of Holdings conforming to the
requirements hereof and executed by a duly authorized officer of Holdings,
(iv) the Holdings Pledge Agreement, executed and delivered by a duly
authorized officer of Holdings, with a counterpart or a conformed copy for
each Lender,
(v) the Holdings Security Agreement, executed and delivered by a
duly authorized officer of Holdings, with a counterpart or a conformed
copy for each Lender,
(vi) the Joinder and Assumption Agreement, executed and delivered by
a duly authorized officer of the Borrower, with a counterpart or a
conformed copy for each Lender,
(vii) for the account of each Lender having a Term Loan Commitment,
a Term Note Assumption Endorsement of the Borrower conforming to the
requirements hereof and executed by a duly authorized officer of the
Borrower,
(viii) for the account of each Lender having a Revolving Credit
Commitment, a Revolving Credit Note Assumption Endorsement of the Borrower
conforming to the requirements hereof and executed by a duly authorized
officer of the Borrower,
(ix) the Subsidiaries Guarantee, executed and delivered by a duly
authorized officer of the party thereto, with a counterpart or a conformed
copy for each Lender,
(x) each of the Borrower Security Agreement and Subsidiaries
Security Agreement, each executed and delivered by a duly authorized
officer of the party thereto, with a counterpart or a conformed copy for
each Lender,
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(xi) each of the Memoranda of Security Interest in Trademarks
attached as exhibits to the Security Agreements, each executed and
delivered by a duly authorized officer of the parties thereto, with a
counterpart or a conformed copy for each Lender,
(xii) each of the Collateral Assignments, each executed and
delivered by a duly authorized officer of the party thereto, with a
counterpart or a conformed copy for each Lender,
(xiii) the Assignment of Life Insurance, executed and delivered by a
duly authorized officer of the party thereto, with a counterpart or a
conformed copy for each Lender, and
(b) RELATED AGREEMENTS. The Administrative Agent shall have
received, with a copy for each Lender, true and correct copies, certified as to
authenticity by Holdings, of the Acquisition Documents and such other documents
or instruments as may be reasonably requested by the Administrative Agent,
including, without limitation, a copy of any debt instrument, security agreement
or other material contract to which Holdings, the Borrower, Metrocorp, Jewel or
their respective Subsidiaries may be a party.
(c) CONCURRENT TRANSACTIONS.
(i) The Administrative Agent and the Arranger shall have
received evidence satisfactory to them that CP, SCC, the general
partners of CP, certain officers of the Borrower and certain other
stockholders of Holdings shall have collectively contributed at
least $13,000,000 in cash to the common equity of Holdings.
(ii) The Administrative Agent and the Arranger shall have
received evidence satisfactory to them that the consideration
payable to the existing stockholders of the Borrower pursuant to the
terms of the Acquisition Documents will consist of $24,650,000 in
cash at the closing of the Acquisition, and $5,000,000 aggregate
face amount of Zero Coupon Convertible Preferred Stock.
(iii) The Acquisition shall have been, shall be concurrently
with, or shall be immediately following, the making of the initial
Loans, consummated in accordance with the terms of Acquisition
Documents, without any amendment, modification or waiver thereof
except with the consent of the Administrative Agent and the Arranger
shall have received evidence satisfactory to it to that effect.
(iv) The Assumption shall have, concurrently with or
immediately following the consummation of the Acquisition, the
making of the initial Loans, become effective in accordance with the
terms of this Agreement and the Joinder and Assumption Agreement.
(v) All amounts owing to the Existing Creditors under the
Existing Financing Documents shall have been, or shall be
concurrently with the making
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of the initial Loans, repaid in full, and any Liens created pursuant
to the Existing Financing Documents shall have been or shall,
concurrently with the making of the initial Loans, released, and the
Existing Financing Documents shall terminate and be of no further
force and effect upon such repayment; in each case pursuant to such
payout letters, Lien releases, termination statements, mortgage
satisfactions and other documents as the Administrative Agent may
require, each of which shall be in form and substance satisfactory
to the Administrative Agent.
(d) BUSINESS PLAN. The Administrative Agent and the Arranger shall
have received a business plan of Holdings and its Subsidiaries for fiscal years
1998-2004 which is in form and substance satisfactory to the Administrative
Agent and the Arranger.
(e) MINIMUM EBITDA. The Consolidated EBITDA of the Borrower, as
adjusted by the revenue adjustments and expense items listed in Schedule 7.1(e),
for the period of twelve consecutive calendar months ended December 31, 1998
shall be at least $3,200,000.
(f) FEES AND EXPENSES. The Administrative Agent shall have received
satisfactory evidence that the fees and expenses to be incurred in connection
with the Acquisition shall not exceed $1,250,000 in the aggregate.
(g) KEY PERSON LIFE INSURANCE. The Administrative Agent shall have
received satisfactory evidence that key person life insurance policies have been
established on the life of Jo Kirchner in an amount not less than $2,500,000.00
and on terms mutually satisfactory to the Administrative Agent and CP.
(h) EMPLOYMENT AGREEMENTS. The Administrative Agent shall have
received certified copies of the executed employment contracts and non-compete
agreements between Holdings, the Borrower, Metrocorp or Jewel and each member of
their senior management (as designated by the Administrative Agent) and each
such employment contract and non-compete agreement shall be in form and
substance satisfactory to the Administrative Agent.
(i) TAX SHARING AGREEMENT. The Administrative Agent shall have
received certified copies of the executed Tax Sharing Agreement and such Tax
Sharing Agreement shall be in form and substance satisfactory to the
Administrative Agent.
(j) MANAGEMENT FEE AGREEMENT. The Administrative Agent shall have
received certified copies of the Management Fee Agreement, and each other
management, consulting, investment banking or similar agreements between CP
and/or SCC and/or their respective Affiliates, on the one hand, and Holdings,
the Borrower, Metrocorp, Jewel and any of their respective Subsidiaries, on the
other hand, all of which agreements shall be satisfactory in form and substance
to the Administrative Agent and all management fees and other amounts payable to
CP, SCC and their respective Affiliates thereunder shall have been subordinated
to the Obligations in a manner, and pursuant to documentation, satisfactory in
form and substance to the Administrative Agent.
(k) HEADQUARTERS LEASE. The Borrower shall have entered into an
arm's-length lease for a minimum of two (2) years following the Closing Date for
the corporate
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offices of the Borrower located at 199 South Erwin Street, Cartersville, Georgia
30120, and such lease shall be in form and substance satisfactory to the
Administrative Agent and CP.
(l) BORROWING CERTIFICATE. The Administrative Agent shall have
received, with a counterpart for each Lender, a certificate of each of Holdings
and the Borrower, dated the Closing Date, each substantially in the form of
Exhibit O, with appropriate insertions and attachments, satisfactory in form and
substance to the Administrative Agent, executed by the President or any Vice
President and the Secretary or any Assistant Secretary of each of Holdings and
the Borrower.
(m) CORPORATE PROCEEDINGS OF HOLDINGS. The Administrative Agent
shall have received, with a counterpart for each Lender, a copy of the
resolutions, in form and substance satisfactory to the Administrative Agent, of
the Board of Directors of Holdings authorizing (i) the execution, delivery and
performance of this Agreement and the other Loan Documents to which it is a
party, (ii) the borrowings contemplated hereunder and (iii) the granting by it
of the Liens created pursuant to the Holdings Security Documents, certified by
the Secretary or an Assistant Secretary of Holdings as of the Closing Date,
which certificate shall be in form and substance satisfactory to the
Administrative Agent and shall state that the resolutions thereby certified have
not been amended, modified, revoked or rescinded.
(n) HOLDINGS INCUMBENCY CERTIFICATE. The Administrative Agent shall
have received, with a counterpart for each Lender, a certificate of Holdings,
dated the Closing Date, as to the incumbency and signature of the officers of
Holdings executing any Loan Document satisfactory in form and substance to the
Administrative Agent, executed by the President or any Vice President and the
Secretary or any Assistant Secretary of Holdings.
(o) CORPORATE PROCEEDINGS OF THE BORROWER. The Administrative Agent
shall have received concurrently with or immediately following the effectiveness
of the Assumption, with a counterpart for each Lender, a copy of the
resolutions, in form and substance satisfactory to the Administrative Agent, of
the Board of Directors of the Borrower authorizing (i) the execution, delivery
and performance of this Agreement and the other Loan Documents to which it is a
party, (ii) the Assumption, (iii) the borrowings contemplated hereunder and (iv)
the granting by it of the Liens created pursuant to the Borrower Security
Documents, certified by the Secretary or an Assistant Secretary of the Borrower
as of the Closing Date, which certificate shall be in form and substance
satisfactory to the Administrative Agent and shall state that the resolutions
thereby certified have not been amended, modified, revoked or rescinded.
(p) BORROWER INCUMBENCY CERTIFICATE. The Administrative Agent shall
have received, concurrently with or immediately following the effectiveness of
the Assumption, with a counterpart for each Lender, a certificate of the
Borrower, dated the Closing Date, as to the incumbency and signature of the
officers of the Borrower executing any Loan Document satisfactory in form and
substance to the Administrative Agent, executed by the President or any Vice
President and the Secretary or any Assistant Secretary of the Borrower.
(q) CORPORATE PROCEEDINGS OF METROCORP. The Administrative Agent
shall have received concurrently with or immediately following the consummation
of the Acquisition, with a counterpart for each Lender, a copy of the
resolutions, in form and substance satisfactory
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to the Administrative Agent, of the Board of Directors of Metrocorp authorizing
(i) the execution, delivery and performance of the Loan Documents to which
Metrocorp is a party and (ii) the granting by it of the Liens created pursuant
to Subsidiary Security Documents, certified by the Secretary or an Assistant
Secretary of Metrocorp as of the Closing Date, which certificate shall be in
form and substance satisfactory to the Administrative Agent and shall state that
the resolutions thereby certified have not been amended, modified, revoked or
rescinded.
(r) METROCORP INCUMBENCY CERTIFICATE. The Administrative Agent shall
have received concurrently with or immediately following the consummation of the
Acquisition, with a counterpart for each Lender, a certificate of Metrocorp,
dated the Closing Date, as to the incumbency and signature of the officers of
Metrocorp executing any Loan Document satisfactory in form and substance to the
Administrative Agent, executed by the President or any Vice President and the
Secretary or any Assistant Secretary of Metrocorp.
(s) CORPORATE PROCEEDINGS OF JEWEL. The Administrative Agent shall
have received concurrently with or immediately following the consummation of the
Acquisition, with a counterpart for each Lender, a copy of the resolutions, in
form and substance satisfactory to the Administrative Agent, of the Board of
Directors of Jewel authorizing (i) the execution, delivery and performance of
the Loan Documents to which Jewel is a party and (ii) the granting by it of the
Liens created pursuant to Subsidiary Security Documents, certified by the
Secretary or an Assistant Secretary of Jewel as of the Closing Date, which
certificate shall be in form and substance satisfactory to the Administrative
Agent and shall state that the resolutions thereby certified have not been
amended, modified, revoked or rescinded.
(t) JEWEL INCUMBENCY CERTIFICATE. The Administrative Agent shall
have received concurrently with or immediately following the consummation of the
Acquisition, with a counterpart for each Lender, a certificate of Jewel, dated
the Closing Date, as to the incumbency and signature of the officers of Jewel
executing any Loan Document satisfactory in form and substance to the
Administrative Agent, executed by the President or any Vice President and the
Secretary or any Assistant Secretary of Jewel.
(u) CORPORATE DOCUMENTS. The Administrative Agent shall have
received, with a counterpart for each Lender, true and complete copies of the
certificate of incorporation and by-laws of each of Holdings, the Borrower,
Metrocorp and Jewel, certified as of the Closing Date as complete and correct
copies thereof by the Secretary or an Assistant Secretary of the such Person.
(v) GOOD STANDING CERTIFICATES. The Administrative Agent shall have
received, with a copy for each Lender, certificates dated as of a recent date
from the Secretary of State or other appropriate authority, evidencing the good
standing of each Loan Party, the Borrower, Metrocorp and Jewel, (i) in the
jurisdiction of its organization and (ii) in each other jurisdiction where its
ownership, lease or operation of property or the conduct of its business
requires it to qualify as a foreign Person except, as to this subclause (ii),
where the failure to so qualify could not have a Material Adverse Effect.
(w) CONSENTS, LICENSES AND APPROVALS. The Administrative Agent shall
have received, with a counterpart for each Lender, a certificate of a
Responsible Officer of Holdings
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(i) attaching copies of all consents, authorizations and filings referred to in
Section 5.4, and (ii) stating that such consents, licenses and filings are in
full force and effect, and each such consent, authorization and filing shall be
in form and substance satisfactory to the Administrative Agent.
(x) FEES. The Administrative Agent shall have received the fees to
be received on the Closing Date referred to in the Fee Letter.
(y) LEGAL OPINIONS. The Administrative Agent shall have received,
with a counterpart for each Lender, the following executed legal opinions:
(i) the executed legal opinion of Morgan, Lewis & Bockius LLP,
counsel to Holdings, the Borrower, Metrocorp and Jewel,
substantially in the form of Exhibit P-1; and
(ii) the executed legal opinion of Brinson, Askew, Berry,
Seigler, Richardson & Davis, LLP, counsel to the Borrower,
Metrocorp, and Jewel, substantially in the form of Exhibit P-2.
Each such legal opinion shall cover such other matters incident to the
transactions contemplated by this Agreement as the Administrative Agent may
reasonably require.
(z) PLEDGED STOCK; STOCK POWERS. The Administrative Agent shall have
received the certificates representing the shares pledged pursuant to each of
the Pledge Agreements, together with an undated stock power for each such
certificate executed in blank by a duly authorized officer of the pledgor
thereof. Each Issuer referred to in each Pledge Agreement shall have delivered
an acknowledgement of and consent to such Pledge Agreement, executed by a duly
authorized officer of such Issuer, in substantially the form appended to such
Pledge Agreement.
(aa) ACTIONS TO PERFECT LIENS. The Administrative Agent shall have
received evidence in form and substance satisfactory to it that all filings,
recordings, registrations and other actions, including, without limitation, the
filing of duly executed financing statements on form UCC-1, necessary or, in the
opinion of the Administrative Agent, desirable to perfect the Liens created by
the Security Documents shall have been completed.
(bb) LIEN SEARCHES. The Administrative Agent shall have received the
results of a recent search by a Person satisfactory to the Administrative Agent,
of the Uniform Commercial Code, judgment and tax lien filings which may have
been filed with respect to personal property of Holdings, the Borrower,
Metrocorp, Jewel and each other Loan Party, and the results of such search shall
be satisfactory to the Administrative Agent.
(cc) INSURANCE. The Administrative Agent shall have received
evidence in form and substance satisfactory to it that all of the requirements
of Section 8.5 hereof and Section 5(m) of the Security Agreements shall have
been satisfied.
(dd) STRUCTURE. The Administrative Agent shall be satisfied with the
corporate and capital structure of Holdings and its Subsidiaries following the
Acquisition, and all related legal matters, including, but not limited to, the
viability and applicability of SCC's net operating
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loss carry forwards and other tax attributes, and the structural insulation of
the Borrower, its operations and its assets from all existing subsidiaries and
businesses and each subsequently acquired or organized subsidiary or business,
if any, of SCC.
7.2 CONDITIONS TO EACH LOAN. The agreement of each Lender to make
any Loan requested to be made by it on any date (including, without limitation,
its initial Loan) is subject to the satisfaction of the following conditions
precedent:
(a) REPRESENTATIONS AND WARRANTIES. Each of the representations and
warranties made by Holdings, the Borrower and the other Loan Parties in or
pursuant to the Loan Documents shall be true and correct in all material
respects on and as of such date as if made on and as of such date.
(b) NO DEFAULT. No Default or Event of Default shall have occurred
and be continuing on such date or after giving effect to the Loans requested to
be made on such date.
(c) ADDITIONAL MATTERS. All corporate and other proceedings, and all
documents, instruments and other legal matters in connection with the
transactions contemplated by this Agreement, the other Loan Documents and the
Acquisition Documents shall be satisfactory in form and substance to the
Administrative Agent, and the Administrative Agent shall have received such
other documents and legal opinions in respect of any aspect or consequence of
the transactions contemplated hereby or thereby as it shall reasonably request.
Each borrowing of Holdings or of the Borrower hereunder shall constitute a
representation and warranty by Holdings and, from and after the effectiveness of
the Assumption, the Borrower, as of the date thereof that the conditions
contained in this Section 7.2 have been satisfied.
SECTION 8. AFFIRMATIVE COVENANTS
Holdings and, from and after the effectiveness of the Assumption,
the Borrower, each hereby agrees that, so long as any of the Commitments remain
in effect or any amount is owing to any Lender or the Administrative Agent
hereunder or under any other Loan Document, Holdings and the Borrower shall, and
(except in the case of delivery of financial information, reports and notices)
shall cause each of their respective Subsidiaries to:
8.1 FINANCIAL STATEMENTS. Furnish to each Lender:
(a) as soon as available, but in any event within 120 days after the
end of each fiscal year of Holdings, a copy of the consolidated balance sheet of
Holdings and its consolidated Subsidiaries as at the end of such year and the
related consolidated statements of income and retained earnings and of cash
flows for such year, setting forth in each case in comparative form the figures
for the previous year, reported on without a "going concern" or like
qualification or exception, or qualification arising out of the scope of the
audit, Smith & Howard, P.C. or independent certified public accountants of
nationally recognized standing or otherwise acceptable to the Administrative
Agent; and
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(b) as soon as available, but in any event not later than 45 days
after the end of each of the first three quarterly periods of each fiscal year
of Holdings, the unaudited consolidated balance sheet of Holdings and its
consolidated Subsidiaries as at the end of such quarter and the related
unaudited consolidated statements of income and retained earnings and of cash
flows of Holdings and its consolidated Subsidiaries for such quarter and the
portion of the fiscal year through the end of such quarter, setting forth in
each case in comparative form the figures for the previous year, certified by a
Responsible Officer as being fairly stated in all material respects (subject to
normal year-end audit adjustments); and
(c) as soon as available, but in any event not later than 45 days
after the end of each calendar month, the unaudited consolidated and
consolidating balance sheet of Holdings, and its consolidated Subsidiaries as at
the end of such month and the related unaudited consolidated and consolidating
statements of income and retained earnings and of cash flows of Holdings and its
consolidated Subsidiaries for such month and the portion of the fiscal year
through the end of such month, setting forth in each case in comparative form
the figures for the previous year, certified by a Responsible Officer as being
fairly stated in all material respects (subject to normal year-end audit
adjustments);
all such financial statements shall fairly present the financial condition of
Holdings and its consolidated Subsidiaries and shall be prepared in reasonable
detail and in accordance with GAAP applied consistently throughout the periods
reflected therein and with prior periods (except as approved by such accountants
or officer, as the case may be, and disclosed therein).
8.2 CERTIFICATES; OTHER INFORMATION. Furnish to each Lender:
(a) concurrently with the delivery of the financial statements
referred to in Section 8.1(a), a certificate of the independent certified public
accountants reporting on such financial statements stating that in making the
examination necessary therefor no knowledge was obtained of any Default or Event
of Default, except as specified in such certificate;
(b) concurrently with the delivery of the financial statements
referred to in Sections 8.1(a), (b) and (c), a certificate of a Responsible
Officer (i) stating that, to the best of such Officer's knowledge, Holdings and
the Borrower during such period have observed or performed all of their
covenants and other agreements, and satisfied every condition, contained in this
Agreement and the other Loan Documents to be observed, performed or satisfied by
them, and that such Officer has obtained no knowledge of any Default or Event of
Default except as specified in such certificate and (ii) showing in detail the
calculations supporting such Officer's certification of Holdings' and the
Borrower's compliance with the requirements of Section 9.1(a) through 9.1(d);
(c) not later than thirty days prior to the end of each fiscal year
of Holdings, a copy of the projections by Holdings of the operating budget and
cash flow budget of Holdings and its Subsidiaries for the succeeding fiscal
year, such projections to be accompanied by a certificate of a Responsible
Officer to the effect that such projections have been prepared on the basis of
sound financial planning practice and that such Officer has no reason to believe
they are incorrect or misleading in any material respect;
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(d) within five days after the same are sent, copies of all
financial statements and reports which Holdings sends to its stockholders, and
within five days after the same are filed, copies of all financial statements
and reports which Holdings may make to, or file with, the Securities and
Exchange Commission or any successor or analogous Governmental Authority;
(e) during the month of April in each calendar year, a report of a
reputable insurance broker with respect to the insurance maintained by Holdings
and its Subsidiaries in accordance with Section 8.5 of this Agreement and
Section 5(m) of each Security Agreement, and such supplemental reports as the
Administrative Agent may from time to time request; and
(f) promptly, such additional financial and other information as any
Lender may from time to time reasonably request.
8.3 PAYMENT OF OBLIGATIONS. Pay, discharge or otherwise satisfy at
or before maturity or before they become delinquent, as the case may be, all its
obligations of whatever nature, except where the amount or validity thereof is
currently being contested in good faith by appropriate proceedings and reserves
in conformity with GAAP with respect thereto have been provided on the books of
Holdings or its Subsidiaries, as the case may be.
8.4 CONDUCT OF BUSINESS AND MAINTENANCE OF EXISTENCE. Continue to
engage in business of the same general type as now conducted by it and preserve,
renew and keep in full force and effect its corporate existence and take all
reasonable action to maintain all rights, privileges and franchises necessary or
desirable in the normal conduct of its business except as otherwise permitted
pursuant to Section 9.5; comply with all Contractual Obligations and
Requirements of Law except to the extent that failure to comply therewith would
not, in the aggregate, have a Material Adverse Effect.
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8.5 MAINTENANCE OF PROPERTY; INSURANCE. Keep all property useful and
necessary in its business in good working order and condition; maintain with
financially sound and reputable insurance companies insurance on all its
property in at least such amounts and against at least such risks as are usually
insured against in the same general area by companies engaged in the same or a
similar business, which insurance shall name the Administrative Agent as lender
loss payee, in the case of property or casualty insurance, and as an additional
insured, in the case of liability insurance; and furnish to each Lender, upon
written request, full information as to the insurance carried.
8.6 INSPECTION OF PROPERTY; BOOKS AND RECORDS; DISCUSSIONS. Keep
proper books of records and account in which full, true and correct entries in
conformity with GAAP and all Requirements of Law shall be made of all dealings
and transactions in relation to its business and activities; and permit
representatives of any Lender to visit and inspect any of its properties and
examine and make abstracts from any of its books and records at any reasonable
time and as often as may reasonably be desired and to discuss the business,
operations, properties and financial and other condition of Holdings and its
Subsidiaries with officers and employees of Holdings and its Subsidiaries and
with its independent certified public accountants.
8.7 NOTICES. Promptly give notice to the Administrative Agent and
each Lender of:
(a) the occurrence of any Default or Event of Default;
(b) any (i) default or event of default under any Contractual
Obligation of Holdings or any of its Subsidiaries or (ii) litigation,
investigation or proceeding which may exist at any time between Holdings or any
of its Subsidiaries and any Governmental Authority, which in either case, if not
cured or if adversely determined, as the case may be, could have a Material
Adverse Effect;
(c) any litigation or proceeding affecting Holdings or any of its
Subsidiaries in which the amount involved is $100,000 or more and not covered by
insurance or in which injunctive or similar relief is sought;
(d) of the acquisition by any Loan Party of any property or interest
in property (including, without limitation, real property), that is not subject
to a perfected Lien in favor of the Administrative Agent pursuant to the
Security Documents;
(e) of the occurrence of any transaction or occurrence referred to
in Section 5.5(d), and the receipt of any Net Proceeds or any insurance proceeds
as a result thereof (whether or not such Net Proceeds or proceeds are then
required to be applied to the repayment of Loans and reduction of Revolving
Credit Commitments as specified in Section 5.5(d));
(f) the following events, as soon as possible and in any event
within 30 days after Holdings or the Borrower knows or has reason to know
thereof: (i) the occurrence or expected occurrence of any Reportable Event with
respect to any Plan, a failure to make any required contribution to a Plan, the
creation of any Lien in favor of the PBGC or a Plan or any withdrawal from, or
the termination, Reorganization or Insolvency of, any Multiemployer Plan or (ii)
the institution of proceedings or the taking of any other action by the PBGC or
the
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Borrower or any Commonly Controlled Entity or any Multiemployer Plan with
respect to the withdrawal from, or the terminating, Reorganization or Insolvency
of, any Plan; and
(g) any material adverse change in the business, operations,
property, condition (financial or otherwise) or prospects of Holdings and its
Subsidiaries taken as a whole.
Each notice pursuant to this Section shall be accompanied by a statement of a
Responsible Officer setting forth details of the occurrence referred to therein
and stating what action Holdings or the Borrower proposes to take with respect
thereto.
8.8 ENVIRONMENTAL LAWS.
(a) Comply with, and ensure compliance by all tenants and
subtenants, if any, with, all applicable Environmental Laws and obtain and
comply in all material respects with and maintain, and ensure that all tenants
and subtenants obtain and comply in all material respects with and maintain, any
and all licenses, approvals, notifications, registrations or permits required by
applicable Environmental Laws except to the extent that failure to do so could
not be reasonably expected to have a Material Adverse Effect.
(b) Conduct and complete all investigations, studies, sampling and
testing, and all remedial, removal and other actions required under
Environmental Laws and promptly comply in all material respects with all lawful
orders and directives of all Governmental Authorities regarding Environmental
Laws except to the extent that the same are being contested in good faith by
appropriate proceedings and the pendency of such proceedings could not be
reasonably expected to have a Material Adverse Effect.
8.9 ADDITIONAL COLLATERAL; ADDITIONAL GUARANTORS.
(a) In the event that Holdings or any Subsidiary thereof acquires
any property or interest in property (including, without limitation, real
property) other than property made subject to a Lien permitted under Section
9.3(g), that is not subject to a perfected Lien in favor of the Administrative
Agent pursuant to the Security Documents, Holdings and the Borrower shall, and
shall cause each of their respective Subsidiaries to, take such action
(including, without limitation, the preparation and filing of mortgages or deeds
of trust in form and substance satisfactory to the Administrative Agent) as the
Administrative Agent shall request in order to create and/or perfect a Lien in
favor of the Administrative Agent on such property.
(b) In the event that any Loan Party is permitted to acquire or form
any additional Subsidiary, such Subsidiary shall execute a guarantee and a
security agreement, or supplements to the Subsidiaries Guarantee and the
Subsidiaries Security Agreement, and Holdings and/or any Subsidiary of Holdings
which is a holder of any Capital Stock of such Subsidiary shall execute such
pledge agreements or supplements to the Pledge Agreements, each in form and
substance satisfactory to the Administrative Agent, and shall take such other
action as shall be necessary or advisable (including, without limitation, the
execution of financing statements on form UCC-1) in order to perfect the Liens
granted by such Subsidiary in favor of the Administrative Agent for the benefit
of the Lenders and to effect and perfect the pledge of all of the Capital Stock
of such Subsidiary in favor of the Administrative Agent for the benefit of the
Lenders. Such Subsidiary shall thereupon become a Guarantor for all purposes
under the
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Loan Documents, including, without limitation, Section 8.9(a) of this Agreement.
The Administrative Agent shall be entitled to receive legal opinions of one or
more counsel to Holdings and such Subsidiary addressing such matters as the
Administrative Agent or its counsel may reasonably request, including, without
limitation, the enforceability of the guaranty and the security agreement to
which such Subsidiary becomes a party and the pledge of the Capital Stock of
such Subsidiary, and the creation, validity and perfection of the Liens so
granted by such Subsidiary and Holdings, the Borrower and/or other Subsidiaries
to the Administrative Agent for the benefit of the Lenders.
8.10 YEAR 2000 COVENANTS. No later than the Closing Date, Holdings
and its Subsidiaries shall review, and shall determine that the Borrower,
Metrocorp and Jewel shall have reviewed, the areas within their business and
operations which could be adversely affected by, and shall have developed or be
developing a program to address on a timely basis, the Year 2000 Problem, and
shall have made or be making related appropriate inquiry of material suppliers
and vendors. From time to time, at the request of the Administrative Agent,
Holdings and its Subsidiaries shall provide to the Administrative Agent such
updated information or documentation as is requested regarding the status of
their efforts to address the Year 2000 Problem.
SECTION 9. NEGATIVE COVENANTS
Holdings and, from and after the effectiveness of the Assumption,
the Borrower, each hereby agrees that, so long as any of the Commitments remain
in effect or any amount is owing to any Lender or the Administrative Agent
hereunder or under any other Loan Document, neither Holdings nor the Borrower
shall, nor (except with respect to Sections 9.1) shall permit any of their
respective Subsidiaries to, directly or indirectly:
9.1 FINANCIAL CONDITION COVENANTS.
(a) MAINTENANCE OF EBITDA. Permit Consolidated EBITDA of Holdings
for any period of twelve consecutive calendar months ending on the date set
forth below to be less than the amount set forth opposite such date below:
DATE EBITDA
---------------------- ----------------
6/30/99 .................................. $ 3,300,000.00
9/30/99 .................................. $ 3,300,000.00
12/31/99 ................................. $ 3,500,000.00
3/31/00 .................................. $ 3,700,000.00
6/30/00 .................................. $ 3,850,000.00
9/30/99 .................................. $ 4,100,000.00
12/31/00 ................................. $ 4,250,000.00
3/31/01 .................................. $ 4,500,000.00
6/30/01 .................................. $ 4,750,000.00
9/30/01 .................................. $ 5,000,000.00
12/31/01 ................................. $ 5,250,000.00
3/31/02 and at the end
of each fiscal quarter
thereafter ............................... $ 5,500,000.00
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(B) LEVERAGE RATIO. Permit the Leverage Ratio for any period of
twelve consecutive calendar months ending on the date set forth below to be
greater than the amount set forth opposite such date below:
DATE RATIO
---- -----
6/30/99 .................................................. 4.00
9/30/99 .................................................. 4.00
12/31/99 ................................................. 3.50
3/31/00 .................................................. 3.25
6/30/00 .................................................. 3.25
9/30/99 .................................................. 3.00
12/31/00 ................................................. 2.75
3/31/01 .................................................. 2.50
6/30/01 .................................................. 2.25
9/30/01 .................................................. 2.00
12/31/01 ................................................. 1.75
3/31/02 and at the end of
each fiscal quarter thereafter ........................... 1.50
(C) INTEREST COVERAGE. Permit, for (i) during the first four fiscal
quarters ended following the Closing Date, the period commencing on the Closing
Date and ended on the last day of a fiscal quarter during such four fiscal
quarter period thereafter, and (ii) thereafter, any period of four consecutive
fiscal quarters, in each case ending during any "Test Period" set forth below
the ratio of (x) Consolidated EBITDA of Holdings for such period to (y)
Consolidated Interest Expense of Holdings for such period to be less than the
ratio set forth opposite such period below:
TEST PERIOD RATIO
----------- -----
6/30/99 ................................................... 2.25
9/30/99 ................................................... 2.25
12/31/99 .................................................. 2.50
3/31/00 ................................................... 2.75
6/30/00 ................................................... 3.00
9/30/99 ................................................... 3.25
12/31/00 and at the end of
each fiscal quarter thereafter ............................ 3.50
(D) FIXED CHARGE COVERAGE. Permit, for (i) during the first four
fiscal quarters ended following the Closing Date, the period commencing on the
Closing Date and ended on the last day of a fiscal quarter during such four
fiscal quarter period thereafter, and (ii) thereafter, any period of four
consecutive fiscal quarters, in each case ending during any "Test Period" set
forth below the ratio of (x) Consolidated EBITDA of Holdings for such period to
(y) Consolidated Fixed Charges of Holdings for such period to be less than the
ratio set forth opposite such period below:
PERIOD RATIO
------ -----
9/30/99 ........................................... 1.00
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12/31/99 .......................................... 1.05
3/31/00 ........................................... 1.15
6/30/00 ........................................... 1.20
9/30/99 ........................................... 1.20
12/31/00 .......................................... 1.20
3/31/01 ........................................... 1.25
6/30/01 ........................................... 1.25
9/30/01 ........................................... 1.25
12/31/01 .......................................... 1.25
3/31/02 and at the end of
each fiscal quarter thereafter .................... 1.50
9.2 LIMITATION ON INDEBTEDNESS. Create, incur, assume or suffer to
exist any Indebtedness, except:
(a) Indebtedness of Holdings and the Borrower under this Agreement;
(b) Indebtedness of Holdings or the Borrower to any Subsidiary
Guarantor and of any Subsidiary Guarantor to Holdings or the Borrower or any
other Subsidiary Guarantor;
(c) Indebtedness of Holdings and any of its Subsidiaries incurred to
finance the acquisition of fixed or capital assets (whether pursuant to a loan,
a Financing Lease or otherwise) in an aggregate principal amount not exceeding
as to Holdings and its Subsidiaries $50,000 at any time outstanding;
(d) Indebtedness outstanding on the date hereof and listed on
Schedule 9.2(d); and
(e) additional Indebtedness not exceeding $50,000 in aggregate
principal amount at any one time outstanding.
9.3 Limitation on Liens. Create, incur, assume or suffer to exist
any Lien upon any of its property, assets or revenues, whether now owned or
hereafter acquired, except for:
(a) Liens for taxes not yet due or which are being contested in good
faith by appropriate proceedings, PROVIDED that adequate reserves with
respect thereto are maintained on the books of Holdings or its
Subsidiaries, as the case may be, in conformity with GAAP;
(b) carriers', warehousemen's, mechanics', materialmen's,
repairmen's or other like Liens arising in the ordinary course of business
which are not overdue for a period of more than 60 days or which are being
contested in good faith by appropriate proceedings;
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(c) pledges or deposits in connection with workers' compensation,
unemployment insurance and other social security legislation and deposits
securing liability to insurance carriers under insurance or self-insurance
arrangements;
(d) deposits to secure the performance of bids, trade contracts
(other than for borrowed money), leases, statutory obligations, surety and
appeal bonds, performance bonds and other obligations of a like nature
incurred in the ordinary course of business;
(e) easements, rights-of-way, restrictions and other similar
encumbrances incurred in the ordinary course of business which, in the
aggregate, are not substantial in amount and which do not in any case
materially detract from the value of the property subject thereto or
materially interfere with the ordinary conduct of the business of Holdings
or such Subsidiary;
(f) Liens in existence on the date hereof listed on Schedule 9.3(f),
securing Indebtedness permitted by Section 9.2(d), PROVIDED that no such
Lien is spread to cover any additional property after the Closing Date and
that the amount of Indebtedness secured thereby is not increased;
(g) Liens securing Indebtedness of Holdings and its Subsidiaries
permitted by Section 9.2(c) incurred to finance the acquisition of fixed
or capital assets, PROVIDED that (i) such Liens shall be created
substantially simultaneously with the acquisition of such fixed or capital
assets, (ii) such Liens do not at any time encumber any property other
than the property financed by such Indebtedness, (iii) the amount of
Indebtedness secured thereby is not increased and (iv) the principal
amount of Indebtedness secured by any such Lien shall at no time exceed
80% of the original purchase price of such property of such property at
the time it was acquired;
(h) Liens (not otherwise permitted hereunder) which secure
obligations not exceeding (as to Holdings and all Subsidiaries) $50,000 in
aggregate amount at any time outstanding; and
(i) Liens created pursuant to the Security Documents.
9.4 LIMITATION ON GUARANTEE OBLIGATIONS. Create, incur, assume or
suffer to exist any Guarantee Obligation except:
(a) Guarantee Obligations in existence on the date hereof and listed
on Schedule 9.4(a);
(b) guarantees made in the ordinary course of its business by
Holdings of obligations of any of its Subsidiaries, which obligations are
otherwise permitted under this Agreement; and
(c) the Guarantees.
9.5 LIMITATION ON FUNDAMENTAL CHANGES. Enter into any merger,
consolidation or amalgamation, or liquidate, wind up or dissolve itself (or
suffer any liquidation
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or dissolution), or convey, sell, lease, assign, transfer or otherwise dispose
of, all or substantially all of its property, business or assets, or make any
material change in its present method of conducting business, except:
(a) any Subsidiary of the Borrower may be merged or consolidated
with or into the Borrower (PROVIDED that the Borrower shall be the
continuing or surviving corporation) or with or into any one or more
wholly owned Subsidiaries of the Borrower (PROVIDED that a wholly owned
Subsidiary or Subsidiaries shall be the continuing or surviving
corporation); and
(b) any wholly owned Subsidiary of the Borrower may sell, lease,
transfer or otherwise dispose of any or all of its assets (upon voluntary
liquidation or otherwise) to the Borrower or any other wholly owned
Subsidiary of the Borrower.
9.6 LIMITATION ON SALE OF ASSETS. Convey, sell, lease, assign,
transfer or otherwise dispose of any of its property, business or assets
(including, without limitation, receivables and leasehold interests), whether
now owned or hereafter acquired, or, in the case of any Subsidiary of Holdings,
issue or sell any shares of such Subsidiary's Capital Stock to any Person other
than Holdings or any wholly owned Subsidiary of Holdings, except:
(a) the sale or other disposition of obsolete or worn out property
in the ordinary course of business; PROVIDED that the Net Proceeds of each
such transaction are applied to the prepayment of the Loans as provided in
Section 5.5(c);
(b) the sale of inventory in the ordinary course of business;
(c) the sale or discount without recourse of accounts receivable
arising in the ordinary course of business in connection with the
compromise or collection thereof; and
(d) as permitted by Section 9.5(b).
9.7 LIMITATION ON LEASES. Permit Consolidated Lease Expense for any
fiscal year of the Borrower to exceed $125,000.00.
9.8 LIMITATION ON DIVIDENDS. Declare or pay any dividend (other than
dividends payable solely in common stock of Holdings) on, or make any payment on
account of, or set apart assets for a sinking or other analogous fund for, the
purchase, redemption, defeasance, retirement or other acquisition of, any shares
of any class of Capital Stock of Holdings or any warrants or options to purchase
any such Stock, whether now or hereafter outstanding, or make any other
distribution in respect thereof, either directly or indirectly, whether in cash
or property or in obligations of Holdings or any Subsidiary thereof, or make any
management fee, consulting fee, investment banking fee or similar payment to any
holder of any Capital Stock of Holdings or any Affiliate thereof (all such
declarations, payments, setting apart, purchases, redemptions, defeasances,
retirements, acquisitions, distributions and payments being herein called
"Restricted Payments"), except that:
(a) Holdings may repurchase or redeem the Warrants in accordance
with the terms thereof and of the Warrant Agreements;
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(b) so long as no Default or Event of Default has occurred and is
continuing or would result therefrom, Holdings may make payments pursuant
to, and in accordance with, the Management Fee Agreement;
(c) so long as no Default or Event of Default has occurred and is
continuing or would result therefrom, Holdings may make cash payments in
respect of any purchase, redemption, defeasance, retirement or other
acquisition of any shares of any class of Capital Stock of Holdings from
Management Stockholders (as defined in the Stockholders Agreement)
required pursuant to, and in accordance with the terms of, the
Stockholders Agreement, PROVIDED that the aggregate amount so paid in cash
during the term of this Agreement shall not exceed (i) $250,000 in the
case of all such purchases, redemptions, defeasances, retirements or other
acquisitions of such shares made at a purchase price per share equal to
the original cost therefor paid by such Management Stockholder and (ii)
$500,000 in the case of all such purchases, redemptions, defeasances,
retirements or other acquisitions of such shares made at a purchase price
per share equal to the Fair Market Value (as defined in the Stockholders'
agreement) thereof pursuant to Section 5 of the Stockholders' Agreement;
(d) so long as no Default or Event of Default has occurred and is
continuing or would result therefrom, Holdings may distribute amounts to
SCC in respect of the portion of the combined tax liability of SCC and its
Subsidiaries attributable to Holdings and its Subsidiaries, after giving
effect to any net operating loss carryforwards available to SCC to reduce
any such tax liability, pursuant to and in accordance with the terms of
the Tax Sharing Agreement, PROVIDED that Holdings shall have provided to
the Administrative Agent a certificate of a Responsible Officer setting
forth the calculation of the amount of such dividend in reasonable detail;
and
(e) so long as no Default or Event of Default has occurred and is
continuing or would result therefrom, Holdings may distribute amounts to
SCC for the purpose of redeeming Zero Coupon Preferred Stock pursuant to
Sections G(a), (b), or (c) of the Zero Coupon Certificate of Designations,
in amounts not in excess of the redemption price therefor.
9.9 LIMITATION ON CAPITAL EXPENDITURES. Make or commit to make (by
way of the acquisition of securities of a Person or otherwise) any expenditure
in respect of the purchase or other acquisition of fixed or capital assets
(excluding any such asset acquired in connection with normal replacement and
maintenance programs properly charged to current operations) except for
expenditures in the ordinary course of business not exceeding $100,000 in the
aggregate for Holdings and its Subsidiaries during any fiscal year
9.10 LIMITATION ON INVESTMENTS, LOANS AND ADVANCES. Make any
advance, loan, extension of credit or capital contribution to, or purchase any
stock, bonds, notes, debentures or other securities of or any assets
constituting a business unit of, or make any other investment in, any Person, or
purchase or enter into any contract to purchase any interest in real property,
except :
(a) extensions of trade credit in the ordinary course of business;
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(b) investments in Cash Equivalents;
(c) loans to officers of Holdings listed on Schedule 9.10(c) in
aggregate principal amounts outstanding not to exceed the respective
amounts set forth for such officers on said Schedule;
(d) investments by Holdings or the Borrower in each other or in
Subsidiary Guarantors, and investments by such Subsidiary Guarantors in
Holdings or the Borrower and in other Subsidiary Guarantors; and
(e) purchases of and/or contracts to purchase interests in real
property for an aggregate consideration not to exceed $250,000.00 during
any fiscal year of Holdings.
9.11 LIMITATION ON OPTIONAL PAYMENTS AND MODIFICATIONS OF
INSTRUMENTS.
(a) Make any optional payment or prepayment on or redemption or
purchase of any Indebtedness (other than the Loans), (b) amend, modify or
change, or consent or agree to any amendment, modification or change to
any of the terms relating to the payment or prepayment or principal of or
interest on, any such Indebtedness (other than any such amendment,
modification or change which would extend the maturity or reduce the
amount of any payment of principal thereof or which would reduce the rate
or extend the date for payment of interest thereon), (c) amend any
Acquisition Document, or the Tax Sharing Agreement, the Management Fee
Agreement, the Stockholders Agreement, any Subordinated Promissory Note
(as defined in the Stockholders Agreement) or the Stock Option Plan, (d)
amend, modify or change, or consent or agree to any amendment,
modification or change to any of the terms of any franchise agreement in
effect as of the Closing Date between the Borrower and any franchisee,
which amendment modification or change could result in a Material Adverse
Effect or would reduce in any material respect the amount of the fees to
be paid by any such franchisee to the Borrower; or (e) enter into any
franchise agreement with any franchisee or prospective franchisee in a
form other than substantially the form attached hereto as Exhibit P.
9.12 LIMITATION ON TRANSACTIONS WITH AFFILIATES. Enter into any
transaction, including, without limitation, any purchase, sale, lease or
exchange of property or the rendering of any service, with any Affiliate unless
such transaction is (a) otherwise permitted under this Agreement, (b) in the
ordinary course of Holdings' or such Subsidiary's business and (c) upon fair and
reasonable terms no less favorable to Holdings or such Subsidiary, as the case
may be, than it would obtain in a comparable arm's length transaction with a
Person which is not an Affiliate.
9.13 LIMITATION ON SALES AND LEASEBACKS. Enter into any arrangement
with any Person providing for the leasing by Holdings or any Subsidiary of real
or personal property which has been or is to be sold or transferred by Holdings
or such Subsidiary to such Person or to any other Person to whom funds have been
or are to be advanced by such Person on the security of such property or rental
obligations of Holdings or such Subsidiary.
9.14 LIMITATION ON CHANGES IN FISCAL YEAR. Permit the fiscal year of
Holdings or the Borrower to end on a day other than December 31.
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9.15 LIMITATION ON NEGATIVE PLEDGE CLAUSES. Enter into with any
Person any agreement, other than (a) this Agreement, and (b) any industrial
revenue bonds, purchase money `s or Financing Leases permitted by this Agreement
(in which cases, any prohibition or limitation shall only be effective against
the assets financed thereby), which prohibits or limits the ability of Holdings
or any of its Subsidiaries to create, incur, assume or suffer to exist any Lien
upon any of its property, assets or revenues, whether now owned or hereafter
acquired.
9.16 LIMITATION ON LINES OF BUSINESS.
(a) With respect to the Borrower and the other Subsidiaries of
Holdings, enter into any business, either directly or through any Subsidiary,
except for those businesses in which the Borrower and its Subsidiaries are
engaged on the date of this Agreement or which are directly related thereto.
(b) With respect to Holdings, engage in any business other than
acquiring pursuant to the Acquisition and holding the Capital Stock of the
Borrower, Metrocorp and Jewel, and businesses incidental thereto.
9.17 GOVERNING DOCUMENTS. Amend its certificate of incorporation
(except to increase the number of authorized shares of common stock),
partnership agreement or other Governing Documents, without the prior written
consent of the Required Lenders, which shall not be unreasonably withheld or
delayed.
9.18 LIMITATION ON SUBSIDIARY FORMATION. Form any Subsidiaries
unless, immediately upon the formation of such Subsidiary, all requirements of
Section 8.9 shall have been satisfied.
9.19 LIMITATION ON SECURITIES ISSUANCES. (A) Permit any Subsidiary
to issue any shares of Capital Stock that are not "certificated securities" (as
defined inss.8-102 of the Uniform Commercial Code as in effect in the State of
New York on the date hereof) and are not pledged to the Administrative Agent
pursuant to a Pledge Agreement or (B) issue or permit any Subsidiary to issue
any shares of preferred stock.
SECTION 10. EVENTS OF DEFAULT
If any of the following events shall occur and be continuing:
(a) Holdings or the Borrower shall fail to pay any principal of any
Loan when due in accordance with the terms thereof or hereof; or Holdings or the
Borrower shall fail to pay any interest on any Loan, or any other amount payable
hereunder or under the other Loan Documents or the Fee Letter, within five days
after any such interest or other amount becomes due in accordance with the terms
thereof or hereof; or
(b) Any representation or warranty made or deemed made by Holdings,
the Borrower or any other Loan Party herein or in any other Loan Document or
which is contained in any certificate, document or financial or other statement
furnished by it at any time under or in
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connection with this Agreement or any such other Loan Document shall prove to
have been incorrect in any material respect on or as of the date made or deemed
made; or
(c) Holdings, the Borrower or any other Loan Party shall default in
the observance or performance of any agreement contained in Section 9 of this
Agreement, any Collateral Assignment, Section 5 of any Pledge Agreement and
Section 5 of the any Security Agreement; or
(d) Holdings or the Borrower or any other Loan Party shall default
in the observance or performance of any other agreement contained in this
Agreement or any other Loan Document (other than as provided in paragraphs (a)
through (c) of this Section), and such default shall continue unremedied for a
period of 30 days; or
(e) Holdings or the Borrower or any of the other Subsidiaries of
Holdings shall (i) default in any payment of principal of or interest of any
Indebtedness (other than the Loans) or in the payment of any Guarantee
Obligation, beyond the period of grace (not to exceed 30 days), if any, provided
in the instrument or agreement under which such Indebtedness or Guarantee
Obligation was created, if the aggregate amount of the Indebtedness and/or
Guarantee Obligations in respect of which such default or defaults shall have
occurred is at least $50,000; or (ii) default in the observance or performance
of any other agreement or condition relating to any such Indebtedness or
Guarantee Obligation or contained in any instrument or agreement evidencing,
securing or relating thereto, or any other event shall occur or condition exist,
the effect of which default or other event or condition is to cause, or to
permit the holder or holders of such Indebtedness or beneficiary or
beneficiaries of such Guarantee Obligation (or a trustee or agent on behalf of
such holder or holders or beneficiary or beneficiaries) to cause, with the
giving of notice if required, such Indebtedness to become due prior to its
stated maturity or such Guarantee Obligation to become payable; or
(f) (i) Holdings, the Borrower or any of the other Subsidiaries of
Holdings shall commence any case, proceeding or other action (A) under any
existing or future law of any jurisdiction, domestic or foreign, relating to
bankruptcy, insolvency, reorganization or relief of debtors, seeking to have an
order for relief entered with respect to it, or seeking to adjudicate it a
bankrupt or insolvent, or seeking reorganization, arrangement, adjustment,
winding-up, liquidation, dissolution, composition or other relief with respect
to it or its debts, or (B) seeking appointment of a receiver, trustee,
custodian, conservator or other similar official for it or for all or any
substantial part of its assets, or Holdings, the Borrower or any of the other
Subsidiaries of Holdings shall make a general assignment for the benefit of its
creditors; or (ii) there shall be commenced against Holdings, the Borrower or
any of the other Subsidiaries of Holdings any case, proceeding or other action
of a nature referred to in clause (i) above which (A) results in the entry of an
order for relief or any such adjudication or appointment or (B) remains
undismissed, undischarged or unbonded for a period of 60 days; or (iii) there
shall be commenced against Holdings, the Borrower or any of the other
Subsidiaries of Holdings any case, proceeding or other action seeking issuance
of a warrant of attachment, execution, distraint or similar process against all
or any substantial part of its assets which results in the entry of an order for
any such relief which shall not have been vacated, discharged, or stayed or
bonded pending appeal within 60 days from the entry thereof; or (iv) Holdings,
the Borrower or any of the other Subsidiaries of Holdings shall take any action
in furtherance of, or indicating its
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consent to, approval of, or acquiescence in, any of the acts set forth in clause
(i), (ii), or (iii) above; or (v) Holdings, the Borrower or any of the other
Subsidiaries of Holdings shall generally not, or shall be unable to, or shall
admit in writing its inability to, pay its debts as they become due; or
(g) (i) Any Person shall engage in any "prohibited transaction" (as
defined in Section 406 of ERISA or Section 4975 of the Code) involving any Plan,
(ii) any "accumulated funding deficiency" (as defined in Section 302 of ERISA),
whether or not waived, shall exist with respect to any Plan or any Lien in favor
of the PBGC or a Plan shall arise on the assets of Holdings or any Commonly
Controlled Entity, (iii) a Reportable Event shall occur with respect to, or
proceedings shall commence to have a trustee appointed, or a trustee shall be
appointed, to administer or to terminate, any Single Employer Plan, which
Reportable Event or commencement of proceedings or appointment of a trustee is,
in the reasonable opinion of the Required Lenders, likely to result in the
termination of such Plan for purposes of Title IV of ERISA, (iv) any Single
Employer Plan shall terminate for purposes of Title IV of ERISA, (v) Holdings or
any Commonly Controlled Entity shall, or in the reasonable opinion of the
Required Lenders is likely to, incur any liability in connection with a
withdrawal from, or the Insolvency or Reorganization of, a Multiemployer Plan or
(vi) any other event or condition shall occur or exist with respect to a Plan;
and in each case in clauses (i) through (vi) above, such event or condition,
together with all other such events or conditions, if any, could have a Material
Adverse Effect; or
(h) One or more judgments or decrees shall be entered against
Holdings or any of its Subsidiaries involving in the aggregate a liability (not
paid or fully covered by insurance) of $50,000 or more, and all such judgments
or decrees shall not have been vacated, discharged, stayed or bonded pending
appeal within 60 days from the entry thereof; or
(i) Any of the Security Documents shall cease, for any reason, to be
in full force and effect, or Holdings, the Borrower or any other Loan Party
which is a party to any of the Security Documents shall so assert or (ii) the
Lien created by any of the Security Documents shall cease to be enforceable and
of the same effect and priority purported to be created thereby; or
(j) Any Guarantee shall cease, for any reason, to be in full force
and effect or any Guarantor shall so assert; or
(k) (i) SCC or CP shall fail to own, directly and beneficially, the
greater of (A) the percentage of the outstanding Capital Stock of Holdings owned
by them immediately following the Closing Date (after giving effect to any
dilution resulting from the exercise of options in accordance with the Stock
Option Plan and the exercise of the Warrants) or (B) 80% of the outstanding
Capital Stock of Holdings, or (ii) Holdings shall fail to own, directly and
beneficially, 100% of the outstanding Capital Stock of each of the Borrower,
Metrocorp and Jewel, and of each other Subsidiary thereof, or (iii) any Person
or "group" (within the meaning of Section 13(d) or 14(d) of the Securities
Exchange Act of 1934, as amended), other than SCC or CP (A) shall have acquired
beneficial ownership of 25% or more of any outstanding class of Capital Stock
having ordinary voting power in the election of directors of Holdings or (B)
shall obtain the power (whether or not exercised) to elect a majority of
Holdings' directors or (iv) the
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Board of Directors of Holdings shall not consist of a majority of Continuing
Directors; "CONTINUING DIRECTORS" shall mean the directors of Holdings on the
Closing Date and each other director, if such other director's nomination for
election to the Board of Directors of Holdings is recommended by a majority of
the then Continuing Directors;
then, and in any such event, (A) if such event is an Event of Default specified
in clause (i) or (ii) of paragraph (f) of this Section with respect to Holdings
or the Borrower, automatically the Commitments shall immediately terminate and
the Loans hereunder (with accrued interest thereon) and all other amounts owing
under this Agreement shall immediately become due and payable, and (B) if such
event is any other Event of Default, either or both of the following actions may
be taken: (i) with the consent of the Required Lenders, the Administrative Agent
may, or upon the request of the Required Lenders, the Administrative Agent
shall, by notice to Holdings or the Borrower declare the Commitments to be
terminated forthwith, whereupon the Commitments shall immediately terminate; and
(ii) with the consent of the Required Lenders, the Administrative Agent may, or
upon the request of the Required Lenders, the Administrative Agent shall, by
notice to Holdings or the Borrower, declare the Loans hereunder (with accrued
interest thereon) and all other amounts owing under this Agreement (including,
without limitation, all amounts of L/C Obligations, whether or not the
beneficiaries of the then outstanding Letters of Credit have presented the
documents required thereunder) to be due and payable forthwith, whereupon the
same shall immediately become due and payable. Except as expressly provided
above in this Section, presentment, demand, protest and all other notices of any
kind are hereby expressly waived.
With respect to all Letters of Credit with respect to which
presentment for honor shall not have occurred at the time of an acceleration
pursuant to the preceding paragraph, Holdings and the Borrower shall, jointly
and severally, at such time deposit in a cash collateral account opened by the
Administrative Agent an amount equal to the aggregate then undrawn and unexpired
amount of such Letters of Credit. Holdings and the Borrower hereby grant to the
Administrative Agent, for the benefit of the Issuing Lender and the L/C
Participants, a security interest in such cash collateral to secure all
obligations of Holdings and the Borrower under this Agreement and the other Loan
Documents. Amounts held in such cash collateral account shall be applied by the
Administrative Agent to the payment of drafts drawn under such Letters of
Credit, and the unused portion thereof after all such Letters of Credit shall
have expired or been fully drawn upon, if any, shall be applied to repay other
obligations of Holdings and the Borrower hereunder and under the Notes. After
all such Letters of Credit shall have expired or been fully drawn upon, all
Reimbursement Obligations shall have been satisfied and all other obligations of
Holdings and the Borrower hereunder and under the Notes shall have been paid in
full, the balance, if any, in such cash collateral account shall be returned to
the Borrower. Holdings and the Borrower shall execute and deliver to the
Administrative Agent, for the account of the Issuing Lender and the L/C
Participants, such further documents and instruments as the Administrative Agent
may request to evidence the creation and perfection of the within security
interest in such cash collateral account.
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SECTION 11. THE AGENT
11.1 APPOINTMENT. Each Lender hereby irrevocably designates and
appoints the Administrative Agent as the agent of such Lender under this
Agreement and the other Loan Documents, and each such Lender irrevocably
authorizes the Administrative Agent, in such capacity, to take such action on
its behalf under the provisions of this Agreement and the other Loan Documents
and to exercise such powers and perform such duties as are expressly delegated
to the Administrative Agent by the terms of this Agreement and the other Loan
Documents, together with such other powers as are reasonably incidental thereto.
Notwithstanding any provision to the contrary elsewhere in this Agreement, the
Administrative Agent shall not have any duties or responsibilities, except those
expressly set forth herein, or any fiduciary relationship with any Lender, and
no implied covenants, functions, responsibilities, duties, obligations or
liabilities shall be read into this Agreement or any other Loan Document or
otherwise exist against the Administrative Agent.
11.2 DELEGATION OF DUTIES. The Administrative Agent may execute any
of its duties under this Agreement and the other Loan Documents by or through
agents or attorneys-in-fact and shall be entitled to advice of counsel
concerning all matters pertaining to such duties. The Administrative Agent shall
not be responsible for the negligence or misconduct of any agents or attorneys
in-fact selected by it with reasonable care.
11.3 EXCULPATORY PROVISIONS. Neither the Administrative Agent nor
any of its officers, directors, employees, agents, attorneys-in-fact or
Affiliates shall be (i) liable for any action lawfully taken or omitted to be
taken by it or such Person under or in connection with this Agreement or any
other Loan Document (except for its or such Person's own gross negligence or
willful misconduct) or (ii) responsible in any manner to any of the Lenders for
any recitals, statements, representations or warranties made by Holdings, the
Borrower or any officer thereof contained in this Agreement or any other Loan
Document or in any certificate, report, statement or other document referred to
or provided for in, or received by the Administrative Agent under or in
connection with, this Agreement or any other Loan Document or for the value,
validity, effectiveness, genuineness, enforceability or sufficiency of this
Agreement or any other Loan Document or for any failure of Holdings or the
Borrower to perform its obligations hereunder or thereunder. The Administrative
Agent shall not be under any obligation to any Lender to ascertain or to inquire
as to the observance or performance of any of the agreements contained in, or
conditions of, this Agreement or any other Loan Document, or to inspect the
properties, books or records of Holdings or the Borrower.
11.4 RELIANCE BY ADMINISTRATIVE AGENT. The Administrative Agent
shall be entitled to rely, and shall be fully protected in relying, upon any
Note, writing, resolution, notice, consent, certificate, affidavit, letter,
cablegram, telegram, telecopy, telex or teletype message, statement, order or
other document or conversation believed by it to be genuine and correct and to
have been signed, sent or made by the proper Person or Persons and upon advice
and statements of legal counsel (including, without limitation, counsel to
Holdings or the Borrower or any other Loan Party), independent accountants and
other experts selected by the Administrative Agent. The Administrative Agent may
deem and treat the payee of any Note as the owner thereof for all purposes
unless a written notice of assignment, negotiation or transfer thereof shall
have been filed with the Administrative Agent. The Administrative Agent shall be
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fully justified in failing or refusing to take any action under this Agreement
or any other Loan Document unless it shall first receive such advice or
concurrence of the Required Lenders as it deems appropriate or it shall first be
indemnified to its satisfaction by the Lenders against any and all liability and
expense which may be incurred by it by reason of taking or continuing to take
any such action. The Administrative Agent shall in all cases be fully protected
in acting, or in refraining from acting, under this Agreement and the other Loan
Documents in accordance with a request of the Required Lenders, and such request
and any action taken or failure to act pursuant thereto shall be binding upon
all the Lenders and all future holders of the Loans.
11.5 NOTICE OF DEFAULT. The Administrative Agent shall not be deemed
to have knowledge or notice of the occurrence of any Default or Event of Default
hereunder unless the Administrative Agent has received notice from a Lender or
Holdings or the Borrower referring to this Agreement, describing such Default or
Event of Default and stating that such notice is a "notice of default". In the
event that the Administrative Agent receives such a notice, the Administrative
Agent shall give notice thereof to the Lenders. The Administrative Agent shall
take such action with respect to such Default or Event of Default as shall be
reasonably directed by the Required Lenders; provided that unless and until the
Administrative Agent shall have received such directions, the Administrative
Agent may (but shall not be obligated to) take such action, or refrain from
taking such action, with respect to such Default or Event of Default as it shall
deem advisable in the best interests of the Lenders.
11.6 NON-RELIANCE ON ADMINISTRATIVE AGENT AND OTHER LENDERS. Each
Lender expressly acknowledges that neither the Administrative Agent nor any of
its officers, directors, employees, agents, attorneys-in-fact or Affiliates has
made any representations or warranties to it and that no act by the
Administrative Agent hereinafter taken, including any review of the affairs of
Holdings or the Borrower or any other Loan Party, shall be deemed to constitute
any representation or warranty by the Administrative Agent to any Lender. Each
Lender represents to the Administrative Agent that it has, independently and
without reliance upon the Administrative Agent or any other Lender, and based on
such documents and information as it has deemed appropriate, made its own
appraisal of and investigation into the business, operations, property,
financial and other condition and creditworthiness of Holdings or the Borrower
and the other Loan Parties and made its own decision to make its Loans hereunder
and enter into this Agreement. Each Lender also represents that it will,
independently and without reliance upon the Administrative Agent or any other
Lender, and based on such documents and information as it shall deem appropriate
at the time, continue to make its own credit analysis, appraisals and decisions
in taking or not taking action under this Agreement and the other Loan
Documents, and to make such investigation as it deems necessary to inform itself
as to the business, operations, property, financial and other condition and
creditworthiness of Holdings or the Borrower. Except for notices, reports and
other documents expressly required to be furnished to the Lenders by the
Administrative Agent hereunder or under the other Loan Documents, the
Administrative Agent shall not have any duty or responsibility to provide any
Lender with any credit or other information concerning the business, operations,
property, condition (financial or otherwise), prospects or creditworthiness of
Holdings or the Borrower or any other Loan Party which may come into the
possession of the Administrative Agent or any of its officers, directors,
employees, agents, attorneys-in-fact or Affiliates.
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11.7 INDEMNIFICATION. The Lenders agree to indemnify the
Administrative Agent in its capacity as such (to the extent not reimbursed by
Holdings or the Borrower and without limiting the obligation of Holdings and the
Borrower to do so), ratably according to their respective Credit Exposure
Percentages in effect on the date on which indemnification is sought, from and
against any and all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements of any kind
whatsoever which may at any time (including, without limitation, at any time
following the payment of the Loans) be imposed on, incurred by or asserted
against the Administrative Agent in any way relating to or arising out of, the
Commitments, this Agreement, any of the other Loan Documents or any documents
contemplated by or referred to herein or therein or the transactions
contemplated hereby or thereby or any action taken or omitted by the
Administrative Agent under or in connection with any of the foregoing; provided
that no Lender shall be liable for the payment of any portion of such
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements resulting solely from the Administrative
Agent's gross negligence or willful misconduct. The agreements in this Section
shall survive the payment of the Loans and all other amounts payable hereunder.
11.8 ADMINISTRATIVE AGENT IN ITS INDIVIDUAL CAPACITY. The
Administrative Agent and its Affiliates may make loans to, accept deposits from
and generally engage in any kind of business with Holdings and the Borrower and
the other Loan Parties as though the Administrative Agent were not the
Administrative Agent hereunder and under the other Loan Documents. With respect
to the Loans made by it, the Administrative Agent shall have the same rights and
powers under this Agreement and the other Loan Documents as any Lender and may
exercise the same as though it were not the Administrative Agent, and the terms
"Lender" and "Lenders" shall include the Administrative Agent in its individual
capacity.
11.9 SUCCESSOR ADMINISTRATIVE AGENT. The Administrative Agent may
resign as Administrative Agent upon 10 days' notice to the Lenders. If the
Administrative Agent shall resign as Administrative Agent under this Agreement
and the other Loan Documents, then the Required Lenders shall appoint from among
the Lenders a successor agent for the Lenders, which successor agent shall be
approved by Holdings and the Borrower, whereupon such successor agent shall
succeed to the rights, powers and duties of the Administrative Agent, and the
term "Administrative Agent" shall mean such successor agent effective upon such
appointment and approval, and the former Administrative Agent's rights, powers
and duties as Administrative Agent shall be terminated, without any other or
further act or deed on the part of such former Administrative Agent or any of
the parties to this Agreement or any holders of the Loans. After any retiring
Administrative Agent's resignation as Administrative Agent, the provisions of
this Section 10 shall inure to its benefit as to any actions taken or omitted to
be taken by it while it was Administrative Agent under this Agreement and the
other Loan Documents.
SECTION 12. MISCELLANEOUS
12.1 AMENDMENTS AND WAIVERS. Neither this Agreement nor any other
Loan Document, nor any terms hereof or thereof may be amended, supplemented or
modified except in accordance with the provisions of this Section 12.1. The
Required Lenders may, or, with the written consent of the Required Lenders, the
Administrative Agent may, from time to time, (a)
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enter into with Holdings and, from and after the effectiveness of the
Assumption, the Borrower, written amendments, supplements or modifications
hereto and to the other Loan Documents for the purpose of adding any provisions
to this Agreement or the other Loan Documents or changing in any manner the
rights of the Lenders or of the Borrower hereunder or thereunder or (b) waive,
on such terms and conditions as the Required Lenders or the Administrative
Agent, as the case may be, may specify in such instrument, any of the
requirements of this Agreement or the other Loan Documents or any Default or
Event of Default and its consequences; provided, however, that no such waiver
and no such amendment, supplement or modification shall (i) reduce the amount or
extend the scheduled date of maturity of any Loan or of any installment thereof,
or reduce the stated rate of any interest or fee payable hereunder or extend the
scheduled date of any payment thereof or increase the aggregate amount or extend
the expiration date of any Lender's Commitments, in each case without the
consent of each Lender affected thereby, or (ii) amend, modify or waive any
provision of this Section 12.1 or reduce the percentage specified in the
definition of Required Lenders or Majority Lenders, or consent to the assignment
or transfer by Holdings or the Borrower of any of its rights and obligations
under this Agreement and the other Loan Documents or release all or
substantially all of the Collateral or release all or substantially all of the
Guarantors from their obligations under the Guarantees, in each case without the
written consent of each all of the Lenders, or (iii) amend, modify or waive any
provision of Section 10 without the written consent of the then Administrative
Agent. Any such waiver and any such amendment, supplement or modification shall
apply equally to each of the Lenders and shall be binding upon Holdings, the
Borrower, the Lenders, the Administrative Agent and all future holders of the
Loans. In the case of any waiver, Holdings, the Borrower, the Lenders and the
Administrative Agent shall be restored to their former positions and rights
hereunder and under the other Loan Documents, and any Default or Event of
Default waived shall be deemed to be cured and not continuing; but no such
waiver shall extend to any subsequent or other Default or Event of Default or
impair any right consequent thereon.
12.2 NOTICES. All notices, requests and demands to or upon the
respective parties hereto to be effective shall be in writing (including by
facsimile transmission) and, unless otherwise expressly provided herein, shall
be deemed to have been duly given or made (a) in the case of delivery by hand,
when delivered, (b) in the case of delivery by mail, three days after being
deposited in the mails, postage prepaid, or (c) in the case of delivery by
facsimile transmission, when sent and receipt has been electronically confirmed,
addressed as follows in the case of Holdings, the Borrower and the
Administrative Agent, and as set forth in Schedule I in the case of the other
parties hereto, or to such other address as may be hereafter notified by the
respective parties hereto:
Holdings: Primrose Holdings, Inc.
c/o Capital Partners, Inc.
One Pickwick Plaza, Suite 310
Greenwich, Connecticut 06830
Attention: Brian D. Fitzgerald
Telephone: (203) 625-0770
Fax: (203) 625 - 0423
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The Borrower: Primrose School Franchise Corporation
199 South Erwin Street
Cartersville, Georgia 30120
Attention: Jo Kirchner
Telephone: (770) 606-9600
Fax: (770) 606-0020
The Administrative Agent: Canadian Imperial Bank of Commerce
425 Lexington Avenue
New York, New York 10014
Attention: Mike Daven
Telephone: (212) 885-4721
Fax: (212) 885-4911
PROVIDED that any notice, request or demand to or upon the Administrative Agent
or the Lenders pursuant to Section 2.3, 3.3, 3.5, 5.2, 5.4 or 5.8(b) shall not
be effective until received.
12.3 NO WAIVER; CUMULATIVE REMEDIES. No failure to exercise and no
delay in exercising, on the part of the Administrative Agent or any Lender, any
right, remedy, power or privilege hereunder or under the other Loan Documents
shall operate as a waiver thereof; nor shall any single or partial exercise of
any right, remedy, power or privilege hereunder preclude any other or further
exercise thereof or the exercise of any other right, remedy, power or privilege.
The rights, remedies, powers and privileges herein provided are cumulative and
not exclusive of any rights, remedies, powers and privileges provided by law.
12.4 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All representations
and warranties made hereunder, in the other Loan Documents and in any document,
certificate or statement delivered pursuant hereto or in connection herewith
shall survive the execution and delivery of this Agreement and the making of the
Loans hereunder.
12.5 PAYMENT OF EXPENSES AND TAXES. Holdings and, from and after the
effectiveness of the Assumption, the Borrower, agrees, jointly and severally (a)
to pay or reimburse the Administrative Agent for all its out-of-pocket costs and
expenses incurred in connection with the development, preparation and execution
of, and any amendment, supplement or modification to, this Agreement and the
other Loan Documents and any other documents prepared in connection herewith or
therewith, and the consummation and administration of the transactions
contemplated hereby and thereby, including, without limitation, the reasonable
fees and disbursements of counsel to the Administrative Agent, (b) to pay or
reimburse each Lender and the Administrative Agent for all its costs and
expenses incurred in connection with the enforcement or preservation of any
rights under this Agreement, the other Loan Documents and any such other
documents, including, without limitation, the fees and disbursements of counsel
(including the allocated fees and expenses of in-house counsel) to each Lender
and of counsel to the Administrative Agent, (c) to pay, indemnify, and hold each
Lender and the Administrative Agent harmless from, any and all recording and
filing fees and any and all liabilities with respect to, or resulting from any
delay in paying, stamp, excise and other taxes, if any, which may be payable or
determined to be payable in connection with the execution and delivery of, or
consummation or administration of any of the transactions contemplated by, or
any amendment,
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supplement or modification of, or any waiver or consent under or in respect of,
this Agreement, the other Loan Documents and any such other documents, and (d)
to pay, indemnify, and hold each Lender and the Administrative Agent harmless
from and against any and all other liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements of any
kind or nature whatsoever with respect to the execution, delivery, enforcement,
performance and administration of this Agreement, the other Loan Documents , the
Acquisition Documents or the use of the proceeds of the Loans in connection with
the Acquisition and the Refinancing and any such other documents, including,
without limitation, any of the foregoing relating to the violation of,
noncompliance with or liability under, any Environmental Law applicable to the
operations of the Borrower, any of its Subsidiaries, the Parent or any of the
Properties (all the foregoing in this clause (d), collectively, the "indemnified
liabilities"), provided, that neither Holdings nor the Borrower shall have any
obligation hereunder to the Administrative Agent or any Lender with respect to
indemnified liabilities arising from (i) the gross negligence or willful
misconduct of the Administrative Agent or any such Lender or (ii) legal
proceedings commenced against the Administrative Agent or any such Lender by any
security holder or creditor thereof arising out of and based upon rights
afforded any such security holder or creditor solely in its capacity as such.
The agreements in this Section shall survive repayment of the Loans and all
other amounts payable hereunder.
12.6 SUCCESSORS AND ASSIGNS; PARTICIPATIONS AND ASSIGNMENTS.
(a) This Agreement shall be binding upon and inure to the benefit of
Holdings, the Borrower, the Lenders, the Administrative Agent and their
respective successors and assigns, except that neither Holdings nor the Borrower
may assign or transfer any of its rights or obligations under this Agreement
without the prior written consent of each Lender.
(b) Any Lender may, in the ordinary course of its commercial banking
business and in accordance with applicable law, at any time sell to one or more
banks or other entities ("PARTICIPANTS") participating interests in any Loan
owing to such Lender, any Commitment of such Lender or any other interest of
such Lender hereunder and under the other Loan Documents. In the event of any
such sale by a Lender of a participating interest to a Participant, such
Lender's obligations under this Agreement to the other parties to this Agreement
shall remain unchanged, such Lender shall remain solely responsible for the
performance thereof, such Lender shall remain the holder of any such Loan for
all purposes under this Agreement and the other Loan Documents, and Holdings,
the Borrower and the Administrative Agent shall continue to deal solely and
directly with such Lender in connection with such Lender's rights and
obligations under this Agreement and the other Loan Documents. Holdings and the
Borrower agree that if amounts outstanding under this Agreement are due or
unpaid, or shall have been declared or shall have become due and payable upon
the occurrence of an Event of Default, each Participant shall, to the maximum
extent permitted by applicable law, be deemed to have the right of setoff in
respect of its participating interest in amounts owing under this Agreement to
the same extent as if the amount of its participating interest were owing
directly to it as a Lender under this Agreement, PROVIDED that, in purchasing
such participating interest, such Participant shall be deemed to have agreed to
share with the Lenders the proceeds thereof as provided in Section 12.7(a) as
fully as if it were a Lender hereunder. Holdings and the Borrower also agree
that each Participant shall be entitled to the benefits of Sections 5.10, 5.11,
and 5.12 with respect to its participation in the Commitments and the Loans
outstanding from
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time to time as if it was a Lender; PROVIDED that, in the case of Section 5.11,
such Participant shall have complied with the requirements of said Section and
PROVIDED, FURTHER, that no Participant shall be entitled to receive any greater
amount pursuant to any such Section than the transferor Lender would have been
entitled to receive in respect of the amount of the participation transferred by
such transferor Lender to such Participant had no such transfer occurred.
(c) Any Lender may, in the ordinary course of its commercial banking
business and in accordance with applicable law, at any time and from time to
time assign to any Lender or any affiliate thereof or, with the consent of
Holdings or the Borrower, so long as no Default or Event of Default has occurred
and is continuing, and the Administrative Agent (which in each case shall not be
unreasonably withheld), to an additional bank or financial institution (an
"ASSIGNEE") all or any part of its rights and obligations under this Agreement
and the other Loan Documents pursuant to an Assignment and Acceptance,
substantially in the form of Exhibit Q, with appropriate completions (an
"ASSIGNMENT AND ACCEPTANCE"), executed by such Assignee, such assigning Lender
(and, in the case of an Assignee that is not then a Lender or an affiliate
thereof, by Holdings or the Borrower (if applicable) and the Administrative
Agent) and delivered to the Administrative Agent for its acceptance and
recording in the Register, PROVIDED that, in the case of any such assignment to
an additional bank or financial institution, the sum of the aggregate principal
amount of the Loans , the aggregate amount of the L/C Obligations and the
aggregate amount of the unused Available Commitments being assigned are not less
than $1,000,000 (or such lesser amount as may be agreed to by Holdings or the
Borrower and the Administrative Agent). Upon such execution, delivery,
acceptance and recording, from and after the effective date determined pursuant
to such Assignment and Acceptance, (x) the Assignee thereunder shall be a party
hereto and, to the extent provided in such Assignment and Acceptance, have the
rights and obligations of a Lender hereunder with Commitments as set forth
therein, and (y) the assigning Lender thereunder shall, to the extent provided
in such Assignment and Acceptance, be released from its obligations under this
Agreement (and, in the case of an Assignment and Acceptance covering all or the
remaining portion of an assigning Lender's rights and obligations under this
Agreement, such assigning Lender shall cease to be a party hereto).
Notwithstanding any provision of this paragraph (c) and paragraph (e) of this
Section, the consent of Holdings or the Borrower shall not be required, and,
unless requested by the Assignee and/or the assigning Lender, new Notes shall
not be required to be executed and delivered by the Borrower, for any assignment
which occurs at any time when any of the events described in Section 10(f) shall
have occurred and be continuing.
(d) The Administrative Agent, on behalf of the Borrower, shall
maintain at the address of the Administrative Agent referred to in Section 12.2
a copy of each Assignment and Acceptance delivered to it and a register (the
"REGISTER") for the recordation of the names and addresses of the Lenders and
the Commitments of, and principal amounts of the Loans owing to, each Lender
from time to time. The entries in the Register shall be conclusive, in the
absence of manifest error, and Holdings, the Borrower, the Administrative Agent
and the Lenders may (and, in the case of any Loan or other obligation hereunder
not evidenced by a Note, shall) treat each Person whose name is recorded in the
Register as the owner of a Loan or other obligation hereunder as the owner
thereof for all purposes of this Agreement and the other Loan Documents,
notwithstanding any notice to the contrary. Any assignment of any Loan or other
obligation hereunder not evidenced by a Note shall be effective only upon
appropriate entries
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with respect thereto being made in the Register. The Register shall be available
for inspection by Holdings, the Borrower or any Lender at any reasonable time
and from time to time upon reasonable prior notice.
(e) Upon its receipt of an Assignment and Acceptance executed by an
assigning Lender and an Assignee (and, in the case of an Assignee that is not
then a Lender or an affiliate thereof, by Holdings or the Borrower (if
applicable) and the Administrative Agent) together with payment to the
Administrative Agent of a registration and processing fee of $3,500, the
Administrative Agent shall (i) promptly accept such Assignment and Acceptance
and (ii) on the effective date determined pursuant thereto record the
information contained therein in the Register and give notice of such acceptance
and recordation to the Lenders and the Borrower.
(f) Holdings and the Borrower authorize each Lender to disclose to
any Participant or Assignee (each, a "TRANSFEREE") and any prospective
Transferee, subject to the provisions of Section 12.15, any and all financial
information in such Lender's possession concerning Holdings, the Borrower, their
Subsidiaries and their Affiliates which has been delivered to such Lender by or
on behalf of Holdings or the Borrower pursuant to this Agreement or which has
been delivered to such Lender by or on behalf of the Borrower in connection with
such Lender's credit evaluation of Holdings and the Borrower and their
Affiliates prior to becoming a party to this Agreement.
(g) For avoidance of doubt, the parties to this Agreement
acknowledge that the provisions of this Section concerning assignments of Loans
and Notes relate only to absolute assignments and that such provisions do not
prohibit assignments creating security interests, including, without limitation,
any pledge or assignment by a Lender of any Loan or Note to any Federal Reserve
Bank in accordance with applicable law.
12.7 ADJUSTMENTS; SET-OFF.
(a) If any Lender (a "BENEFITED LENDER") shall at any time receive
any payment of all or part of its Loans, or interest thereon, or receive any
collateral in respect thereof (whether voluntarily or involuntarily, by set-off,
pursuant to events or proceedings of the nature referred to in Section 10(f), or
otherwise), in a greater proportion than any such payment to or collateral
received by any other Lender, if any, in respect of such other Lender's Loans,
or interest thereon, such benefited Lender shall purchase for cash from the
other Lenders a participating interest in such portion of each such other
Lender's Loan, or shall provide such other Lenders with the benefits of any such
collateral, or the proceeds thereof, as shall be necessary to cause such
benefited Lender to share the excess payment or benefits of such collateral or
proceeds ratably with each of the Lenders; PROVIDED, HOWEVER, that if all or any
portion of such excess payment or benefits is thereafter recovered from such
benefited Lender, such purchase shall be rescinded, and the purchase price and
benefits returned, to the extent of such recovery, but without interest.
Holdings and the Borrower agree that each Lender so purchasing a portion of
another Lender's Loan may exercise all rights of payment (including, without
limitation, rights of set-off) with respect to such portion as fully as if such
Lender were the direct holder of such portion.
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(b) In addition to any rights and remedies of the Lenders provided
by law, each Lender shall have the right, without prior notice to Holdings or
the Borrower, any such notice being expressly waived by Holdings and the
Borrower to the extent permitted by applicable law, upon any amount becoming due
and payable by Holdings or the Borrower hereunder (whether at the stated
maturity, by acceleration or otherwise) to set-off and appropriate and apply
against such amount any and all deposits (general or special, time or demand,
provisional or final), in any currency, and any other credits, indebtedness or
claims, in any currency, in each case whether direct or indirect, absolute or
contingent, matured or unmatured, at any time held or owing by such Lender or
any branch or agency thereof to or for the credit or the account of Holdings or
the Borrower. Each Lender agrees promptly to notify Holdings or the Borrower and
the Administrative Agent after any such set-off and application made by such
Lender, PROVIDED that the failure to give such notice shall not affect the
validity of such set-off and application.
12.8 COUNTERPARTS. This Agreement may be executed by one or more of
the parties to this Agreement on any number of separate counterparts (including
by facsimile transmission of signature pages hereto), and all of said
counterparts taken together shall be deemed to constitute one and the same
instrument. A set of the copies of this Agreement signed by all the parties
shall be lodged with the Borrower and the Administrative Agent.
12.9 SEVERABILITY. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
12.10 INTEGRATION. This Agreement and the other Loan Documents
represent the agreement of Holdings, the Borrower, the Administrative Agent and
the Lenders with respect to the subject matter hereof, and there are no
promises, undertakings, representations or warranties by the Administrative
Agent or any Lender relative to subject matter hereof not expressly set forth or
referred to herein or in the other Loan Documents.
12.11 GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS
OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN
ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
12.12 SUBMISSION TO JURISDICTION; WAIVERS. Holdings and the Borrower
each hereby irrevocably and unconditionally:
(a) submits for itself and its property in any legal action or
proceeding relating to this Agreement and the other Loan Documents to which it
is a party, or for recognition and enforcement of any judgment in respect
thereof, to the non-exclusive general jurisdiction of the courts of the State of
New York, the courts of the United States of America for the Southern District
of New York, and appellate courts from any thereof;
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(b) consents that any such action or proceeding may be brought in
such courts and waives any objection that it may now or hereafter have to the
venue of any such action or proceeding in any such court or that such action or
proceeding was brought in an inconvenient court and agrees not to plead or claim
the same;
(c) agrees that service of process in any such action or proceeding
may be effected by mailing a copy thereof by registered or certified mail (or
any substantially similar form of mail), postage prepaid, to Holdings or the
Borrower at its address set forth in Section 12.2 or at such other address of
which the Administrative Agent shall have been notified pursuant thereto;
(d) agrees that nothing herein shall affect the right to effect
service of process in any other manner permitted by law or shall limit the right
to sue in any other jurisdiction; and
(e) waives, to the maximum extent not prohibited by law, any right
it may have to claim or recover in any legal action or proceeding referred to in
this Section any special, exemplary, punitive or consequential damages.
12.13 ACKNOWLEDGEMENTS. Holdings and the Borrower each hereby
acknowledges that:
(a) it has been advised by counsel in the negotiation, execution and
delivery of this Agreement and the other Loan Documents;
(b) neither the Administrative Agent nor any Lender has any
fiduciary relationship with or duty to the Borrower arising out of or in
connection with this Agreement or any of the other Loan Documents, and the
relationship between Holdings the Borrower and the other Loan Parties, on one
hand, and Administrative Agent and Lenders, on the other hand, in connection
herewith or therewith is solely that of debtor and creditor; and
(c) no joint venture is created hereby or by the other Loan
Documents or otherwise exists by virtue of the transactions contemplated hereby
among the Lenders or among Holdings, the Borrower and the Lenders.
12.14 WAIVERS OF JURY TRIAL. HOLDINGS, THE BORROWER, THE
ADMINISTRATIVE AGENT AND THE LENDERS HEREBY IRREVOCABLY AND UNCONDITIONALLY
WAIVE TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT
OR ANY OTHER LOAN DOCUMENT AND FOR ANY COUNTERCLAIM THEREIN.
12.15 CONFIDENTIALITY. Each Lender agrees to keep confidential any
written or oral information (a) provided to it by or on behalf of Holdings, the
Borrower or any of the other Subsidiaries of Holdings pursuant to or in
connection with this Agreement or (b) obtained by such Lender based on a review
of the books and records of Holdings, the Borrower or any of the other
Subsidiaries of Holdings; provided that nothing herein shall prevent any Lender
from disclosing any such information (i) to the Administrative Agent or any
other Lender, (ii) to any Transferee which agrees to comply with the provisions
of this Section 12.15, (iii) to those employees, directors, agents, attorneys,
accountants and other professional advisors who have
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been advised of the confidential nature of such information, (iv) upon the
request or demand of any examiner or other Governmental Authority having
jurisdiction over such Lender, (v) in response to any order of any court or
other Governmental Authority or as may otherwise be required pursuant to any
Requirement of Law, (vi) which has been publicly disclosed other than in breach
of this Agreement, or (vii) in connection with the exercise of any remedy
hereunder.
[Signature Pages Follow]
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IN WITNESS WHEREOF, the parties hereto have caused this Credit
Agreement to be duly executed and delivered by their proper and duly authorized
officers as of the day and year first above written.
PRIMROSE HOLDINGS, INC.
By: /s/ CALVIN NEIDER
Name: Calvin Neider
Title: President
CANADIAN IMPERIAL BANK
OF COMMERCE
as Administrative Agent
By: /s/ MICHAEL P. DAVEN
Name: Michael P. Daven
Title: As Agent
CIBC, INC., as a Lender
By: /s/ MICHAEL P. DAVEN
Name: Michael P. Daven
Title: As Agent
Credit Agreement: Signature Page
<PAGE>
SCHEDULE 1.0
LENDERS, COMMITMENTS AND APPLICABLE LENDING OFFICES
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Tranche A Revolving Credit
Lender and Lending Offices Term Loan Loan
- --------------------------------------------------------------------------------
Canadian Imperial Bank of Commerce, Inc. $13,150,000.00 $2,500,000.00
Applicable Lending Offices:
Base Rate Loans:
425 Lexington Avenue
New York, New York 10017
Attention:
Telephone: 212-885-
Telecopy: 212-885-4998
Eurodollar Loans:
425 Lexington Avenue
New York, New York 10017
Attention:
Telephone: 212-885-
Telecopy: 212-885-4998
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Total: $13,150,000.00 $2,500,000.00
============== =============
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SCHEDULE 2.2
SCHEDULED TERM LOAN REPAYMENTS
The Term Loans shall be repaid in 24 quarterly installments of
principal, payable on the last day of each March, June, September and December,
commencing June 30, 1999, in the amounts set forth below opposite such
installment (as the same may be reduced in accordance with the terms of this
Agreement):
INSTALLMENT AMOUNT
------------------ -----------
June 30, 1999 $437,500.00
September 30, 1999 $437,500.00
December 31, 1999 $437,500.00
March 31, 2000 $437,500.00
June 30, 2000 $500,000.00
September 30, 2000 $500,000.00
December 31, 2000 $500,000.00
March 31, 2001 $500,000.00
June 30, 2001 $562,500.00
September 30, 2001 $562,500.00
December 31, 2001 $562,500.00
March 31, 2002 $562,500.00
June 30, 2002 $625,000.00
September 30, 2002 $625,000.00
December 31, 2002 $625,000.00
March 31, 2003 $625,000.00
June 30, 2003 $687,500.00
September 30, 2003 $687,500.00
December 31, 2003 $687,500.00
March 31, 2004 $687,500.00
June 30, 2004 $475,000.00
September 30, 2004 $475,000.00
December 31, 2004 $475,000.00
March 31, 2005 $475,000.00
EXHIBIT 3
WARRANT AGREEMENT
WARRANT AGREEMENT (as amended, supplemented or otherwise modified
from time to time, the "Agreement"), dated as of April 6, 1999, by and between
Security Capital Corporation, a Delaware corporation (the "COMPANY" or "SCC"),
and CIBC Capital Corporation ("CIBC CAPITAL").
WITNESSETH:
WHEREAS, pursuant to the Credit Agreement, dated as of April 6,
1999, among Primrose School Franchising Company (the "BORROWER"), Primrose
Holdings, Inc. ("HOLDINGS"), the lenders parties thereto (the "LENDERS"), and
Canadian Imperial Bank of Commerce ("CIBC"), as administrative agent, (as
amended, supplemented or otherwise modified from time to time, the "CREDIT
AGREEMENT"), the Lenders have agreed to make loans to, and CIBC, as the issuing
lender under letters of credit, has agreed to issue letters of credit for the
account of, Holdings and the Borrower;
WHEREAS, to induce CIBC to enter into the Credit Agreement and to
act as administrative agent for the Lenders thereunder, the Company has agreed
to issue to CIBC Capital, an affiliate of CIBC, or its designees, in exchange
for the Primrose Warrants (as hereinafter defined), warrants to purchase up to a
number of shares (the "SHARES") of Class A Common Stock, par value $0.01 per
share, of the Company (the "STOCK"), having a market value, as determined as set
forth herein, equivalent to the Value of the Primrose Interests (as each of such
terms is defined herein) at the time of exercise, at an initial exercise price
of $0.01 per Share (the "WARRANT").
NOW, THEREFORE, in consideration of the premises and the agreements
herein set forth, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
1. GRANT. The Company hereby agrees to grant to CIBC Capital and/or
its assigns, at any time (the date of any such grant being referred to herein as
the "EXCHANGE DATE") from April 6, 2004 to the expiration of the Warrant
Exercise Term (as defined in the Primrose Warrant Agreement), warrants for the
right to purchase, at any time from the Exchange Date until 5:00 P.M., New York
City time, on April 6, 2009 (the "WARRANT EXERCISE TERM"), a number of Shares of
Stock equal to that number of Shares, the product of which number of Shares and
the Current Market Price per share of which is equivalent to the Value of the
Primrose Stock as of the Exchange Date, subject to adjustment as hereinafter
provided, at an initial exercise price of $0.01 per Share (subject to adjustment
as provided in Section 7 hereof). Such grant shall be made to CIBC Capital
and/or its assigns (each, an "EXCHANGING PERSON") upon (a) delivery by such
Exchanging Person of a written notice to the Company making demand thereof and
providing that such notice is accompanied by the Primrose Warrant Certificates
held by such Exchanging Person, and (b) the delivery to the Company by such
Exchanging Person of the Primrose Warrant Certificates held by such Person for
cancellation. The Company shall, upon such delivery of such
<PAGE>
Primrose Warrant Certificates and the issuance of the Warrant Certificates to
such Exchanging Person hereunder, return such Primrose Warrant Certificates for
cancellation.
2. WARRANT CERTIFICATE. The Warrant shall be evidenced by the form
of warrant certificate (the "WARRANT CERTIFICATE") to be delivered on the
Exchange Date pursuant to this Agreement in the form set forth as Exhibit A
attached hereto and made a part hereof, with such appropriate insertions,
omissions, substitutions and other variations as required or permitted by this
Agreement.
3. CERTAIN DEFINITIONS. As used in this Agreement, the following
terms will have the following meanings, unless the context otherwise requires:
"Primrose": means Primrose Holdings, Inc.
"Primrose Liquidity Event": means a "Liquidity Event" as defined in
the Primrose Warrant Agreement.
"Primrose Shares": means the "Shares", as defined in the Primrose
Warrant Agreement.
"Primrose Warrant": means that warrant issued pursuant to the
Primrose Warrant Agreement.
"Primrose Warrant Agreement": means that Warrant Agreement, dated as
of April 6, 1999, between Primrose Holdings, Inc. and CIBC Capital Corporation,
as the same may be amended, supplemented or otherwise modified from time to
time.
"Primrose Warrant Certificates": means the warrant certificates
evidencing the Primrose Warrant issued from time to time under the Primrose
Warrant Agreement.
"Value": with respect to the Primrose Shares at any time, means the
purchase price for such Primrose Shares determined as provided in Section
3(b)(i) of the Primrose Warrant Agreement.
"Zero Coupon Certificate of Designations": as defined in the Credit
Agreement.
"Zero Coupon Convertible Preferred Stock": as defined in the Credit
Agreement.
4. EXERCISE OF WARRANT; PUT AND CALL.
(a) The Warrant is exercisable at a price of $0.01 per Share (the
"EXERCISE PRICE"), payable in cash or by check to the order of the Company, or
any combination of cash or check, subject to adjustment as provided in Section 7
hereof. Upon surrender of the Warrant Certificate duly executed together with
payment of the Exercise Price for the Shares purchased, at the Company's
principal offices located as of the date hereof at 1111 North Loop West, Suite
400, Houston, Texas 77008, the registered holder of the Warrant Certificate (the
"HOLDER") shall be registered on the books and records of the Company as the
owner of the Shares so exchanged or purchased and, if such Shares are evidenced
by certificates, shall be entitled to receive a
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certificate or certificates for the Shares so exchanged or purchased. The
purchase and exchange rights represented by the Warrant Certificate are
exercisable at the option of the Holder hereof, in whole or in part (but not as
to fractional units of the Stock).
(b) (i) Any Holder of the Warrant shall have the right, at any time
commencing on the earlier of April 6, 2004 and the date of a Primrose Liquidity
Event and ending on and including the last day of the Warrant Exercise Term,
upon thirty (30) days' written notice to the Company, to require the Company to
repurchase, and the Company hereby agrees to repurchase, the Warrant owned by
such Holder at any time during the Warrant Exercise Term at a purchase price
equal to the Value of the Primrose Shares.
(ii) The Company shall have the right, at any time commencing on the
earlier of April 6, 2004 and the date of a Primrose Liquidity Event and ending
on and including the last day of the Warrant Exercise Term, upon thirty (30)
days' written notice to the Holder of the Warrant, to repurchase, and the Holder
of the Warrant hereby agrees to sell, the Warrant owned by such Holder at a
purchase price equal to 110% of the purchase price at which the Holder would be
entitled to require the Company to repurchase such Warrant at such time pursuant
to clause (i) of this Section 4(b).
(iii) In the event of any dispute concerning the price payable under
this Section 3(b), the matter shall be referred to a firm of independent public
accountants of nationally recognized standing, selected by the Majority Holders
and reasonably acceptable by the Company, for resolution, and the determinations
of such firm as to all matters of fact and computation shall be binding on the
parties hereto absent manifest error. The fees and expenses of the independent
public accountants referred to in above shall be for the account of the Company.
5. ISSUANCE OF CERTIFICATES.
(a) Upon the exercise or exchange of the Warrant, the registration
of the Holder thereof as the owner of the Shares on the books and records of the
Company and, if applicable, the issuance of certificates for the Shares, shall
be made forthwith (and in any event within five Business Days (as defined in the
Credit Agreement) thereafter) without charge to the Holder thereof including,
without limitation, any tax which may be payable in respect of the issuance
thereof, and such certificates shall (subject to the provisions of Section 6
hereof) be issued in the name of, or in such names as may be directed by, the
Holder thereof; provided, however, that the Company shall not be required to pay
any tax which may be payable in respect of any transfer involved in such
registration and the issuance and delivery of any such certificates in a name
other than that of the Holder and the Company shall not be required to issue or
deliver such certificates unless or until the person or persons requesting the
issuance thereof shall have paid to the Company the amount of such tax or shall
have established to the satisfaction of the Company that such tax has been paid.
(b) The Warrant Certificate and the certificates representing the
Shares shall be executed on behalf of the Company by the manual or facsimile
signature of the present or any future President or Vice President of the
Company, attested to by the manual or facsimile signature of the present or any
future Secretary or Assistant Secretary of the Company. The
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Warrant Certificate shall be dated as of the date of execution by the Company
upon initial issuance, division, exchange, substitution or transfer.
(c) The Warrant Certificate and, upon exercise of the Warrant, in
part or in whole, certificates representing the Shares shall bear a legend
substantially similar to the following:
"The Shares represented by this certificate have not been
registered under the Securities Act of 1933, as amended (the "Act"),
and may not be offered or sold except (i) pursuant to an effective
registration statement under the Act, (ii) to the extent applicable,
pursuant to Rule 144 under the Act (or any similar rule under the
Act relating to the disposition of securities), or (iii) upon the
delivery by the holder to the Company of an opinion of counsel,
reasonably satisfactory to counsel for the Company, stating that an
exemption from registration under the Act is available.
The shares represented by this certificate are subject to
certain restrictions on transfers set forth in Article FOURTH (C) of
the Corporation's Certificate of Incorporation, the full text of
which is printed on the reverse side of this certificate. ANY DIRECT
OR INDIRECT ATTEMPT TO ACQUIRE CLASS A COMMON STOCK OF THE
CORPORATION OR CONTINGENT OR NONCONTINGENT RIGHTS TO ACQUIRE SUCH
STOCK IN VIOLATION OF SUCH RESTRICTIONS SHALL BE NULL AND VOID AND
MAY RESULT IN FINANCIAL LOSS TO THE PERSON OR ENTITY ATTEMPTING SUCH
ACQUISITION."
6. RESTRICTION ON TRANSFER OF WARRANT. The Holder of the Warrant
Certificate, by its acceptance thereof, covenants and agrees that the Warrant is
being acquired as an investment and not with a view to the distribution thereof.
The Warrant may not be sold, transferred, or assigned, except (i) pursuant to an
effective registration statement under the Securities Act of 1933, as amended
(the "ACT"), (ii) to the extent applicable, pursuant to Rule 144 under the Act
(or any similar rule under the Act relating to the disposition of securities),
or (iii) upon the delivery by the Holder to the Company of an opinion of
counsel, reasonably satisfactory to counsel for the Company, stating that an
exemption from registration under the Act is available.
7. REGISTRATION RIGHTS.
(a) REGISTRATION UNDER THE SECURITIES ACT OF 1933. The Warrant and
the Shares have not been registered for purposes of public distribution under
the Act.
(b) REGISTRABLE SECURITIES. As used herein, the term "Registrable
Security" means the Shares and any share of Stock or other securities issued in
any Company distribution or similar transaction relating to Stock; provided,
however, that with respect to any particular Registrable Security, such security
shall cease to be a Registrable Security when, as of the date of determination,
(i) it has been effectively registered under the Act and disposed of pursuant
thereto, (ii) registration under the Act is no longer required for the immediate
public distribution
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of such security or (iii) it has ceased to be outstanding. In the event of any
merger, reorganization, consolidation, recapitalization or other change in
corporate structure affecting the Interest, such adjustment shall be made in the
definition of "Registrable Security" as is appropriate in order to prevent any
dilution or enlargement of the rights granted pursuant to this Section 7
pursuant to the provisions of Section 8 hereof.
(c) PIGGYBACK REGISTRATION.
(i) If, at any time during the ten years following the date of this
Agreement, the Company proposes to register its securities or any such
securities of the Company held by its security holders by filing a
registration statement, or any post-effective amendment to a registration
statement filed by the Company, pursuant to the Act (in any such case,
other than pursuant to Form S-4 or S-8 of the Act or any successor form)
(a "REGISTRATION STATEMENT"), it will give written notice of its intention
to do so by registered mail ("NOTICE"), at least 30 business days prior to
the filing of each such Registration Statement, to all holders of the
Registrable Securities. Upon the written request of such a holder (a
"REQUESTING HOLDER"), made within 15 business days after receipt of the
Notice, that the Company include the Requesting Holder's Registrable
Securities in the proposed Registration Statement (such request to specify
the number and classes of Registrable Securities to be so included in an
amount equal to no less than the Requesting Holder's total number of
Registrable Securities), the Company shall, as to each such Requesting
Holder, use its best efforts to effect the registration under the Act of
the Registrable Securities which it has been so requested to register (a
"PIGGYBACK REGISTRATION"), at the Company's sole cost and expense;
provided, however, that if, in the written opinion of the Company's
managing underwriter, if any, for such offering, the inclusion of all or a
portion of the Registrable Securities requested to be registered, when
added to the securities being registered by the Company or the selling
security holders, will exceed the maximum amount of the Company's
securities which can be marketed (1) at a price reasonably related to
their then current market value, or (2) without materially adversely
affecting the entire offering, then the Company may exclude from such
offering all or a portion of the Registrable Securities which it has been
requested to register.
(ii) If securities are proposed to be offered for sale pursuant to
such Registration Statement by other selling security holders of the
Company and the total number of securities to be offered by the Holder and
such other selling security holders is required to be reduced pursuant to
a request from the managing underwriter (which request shall be made only
for the reasons and in the manner set forth above), the aggregate number
of Registrable Securities to be offered by the Holder pursuant to such
Registration Statement shall equal the number which bears the same ratio
to the maximum number of securities that the managing underwriter believes
may be included for all the selling security holders (including the
Holder) as the original number of Registrable Securities proposed to be
sold by the Holder bears to the total original number of securities
proposed to be offered by the Holder and the other selling security
holders.
(iii) Notwithstanding the provisions of this Section 7(c), the
Company shall have the right at any time after it shall have given written
notice pursuant to this Section
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7(c) (irrespective of whether any written request for inclusion of such
securities shall have already been made) to elect not to file any such
proposed Registration Statement, or to withdraw the same after the filing
but prior to the effective date thereof. Any Requesting Holder shall have
the right to withdraw its request for inclusion of its Registrable
Securities in any Registration Statement pursuant to this Section 7(c) by
giving written notice to the Company of its request to withdraw.
(d) DEMAND REGISTRATION.
(i) At any time from the Exchange Date to last day of the Warrant
Exercise Term, any "Majority Holder" (as such term is defined in Section
7(d)(iii) below) of the Registrable Securities shall have the right (which
right is in addition to the piggyback registration rights provided for
under Section 7(c) hereof), exercisable by written notice to the Company
(the "DEMAND REGISTRATION REQUEST"), to have the Company prepare and file
with the Securities and Exchange Commission (the "COMMISSION"), on one
occasion, at the sole cost and expense of the Company, a Registration
Statement and such other documents, including a prospectus, as may be
necessary (in the opinion of both counsel for the Company and counsel for
such Majority Holder), in order to comply with the provisions of the Act,
so as to permit a public offering and sale of the Registrable Securities
by the holders thereof, for a period of 24 consecutive months.
(ii) The Company covenants and agrees to give written notice of any
Demand Registration Request to all holders of the Registrable Securities
within ten days from the date of the Company's receipt of any such Demand
Registration Request. After receiving notice from the Company as provided
in this Section 7(d)(ii), holders of Registrable Securities may request
the Company to include their Registrable Securities in the Registration
Statement to be filed pursuant to Section 7(d)(i) hereof by notifying the
Company of their decision to include such securities within ten days of
their receipt of the Company's notice.
(iii) The term "Majority Holder" as used herein shall mean any
holder or any combination of holders of Registrable Securities, if the
Holder's aggregate number of Shares (including Shares already issued and
Shares issuable pursuant to the exercise of outstanding Warrants) of
Registrable Securities constitute a majority of the aggregate number of
Shares (including Shares already issued and Shares issuable pursuant to
the exercise of outstanding Warrants) of the Registrable Securities.
(iv) A registration under this Section 7(d) will not be deemed to
have been effected unless the Registration Statement has been declared
effective by the Commission and the Company has complied in all material
respects with its obligations under this Agreement with respect thereto;
provided that if, after it has become effective, the offering of the
Registrable Securities pursuant to such Registration Statement is or
becomes the subject of any stop order, injunction or other order or
requirement of the Commission or any other governmental or administrative
agency, or if any court prevents or otherwise limits the sale of the
Registrable Securities pursuant to the registration, such registration
will be deemed not to have been effected as to the Shares subject to such
stop order, injunction, other order, requirement or limitation. If (i) a
registration requested
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<PAGE>
pursuant to this Section 7(d) is deemed not to have been effected or (ii)
the Registration Statement requested pursuant to this Section 7(d) does
not remain effective for a period of at least 24 consecutive months beyond
the effective date thereof, then the Company shall continue to be
obligated to effect such registration pursuant to this Section 7(d).
(e) REGISTRATION PROCEDURES. Whenever the holders of Registrable
Securities have requested that any Registrable Securities be registered pursuant
to Section 7(d) hereof (each, a "SELLING HOLDER"), the Company will use its best
efforts to effect the registration and the sale of such Registrable Securities
in accordance with the intended method of disposition thereof as quickly as
practicable, and in connection with any such request:
(i) The Company will as expeditiously as possible prepare and file
with the Commission a Registration Statement on any form for which the
Company then qualifies or which counsel for the Company shall deem
appropriate and which form shall be available for the sale of the
Registrable Securities to be registered thereunder in accordance with the
intended method of distribution thereof, and use its best efforts to cause
such filed Registration Statement to become and remain effective for a
period of not less than 24 consecutive months.
(ii) The Company will as expeditiously as possible prepare and file
with the Commission such amendments and supplements to such Registration
Statement and the prospectus used in connection therewith as may be
necessary to keep such Registration Statement effective for a period of
not less than 24 consecutive months, and comply with the provisions of the
Act with respect to the disposition of all securities covered by such
Registration Statement during such period in accordance with the intended
method of disposition of each holder of Registrable Securities selling
Registrable Securities thereunder.
(iii) The Company will, prior to filing a Registration Statement or
prospectus or any amendment or supplement thereto, furnish to (A) the
Holder and (B) the counsel representing the Holder, copies of such
Registration Statement, each amendment or supplement thereto and any
prospectus included in such Registration Statement (including any
preliminary prospectus) as proposed to be filed, together with exhibits
thereto and documents incorporated by reference therein, which documents
will be subject to review and approval by the foregoing within five days
after delivery, and thereafter furnish to the Holder and counsel such
number of copies of such Registration Statement, each amendment and
supplement thereto (in each case including all exhibits thereto and
documents incorporated by reference therein), any prospectus included in
such Registration Statement (including any preliminary prospectus) and
such other documents or information as the Holder or counsel may
reasonably request in order to facilitate the disposition of the
Registrable Securities owned by the Holder.
(iv) After the filing of the Registration Statement, the Company
will promptly notify the Holder of Registrable Securities covered by such
Registration Statement of any stop order issued or threatened by the
Commission in connection therewith and take all reasonable actions
required to prevent the entry of such stop order or to remove it if
entered.
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(v) The Company will use its best efforts to (A) register or qualify
such Registrable Securities under the securities or blue sky laws of such
jurisdictions in the United States as any Selling Holder of such
Registrable Securities may reasonably (in light of such Selling Holder's
intended plan of distribution, if any) request, and (B) cause such
Registrable Securities to be registered with or approved by such other
governmental agencies or authorities in the United States as may be
necessary by virtue of the business and operations of the Company and do
any and all other acts and things that may be reasonably necessary or
advisable to enable each Selling Holder to consummate the disposition of
the Registrable Securities owned by such Selling Holder; provided that the
Company will not be required to (1) qualify generally to do business in
any jurisdiction where it would not otherwise be required to qualify but
for this paragraph (v), (2) subject itself to taxation in any such
jurisdiction, or (3) consent to general service of process in any such
jurisdiction.
(vi) The Company will immediately notify each Selling Holder of such
Registrable Securities, at any time when a prospectus relating thereto is
required to be delivered under the Act, (i) of the occurrence of any event
requiring the preparation of a supplement or amendment to such prospectus
so that, as thereafter delivered to the purchasers of such Registrable
Securities, such prospectus will not contain an untrue statement of a
material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, (ii) promptly
make available to each Selling Holder the number of copies of any such
supplement or amendment as each Selling Holder may reasonably request, and
(iii) of the period during which sales of the Registrable Securities
cannot be made.
(vii) The Company will enter into customary agreements and take such
other actions as are reasonably required in order to expedite or
facilitate the disposition of such Registrable Securities.
(viii) The Company will use its best efforts to cause all such
Registrable Securities (other than the Warrant) to be listed on each
exchange or market on which the Interest is then listed (if any), if the
listing of such Registrable Securities is then permitted under the rules
of such exchange or market and, without limiting the generality of the
foregoing and to the extent require under the rules of the relevant
exchange or over-the-counter market, to arrange for at least two market
makers to register as such with respect to such Registrable Securities
with the National Association of Securities Dealers, Inc. (the "NASD").
(ix) The Company will appoint a transfer agent and registrar for all
such Registrable Securities covered by such Registration Statement not
later than the effective date of such Registration Statement. The Company
may require each Selling Holder to promptly furnish in writing to the
Company such information regarding such Selling Holder's proposed
distribution of Registrable Securities as the Company may from time to
time reasonably request and such other information as may be legally
required in connection with such registration including, without
limitation, all such information as
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may be requested by the Commission or the NASD. The Company may exclude
from such registration any Selling Holder who fails to provide such
information.
(f) REGISTRATION EXPENSES. In connection with any Demand
Registration pursuant to Section 7(d) hereof and any Piggyback Registration
pursuant to Section 7(c) hereof, the Company shall pay the following
registration expenses incurred in connection with the registrations thereunder:
(i) all registration and filing fees, (ii) fees and expenses of compliance with
securities or blue sky laws (including fees and disbursements of counsel in
connection with blue sky qualifications of the Registrable Securities), (iii)
fees and expenses associated with filings to be made with the NASD (including
fees and disbursements of counsel in connection therewith), (iv) printing
expenses, (v) the Company's internal expenses (including, without limitation,
all salaries and expenses of its officers and employees performing legal or
accounting duties), (vi) the fees and expenses incurred in connection with the
listing of the Registrable Securities, (vii) fees and disbursements of counsel
for the Company and customary fees and expenses for independent public
accountants retained by the Company, (viii) the fees and expenses of any special
experts retained by the Company in connection with such registration, (ix)
reasonable fees and expenses of one firm of counsel for the Holder to be chosen
by the Holder and (x) any reasonable out-of-pocket expenses of the Holder. The
Company shall have no obligation to pay any underwriting fees, discounts or
commissions attributable to the sale of Registrable Securities, such costs to be
borne by the holder or holders making the request.
(g) INDEMNIFICATION AND CONTRIBUTION.
(i) The Company agrees to indemnify, defend and hold harmless any
holder of Registrable Securities to be sold pursuant to any Registration
Statement, any person deemed to be an underwriter under the Act and each
person, if any, who controls such holder or person deemed to be an
underwriter within the meaning of Section 15 of the Act or Section 20 of
the Exchange Act, each such holder or person deemed to be an underwriter's
agents, employees, officers and directors and the agents, employees,
officers and directors of any such controlling persons (collectively, the
"HOLDER INDEMNIFIED PARTIES") from and against any losses, claims,
damages, judgments, liabilities and expenses, joint or several (which
shall, for all purposes of this Agreement, include, but not be limited to,
all reasonable costs of defense, settlement, and investigation and all
attorneys' fees and expenses), to which such Holder indemnified party may
become subject (regardless of whether such Holder indemnified party is a
party to the litigation, if any) under the Act or otherwise, and will
reimburse, as incurred, such Holder indemnified party for any legal or
other expenses reasonably incurred in connection with settling,
investigating, defending against or appearing as a third party witness in
connection with any losses, claims, damages, judgments, liabilities and
expenses, insofar as such losses, claims, damages, judgments, liabilities
and expenses (or actions in respect thereof) (A) arise out of or are based
upon any untrue statement or alleged untrue statement of any material fact
contained in (1) a Registration Statement or any other registration
statement filed by the Company under the Act, any preliminary prospectus
or prospectus included therein, or any amendment or supplement thereto,
required to be filed or furnished by reason of this Agreement, or (2) any
blue sky application or other document executed by the Company
specifically for that purpose or based upon written information furnished
by the Company filed in any state or other jurisdiction in order to
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qualify any or all of the Registrable Securities under the securities laws
thereof (any such application, document or information being hereinafter
called a "BLUE SKY Application"), or (B) arise out of or are based upon
the omission or alleged omission to state in any such registration
statement, any preliminary prospectus, prospectus, or any amendment or
supplement thereto, or in any Blue Sky Application, a material fact
required to be stated therein or necessary to make the statements therein,
and with respect to any preliminary prospectus or prospectus, in light of
the circumstances in which they were made, not misleading; PROVIDED,
however, that the Company will not be liable in any such case to the
extent, but only to the extent, that any such loss, claim, damage,
judgment, liability or expense arises out of or is based upon an untrue
statement or alleged untrue statement or omission or alleged omission made
based upon, and in conformity with, written information furnished by or
through any holder of Registrable Securities to the Company concerning the
holders of Registrable Securities or the underwriters specifically for use
in the preparation of such registration statements or any such amendment
or supplement thereof or any such Blue Sky Application or any such
preliminary prospectus or prospectus or any such amendment or supplement
thereto. This indemnity will be in addition to any liability which the
Company may otherwise have.
(ii) If any action or proceeding (including any governmental or
regulatory investigation or proceeding) shall be brought or asserted
against any Holder indemnified party with respect to which indemnity may
be sought against the Company pursuant to this Section 7(g), the Holder
shall promptly notify the Company in writing of the institution of such
action, and the Company shall assume the defense of such action, including
the employment of counsel satisfactory to such Holder indemnified party
and payment of all fees and expenses; PROVIDED, that the omission so to
notify the Company shall not relieve the Company from any liability that
it may have to such Holder indemnified party. A Holder indemnified party
shall have the right to employ separate counsel in any such action or
proceeding and to assume the defense thereof, but the fees and expenses of
such counsel shall be at the expense of the Company. It is understood,
however, that the Company shall not, in connection with any one such
action or separate but substantially similar or related actions in the
same jurisdiction arising out of the same general allegations or
circumstances, be liable for the fees and expenses of more than one
separate firm of attorneys (in addition to any local counsel) at any time
for the Holder indemnified parties, which firm shall be designated in
writing by the Holder and that all such fees and expenses shall be
reimbursed as they are incurred. Anything in this paragraph to the
contrary notwithstanding (x) no Holder indemnified party shall be liable
for any settlement of any such claim or action effected without the
written consent of such Holder indemnified party (which consent shall not
be unreasonably withheld or delayed), but if settled with the written
consent of the Holder indemnified parties, or if there is a final judgment
with respect thereto, the Company agrees to indemnify and hold harmless
each Holder indemnified party from and against any loss or liability by
reason of such settlement or judgment and (y) no settlement of any such
claim or action shall be effected without including an unconditional and
irrevocable release of the Holder indemnified parties from all liability
in respect of such claim or action.
(iii) Each holder of Registrable Securities severally, but not
jointly, will indemnify, defend and hold harmless the Company, each of its
directors, each nominee
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(if any) for director named in the prospectus included in the Registration
Statement, each of its officers, agents and employees, and each person, if
any, who controls the Company within the meaning of Section 15 of the Act
or Section 20 of the Exchange Act, and such persons' officers, directors
and employees (collectively, the "Company indemnified parties") to the
same extent as the foregoing indemnity from the Company but only with
respect to written information furnished through such holder of
Registrable Securities to the Company concerning such holder of
Registrable Securities specifically for use in the preparation of such
Registration Statement or prospectus. In case any action shall be brought
against any Company indemnified party based on such Registration Statement
or any prospectus and in respect of which indemnity may be sought against
any holder of Registrable Securities pursuant to this Section 7(g)(iii),
the holder of Registrable Securities shall have the rights and duties
given to the Company by Section 7(g) (except that if the Company shall
have assumed the defense thereof such holder shall not be required to do
so, but such holder may nonetheless employ separate counsel therein and
participate in the defense thereof; provided that the fees and expenses of
such separate counsel shall be at such holder's expense), and the Company
indemnified parties shall have the rights and duties given to the Holder
indemnified parties by Section 7(g)(a).
(iv) In order to provide for just and equitable contribution under
the Act in any case in which (A) the Holder makes claim for
indemnification pursuant to Section 7(g) hereof but it is judicially
determined (by the entry of a final judgment or decree by a court of
competent jurisdiction and the expiration of time to appeal or the denial
of the last right of appeal) that such indemnification may not be enforced
in such case, notwithstanding the fact that the express provisions of
Section 7(g) provide for indemnification in such case, or (B) contribution
under the Act may be required on the part of any holder of Registrable
Securities or Company indemnified party, then the Company indemnified
party and any such holder of Registrable Securities shall contribute to
the aggregate losses, claims, damages, judgments, liabilities or expenses
to which they may be subject (which shall, for all purposes of this
Agreement, include, but not be limited to, all reasonable costs of
defense, settlement and investigation and all reasonable attorneys' fees
and expenses) in either such case (after contribution from others) in such
proportions as is appropriate to reflect the relative benefits received by
the Company on the one hand and any holder of Registrable Securities on
the other hand, provided, however, that if such allocation is not
permitted by applicable law then the relative fault of the Company and any
holder of Registrable Securities in connection with the statements or
omissions which resulted in such damages and other relevant equitable
considerations shall also be considered. The relative fault shall be
determined by reference to, among other things, whether in the case of an
untrue statement of a material fact or the omission to state a material
fact, such statement or omission relates to information supplied by the
Company, or the holder of Registrable Securities and the parties' relative
intent, knowledge, access to information and opportunity to correct or
prevent such untrue statement or omission. The Company and the Holder
agree that it would not be just and equitable if the respective
obligations of the Company and the holders of Registrable Securities to
contribute pursuant to this Section 7(g)(iv) were to be determined by pro
rata or per capita allocation of the aggregate damages (even if the
holders of Registrable Securities were treated as one entity for such
purpose) or by any other method of allocation that does not take account
of the equitable considerations
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referred to in the first sentence of this Section 7(g)(iv), that the
contribution of each contributing holder of Registrable Securities shall
not be in excess of the amount by which proceeds received by such person
from sales of Registrable Securities exceeds the amount of any damages
that such holder of Registrable Securities shall have otherwise been
required to pay by reason of such untrue alleged untrue statement or
omission or alleged omission. No person guilty of a fraudulent
misrepresentation (within the meaning of Section 11(f) of the Act) shall
be entitled to contribution from any person who is not guilty of such
fraudulent misrepresentation. If the full amount of the contribution
specified in this paragraph is not permitted by law, then any holder of
Registrable Securities shall be entitled to contribution from the Company
and the Company shall be entitled to contribution from any holder of
Registrable Securities to the full extent permitted by law.
(v) Notwithstanding anything contained herein to the contrary, no
holder of Registrable Securities or person that controls any such holder
within the meaning of the Act, if applicable, shall be obligated to
indemnify any Company indemnified party or to make any contribution
pursuant to this Section 7(g), in an amount in excess of the net proceeds
received by such holder of Registrable Securities with respect to the sale
of its Registrable Securities.
(h) NO OBLIGATION TO EXERCISE. Nothing contained in this Agreement
shall be construed as requiring the Holder to exercise its Warrants prior to the
initial filing of any Registration Statement or the effectiveness thereof.
8. ADJUSTMENTS OF NUMBER OF SHARES, ETC.
(a) ADJUSTMENT IN NUMBER OF SHARES. If the Company shall at any time
after the Exchange Date subdivide or combine the outstanding Stock, the number
of Shares issuable upon exercise of the Warrant at the Exercise Price shall
forthwith be adjusted so that the number of Shares issuable upon the exercise of
the Warrant after giving effect to such subdivision, combination or issuance
shall be equal to a percentage of the total number of issued and outstanding
shares of Stock at such time equal to the percentage of issued and outstanding
shares of Stock constituted by the number of Shares issuable upon the exercise
of the Warrant immediately prior to such subdivision, combination or issuance,
in each case on a fully diluted basis.
(b) RECLASSIFICATION, CONSOLIDATION MERGER, ETC. In case of any
reclassification or change of the outstanding Stock, or in the case of any
consolidation of the Company with, or merger of the Company with or into,
another entity (other than a consolidation or merger in which the Company is the
surviving entity and which does not result in any reclassification or change of
the outstanding Stock), or in the case of a sale or conveyance to another entity
of the property of the Company as an entirety or substantially as an entirety,
the Holder shall thereafter have the right to purchase upon exercise or exchange
of the Warrant the kind and number of Stock and other securities and property
receivable upon such reclassification, change, consolidation, merger, sale or
conveyance as if the Holder was the owner of the Stock underlying the Warrant
immediately prior to any such events at a price equal to the Exercise Price.
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(c) DISTRIBUTIONS WITH RESPECT TO OUTSTANDING SECURITIES. In the
event that the Company shall at any time after the Exchange Date and prior to
the exercise of the Warrant declare a distribution or otherwise distribute to
its shareholders any assets, property, rights, dividends, evidences of
indebtedness, securities, whether issued by the Company or by another person or
entity, or any other thing of value, the Holder of the unexercised Warrant shall
thereafter be entitled, in addition to the Stock or other securities receivable
upon the exercise thereof, to receive, upon the exercise of the Warrant, the
same assets, property, rights, dividends, evidences of indebtedness, securities
or any other thing of value that they would have been entitled to receive at the
time of such distribution had they exercised the Warrant prior to the record
date fixed for the determination of shareholders entitled to receive such
distribution. At the time of such distribution, the Company shall make
appropriate reserves including, if requested by the Holder, the establishment of
an escrow on terms satisfactory to the Holder into which such assets, property,
rights, dividends, evidences of indebtedness, securities or other things of
value shall be held for the benefit of the Holder, to ensure the timely
performance of the provisions of this Section 8(c).
(d) BELOW MARKET ISSUANCE. In the event that the Company shall at
any time after the Exchange Date (i) issue any Stock (other than Shares, and
other than Stock issuable upon conversion of the Zero Coupon Convertible
Preferred Stock pursuant to Section F of the Zero Coupon Certificate of
Designations) without consideration or at a price per unit less than the Current
Market Price per share of Stock (as defined in Section 8(g) hereof), or (ii)
issue options, rights or warrants to subscribe for or purchase Stock (or
securities convertible into Stock) without consideration or at a price per share
(or having a conversion price per share, if a security convertible into Stock)
less than the then Current Market Price per share of Stock, the number of Shares
for which the Warrant is exercisable to be in effect after the date of such
issuance shall be determined by multiplying the number of Shares for which the
Warrant is exercisable in effect immediately prior to the date of such issuance
by a fraction, of which the denominator shall be the number of shares of Stock
outstanding on the date of such issuance PLUS the number of shares of Stock
which the aggregate offering price of the total number of shares of Stock so to
be issued or to be offered for subscription or purchase (or the aggregate
initial conversion price of the convertible securities so to be offered) would
purchase at such Current Market Price per share and of which the numerator shall
be the number of shares of Stock outstanding on the date of such issuance PLUS
the number of additional shares of Stock to be issued or to be offered for
subscription or purchase (or into which the convertible securities so to be
offered are initially convertible). In case such subscription price may be paid
in a consideration part or all of which shall be in a form other than cash, the
value of such consideration shall be as determined by an independent investment
banking firm reasonably acceptable to the Majority Holders (the cost of the
engagement of said investment banking firm to be borne by the Company). Stock
owned by or held for the account of the Company or any majority-owned subsidiary
shall not be deemed outstanding for the purpose of any such computation. Such
adjustment shall be made successively whenever the date of such issuance is
fixed (which date of issuance shall be the record date for such issuance if a
record date therefor is fixed); and, in the event that such units or options,
rights or warrants are not so issued, the number of Shares for which the Warrant
is exercisable shall again be adjusted to be the number of Shares for which the
Warrant is exercisable which would then be in effect if the date of such
issuance had not been fixed.
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<PAGE>
(e) OTHER DILUTIVE EVENTS. In case any event shall occur as to which
the other provisions of this Section 8 are similar to, but not strictly
applicable but as to which the failure to make any adjustment would not fairly
protect the purchase rights represented by this Agreement and the Warrant in
accordance with the essential intent and principles hereof then, in each such
case, the Holders of a majority of the Warrant may appoint a firm of independent
public accountants of recognized national standing reasonably acceptable to the
Company, which shall give their opinion as to the adjustment, if any, on a basis
consistent with the essential intent and principles established herein,
necessary to preserve the purchase rights represented by this Agreement and the
Warrant. Upon receipt of such opinion (the "HOLDERS' OPINION"), if the Company
agrees with the Holders' Opinion, it will promptly mail a copy thereof to the
each Holder and shall make the adjustments described therein. If the Company
does not agree with the Holders' Opinion, the Company shall cause the Company's
independent auditors to review the Holders' Opinion. If the Company notifies the
Holders within 30 days from the receipt of the Holders' Opinion that based upon
the opinion of the Company's independent auditors it objects to the Holders'
Opinion, then the accountants rendering the Holders' Opinion and the Company's
independent auditors shall select a third firm of independent public accountants
who will have 30 days to deliver its opinion to the Company and the Holders. The
opinion of such third firm shall be conclusive and binding on the Company and
the Holders. Each party shall bear its own fees and expenses for the accountant
appointed by such party and the Company and the Holders, pro rata, shall equally
bear the expenses of the third firm appointed pursuant to this Section.
(f) PRESERVATION OF RIGHTS. The Company will not, by amendment of
its certificate of incorporation or through any consolidation, merger,
reorganization, transfer of assets, dissolution, issue or sale of securities or
any other voluntary action, avoid or seek to avoid the observance or performance
of any of the terms of this Agreement or the Warrant or the rights represented
thereby, but will at all times in good faith assist in the carrying out of all
such terms and in the taking of all such action as may be necessary or
appropriate in order to protect the rights of the Holders of the Warrant against
dilution or other impairment as provided herein.
(g) CERTAIN DEFINITIONS RELATIVE TO ADJUSTMENTS.
(i) For the purpose of any computation under this Article 8 or
Article 1, the "Current Market Price per share" of Stock on any date shall
mean, in respect of any share of Stock on any date herein specified, (A)
if there shall then be a public market for the Stock, the weighted average
of the daily market prices for 30 consecutive Business Days commencing 45
days before such date; the daily market price for each such Business Day
being (1) the last sale price on such day on the principal stock exchange
or market on which such Stock is then listed or admitted to trading, or
(2) if no sale takes place on such day on any such exchange or market, the
average of the last reported closing bid and asked prices on such day as
officially quoted on any such exchange or market; or (B) at any time there
is not a public market for the Stock, the higher of (1) the Book Value per
share of Stock at such date and (2) the Appraised Value per share of Stock
at such date.
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<PAGE>
(ii) For purposes of any calculation under this Article 7 and
Article 3, "Appraised Value" shall mean, with respect to any share of
Stock on any date herein specified, the fair market value of such share of
Stock (determined without giving effect to the discount for (A) a minority
interest, or (B) any lack of liquidity of such Stock or the fact that the
Company may have no class of securities registered under the Exchange Act)
as of the last day of the most recent fiscal month to end within 60 days
prior to such date, as determined by an investment banking firm acceptable
to the Company and the Majority Holders, it being understood that for
purposes of determining such Appraised Value per unit, outstanding at such
date shall include shares of Stock issuable in respect of such Warrants,
other options or warrants to purchase, or securities convertible into,
Stock.
(iii) For purposes of any calculation under this Article 7, "Book
Value" shall mean, with respect to any share of Stock on any date herein
specified, the consolidated stockholders' equity (as reflected on the
consolidated balance sheet of the Company and its Subsidiaries and
determined in accordance with GAAP) of the Company and its Consolidated
Subsidiaries as of the last day of the month immediately preceding such
date, divided by all shares of such Stock outstanding at such date and all
shares of such Stock issuable in respect of the Warrants exercisable for
shares of such Stock, other options or warrants to purchase, or securities
convertible into, shares of such Stock.
(h) NOTICE OF ADJUSTMENT. Whenever the number of Shares purchasable
upon the exercise of the Warrant is adjusted, as herein provided, the Company
shall promptly mail by nationally recognized overnight carrier, to the Holder
notice of such adjustment or adjustments, certified by the Chief Financial
Officer of the Company, setting forth the number of Shares purchasable upon the
exercise of the Warrant after such adjustment, setting forth a brief statement
of the facts requiring such adjustment and setting forth the computation by
which such adjustment was made. Such certificate shall, in the absence of
manifest error, be conclusive evidence as to the correctness of such adjustment.
9. EXCHANGE AND REPLACEMENT OF WARRANT CERTIFICATE.
(a) The Warrant Certificate is exchangeable, without expense, upon
the surrender thereof by the registered Holder at the principal executive office
of the Company, for a new Warrant Certificate of like tenor and date
representing in the aggregate the right to purchase the same number of Shares in
such denominations as shall be designated by the Holder thereof at the time of
such surrender.
(b) Upon receipt by the Company of evidence reasonably satisfactory
to it of the loss, theft, destruction or mutilation of the Warrant Certificate,
and, in the case of loss, theft or destruction, of indemnity or security
reasonably satisfactory to it, and reimbursement to the Company of all
reasonable expenses incidental thereto, and upon surrender and cancellation of
the Warrant, if mutilated, the Company will make and deliver a new Warrant
Certificate of like tenor and date, in lieu thereof.
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<PAGE>
10. RESERVATION AND LISTING OF SECURITIES. The Company shall at all
times reserve and keep available out of its authorized Stock, and, if
applicable, its other capital interests, solely for the purpose of issuance upon
the exercise of the Warrant, such number of shares of Stock and, if applicable,
such other capital interest as may be issuable from time to time upon the
exercise thereof. At any time the Holder may demand a certificate from the
Company certifying compliance with the requirements of this Section 11 and
setting forth in reasonable detail the calculations supporting such
certification. The Company covenants and agrees that, upon exercise of the
Warrant and payment of the Exercise Price therefor, all Stock and, if
applicable, such other capital interest issuable upon such exercise shall be
duly and validly issued, fully paid, non-assessable and not subject to the
preemptive rights of any shareholder.
11. NOTICES TO WARRANT HOLDER. Nothing contained in this Agreement
shall be construed as conferring upon the Holder the right to vote or to consent
or to receive notice as a member in respect of any meetings of shareholders for
the election of directors or any other matter, or as having any rights
whatsoever as a shareholder of the Company. If however, at any time prior to the
expiration of the Warrant and their exercise, any of the following events shall
occur:
(a) the Company shall take a record of the holders of its Stock for
the purpose of entitling them to receive a dividend or distribution payable
otherwise than in cash, or a cash distribution payable otherwise than out of
current or retained earnings, as indicated by the accounting treatment of such
dividend or distribution on the books of the Company; or
(b) the Company shall offer to all the holders of its Interest any
additional units of ownership interest of the Company or securities convertible
into or exchangeable for Stock of the Company, or any option, right or warrant
to subscribe therefor; or
(c) a dissolution, liquidation or winding up of the Company (other
than in connection with a consolidation or merger) or a sale of all or
substantially all of its property, assets and business as an entirety shall be
proposed;
then, in any one or more of said events, the Company shall give written notice
of such event at least 15 days prior to the date fixed as a record date or the
date of closing the transfer books for the determination of the shareholder
entitled to such distribution, convertible or exchangeable securities or
subscription rights, options or warrants, or entitled to vote on such proposed
dissolution, liquidation, winding up or sale. Such notice shall specify such
record date or the date of closing the transfer books, as the case may be.
Failure to give such notice or any defect therein shall not affect the validity
of any action taken in connection with the declaration or payment of any such
distribution, or the issuance of any convertible or exchangeable securities or
subscription rights, options or warrants, or any proposed dissolution,
liquidation, winding up or sale.
12. NOTICES. Notices to be given hereunder by either party to the
other may be by courier, postage prepaid. Notices shall be addressed to the
parties as follows:
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(a) If to a registered Holder of the Warrant, to the address of the
Holder as shown on the books of the Company; or
(b) If to the Company, to the address set forth in Section 3 of this
Agreement or to such other address as the Company may designate by notice to the
Holder.
A party hereto may change its address by written notice delivered in accordance
with this Section 12. Notices delivered personally shall be deemed communicated
as of actual receipt; notices sent via facsimile transmission shall be deemed
communicated as of receipt by the sender of written confirmation of transmission
thereof; notices sent via overnight courier shall be deemed communicated as of
one day after proper mailing; notices sent via U.S. mail shall be deemed
communicated as of three business days after proper mailing.
13. SUPPLEMENTS AND AMENDMENTS. The Company and CIBC Capital may
from time to time supplement or amend this Agreement in order to cure any
ambiguity, to correct or supplement any provision contained herein which may be
defective or inconsistent with any provisions herein, or to make any other
provisions in this regard to matters or questions arising hereunder which the
Company and CIBC Capital may deem necessary or desirable and which the Company
and CIBC Capital deem not to adversely affect the interests of the Holder of the
Warrant Certificate.
14. SUCCESSORS. All the covenants and provisions of this Agreement
by or for the benefit of the Company and the Holder inure to the benefit of
their respective successors and permitted assigns hereunder.
15. TERMINATION. This Agreement will terminate on the earliest to
occur of (a) the date on which the Warrant expires unexercised, (b) the date on
which the Warrant has been exercised and all the Shares issuable upon exercise
of the Warrant have been resold to the public and (c) the date on which the
Warrant is sold to the Company pursuant to Section 4(b) hereof; PROVIDED,
HOWEVER, that the provisions of Section 7(g) shall survive any such termination.
16. RULES 144 AND 144A. The Company covenants that it will file the
reports required to be filed by it under the Act and the Exchange Act, and it
will take such further action as any holder of its Registrable Securities may
reasonably request, all to the extent required from time to time to enable such
holder to sell Registrable Securities without registration under the Act within
the limitation of the exemptions provided by (a) Rule 144 or Rule 144A under the
Act, as such Rules may be amended from time to time, or (b) any similar rule or
regulation hereafter adopted by the Commission. Upon the request of any holder
of Registrable Securities, the Company will deliver to such holder a written
statement as to whether it has complied with such requirements.
17. MERGER OR CONSOLIDATION OF THE COMPANY. Subject to Section 8(b),
so long as Warrants and/or Registrable Securities remain outstanding, the
Company will not merge or consolidate with or into, or sell, transfer or lease
all or substantially all of its property to, any other corporation unless the
successor or purchasing corporation, as the case may be, shall expressly assume,
by supplemental agreement executed and delivered to the Holder, the due and
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<PAGE>
punctual performance and observance of each and every covenant and condition of
this Agreement to be performed and observed by the Company.
18. BENEFITS OF THIS AGREEMENT. Nothing in this Agreement shall be
construed to give to any person or corporation other than the Company and CIBC
Capital and any other registered holder or holders of the Warrant Certificate,
the Warrant or the Shares any legal or equitable right, remedy or claim under
this Agreement; and this Agreement shall be for the sole and exclusive benefit
of the Company and CIBC Capital and any other holder or holders of the Warrant
Certificate, the Warrant or the Shares.
19. APPLICABLE LAW. THIS AGREEMENT AND EACH WARRANT CERTIFICATE
ISSUED HEREUNDER WILL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS
OF THE STATE OF NEW YORK. THE SECTION HEADINGS HAVE BEEN INSERTED AS A MATTER OF
CONVENIENCE AND ARE NOT A PART OF THIS AGREEMENT.
20. COUNTERPARTS. This Agreement may be signed by the parties in
counterparts which together shall constitute one and the same agreement among
the parties.
21. WAIVERS. The waiver by any party hereto of a breach of any
provision of this Agreement by any party hereto shall not operate or be
construed as a waiver of any other breach by such party.
22. ENFORCEABILITY. Any term or provision of this Agreement which is
invalid or unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction.
23. INDEX OF DEFINED TERMS. The following terms used in this
Agreement are defined at the indicated locations in this Agreement.
"Act": as defined in Section 6.
"Agreement": as defined in the caption to this Agreement.
"Appraised Value": as defined in Section 8(g).
"Blue Sky Application": as defined in Section 7(g)(a).
"Book Value": as defined in Section 8(g).
"CIBC Capital": as defined in the caption to this Agreement.
"Closing Date": as defined in the Credit Agreement, April 6, 1999.
"Commission": as defined in Section 7(d)(a).
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<PAGE>
"Company": as defined in the caption to this Agreement.
"Company Indemnified Parties": as defined in Section 7(g)(c).
"Credit Agreement": as defined in the recitals to this Agreement.
"Current Market Price per share": as defined in Section 8(g).
"Demand Registration Request": as defined in Section 7(d)(a).
"Exchange Act": as defined in Section 7(e)(j).
"Exchange Date": as defined in the recitals to this Agreement.
"Exercise Price": as defined in Section 4.
"Holder": as defined in Section 4.
"Holder Indemnified Parties": as defined in Section 7(g)(a).
"Inspectors": as defined in Section 7(e)(h).
"NASD": as defined in Section 7(e)(k).
"Notice": as defined in Section 7(c).
"Piggyback Registration": as defined in Section 7(c).
"Primrose": as defined in Section 3.
"Primrose": as defined in Section 3.
"Primrose Liquidity Event": as defined in Section 3.
"Primrose Shares": as defined in Section 3.
"Primrose Warrant": as defined in Section 3.
"Primrose Warrant Agreement": as defined in Section 3.
"Registrable Security": as defined in Section 7(b).
"Registration Statement": as defined in Section 7(c).
"Selling Holder": as defined in Section 7(e)(a).
"Shares": as defined in the recitals to this Agreement.
"Stock": as defined in the recitals to this Agreement.
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<PAGE>
"Value": as defined in Section 3.
"Warrant Certificate": as defined in Section 2.
"Warrant Exercise Term": as defined in Section 1.
"Warrant": as defined in the recitals to this Agreement.
[Signature Page follows]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Warrant
Agreement to be duly executed, as of the day and year first above written.
SECURITY CAPITAL CORPORATION
By: /s/ A GEORGE GEBAUER
Name: A. George Gebauer
Title: President
CIBC CAPITAL CORPORATION
By: /s/ MICHAEL P. DAVEN
Name: Michael P. Daven
Title: Managing Director
<PAGE>
EXHIBIT A
THE WARRANT REPRESENTED BY THIS CERTIFICATE AND THE OTHER SECURITIES ISSUABLE
UPON EXERCISE THEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE "ACT"), AND MAY NOT BE OFFERED OR SOLD EXCEPT (I) PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT, (II) TO THE EXTENT APPLICABLE,
PURSUANT TO RULE 144 UNDER THE ACT (OR ANY SIMILAR RULE UNDER THE ACT RELATING
TO THE DISPOSITION OF SECURITIES), OR (III) UPON THE DELIVERY BY THE HOLDER TO
THE COMPANY OF AN OPINION OF COUNSEL, REASONABLY SATISFACTORY TO COUNSEL FOR THE
COMPANY, STATING THAT AN EXEMPTION FROM REGISTRATION UNDER THE ACT IS AVAILABLE.
THE TRANSFER OR EXCHANGE OF THE WARRANT REPRESENTED BY THIS CERTIFICATE IS
RESTRICTED IN ACCORDANCE WITH THE WARRANT AGREEMENT REFERRED TO HEREIN.
EXERCISABLE ON OR BEFORE
5:00 P.M., NEW YORK TIME, APRIL 6, 2009
- --------------------------------------------------------------------------------
No. 1 [__________] Shares
- --------------------------------------------------------------------------------
FORM OF
WARRANT CERTIFICATE
This Warrant Certificate certifies that CIBC Capital Corporation
("CIBC") or its registered assigns, is the registered holder of a warrant (this
"WARRANT") to purchase, at any time from the Exchange Date (as defined in the
Warrant Agreement referred to below) until 5:00 P.M., New York City time on
April 6, 2009 (the "EXPIRATION DATE"), up to [________] shares (the "SHARES") of
fully paid and non-assessable Class A common stock, par value $0.01 per share
(the "STOCK"), of Security Capital Corporation (the "Company"), at the exercise
price of $0.01 per Share (the "EXERCISE PRICE") (subject to any adjustment as
provided in Section 8 of the Warrant Agreement) upon surrender of this Warrant
Certificate and, in the case of the exercise of this Warrant, payment of the
Exercise Price at an office or agency of the Company, but subject to the
conditions set forth herein and in the Warrant Agreement, dated as of April 6,
1999, by and between the Company and CIBC (as amended, supplemented or otherwise
modified from time to time, the "WARRANT AGREEMENT"). Payment of the Exercise
Price may be made in cash, or by certified or official bank check in New York
Clearing House funds payable to the order of the Company, or any combination of
cash or check.
<PAGE>
This Warrant may not be exercised after 5:00 P.M., New York City
time, on the Expiration Date, at which time the Warrant evidenced hereby, unless
exercised prior thereto, shall thereafter be void.
The Warrant evidenced by this Warrant Certificate is duly authorized
and issued pursuant to the Warrant Agreement, which Warrant Agreement is hereby
incorporated by reference in and made a part of this instrument and is hereby
referred to in the description herein of the rights, limitation of rights,
obligations, duties and immunities thereunder of the Company and the holders of
this Warrant (the words "holders" or "holder" meaning the registered holders or
registered holder).
The Warrant Agreement provides that upon the occurrence of certain
events, the number of the Company's securities issuable upon the exercise of
this Warrant may, subject to certain conditions, be adjusted. In such event, the
Company will, at the request of the holder, issue a new Warrant Certificate
evidencing the adjustment in the number and/or type of securities issuable upon
the exercise of the Warrant; PROVIDED, HOWEVER, that the failure of the Company
to issue such new Warrant Certificates shall not in any way change, alter or
otherwise impair the rights of the holder as set forth in the Warrant Agreement.
Upon due presentment for registration of a transfer of this Warrant
Certificate in accordance with the Warrant Agreement at an office or agency of
the Company, a new Warrant Certificate of like tenor and date and evidencing in
the aggregate a warrant to purchase a like number of Shares shall be issued to
the transferee(s) in exchange for this Warrant Certificate, subject to the
limitations provided herein and in the Warrant Agreement, without any charge
except for any tax or other governmental charge imposed in connection therewith.
The Company may deem and treat the registered holder(s) hereof as
the absolute owner(s) of this Warrant Certificate (notwithstanding any notation
of ownership or other writing hereon made by anyone) for the purpose of any
exercise hereof, any distribution to the holder(s) hereof and for all other
purposes. The Company shall not be affected by any notice to the contrary.
All terms used in this Warrant Certificate which are defined in the
Warrant Agreement shall have the meanings assigned to them in the Warrant
Agreement.
[SIGNATURE PAGE FOLLOWS]
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate
to be duly executed.
Dated: ____________
SECURITY CAPITAL CORPORATION
By:________________________________________
Name:
Title:
Attest:
Name:
Title:
<PAGE>
SUBSCRIPTION
The undersigned, pursuant to the provisions of the Warrant
Agreement, hereby agrees to subscribe for and purchase ______ shares of common
stock, par value $__ per share, of SECURITY CAPITAL CORP., covered by the
foregoing Warrant, and makes payment therefor in full at the price per unit
provided in the Warrant Agreement.
Dated: Signature:____________________________
Address:______________________________
ASSIGNMENT
FOR VALUE RECEIVED, ___________ hereby sells, assigns and transfers
unto ______________ the foregoing Warrant and all rights evidenced thereby, and
does irrevocably constitute and appoint _________________ attorney, to transfer
such Warrant on the books of SECURITY CAPITAL CORP.
Dated: Signature:____________________________
Address:______________________________
<PAGE>
PARTIAL ASSIGNMENT
FOR VALUE RECEIVED, ___________________ hereby assigns and transfers
unto __________________________ the right to purchase _______ shares of common
stock, par value $__ per share, of SECURITY CAPITAL CORP., covered by the
foregoing Warrant, and a proportionate part of such Warrant and the rights
evidenced hereby, and does irrevocably constitute and appoint
________________________ attorney, to transfer that part of such Warrant on the
books of SECURITY CAPITAL CORP.,
Dated: Signature:_____________________________
Address:_______________________________
EXHIBIT 4
STOCKHOLDERS' AGREEMENT
THIS STOCKHOLDERS' AGREEMENT dated as of April 6, 1999, is among:
PRIMROSE HOLDINGS, INC., a Delaware corporation (the "Company"); SECURITY
CAPITAL CORPORATION, a Delaware corporation ("Security Capital"); Jo Kirchner of
Dallas, Georgia ("Kirchner"); Robert Benowitz of Cartersville, Georgia
("Benowitz"); and Raymond Orgera of Cartersville, Georgia ("Orgera"); and
SECURITY CAPITAL CORPORATION, a Delaware corporation ("Security Capital").
RECITALS
The Company, Security Capital, Primrose Holdings, Inc., Paul L. Erwin
("Erwin") and The Paul L. Erwin Grantor Retained Annuity Trust (together with
Erwin, the "Sellers") entered into a Stock Purchase Agreement dated as of April
6, 1999 (as amended and in effect from time to time, the "Purchase Agreement")
pursuant to which the Company agreed to purchase from Sellers, and Sellers
agreed to sell to the Company, all of the issued and outstanding stock of The
Jewel I Inc. d/b/a Primrose Country Day School, Metrocorp Properties, Inc. and
Primrose School Franchising Company (each a "Subsidiary" and, collectively, the
"Subsidiaries").
The parties hereto believe it is in the best interests of each of them to
enter into this Agreement to set forth their understanding with respect to
future dispositions of shares of the Company's capital stock and other matters
affecting the Company, all as more particularly set forth herein.
NOW THEREFORE, the parties to this Agreement hereby agree as follows:
ss.1. DEFINITIONS.
(a) For all purposes of this Agreement, the following terms shall have the
meanings set forth below (capitalized terms not otherwise defined herein
shall have the meanings set forth in the Purchase Agreement for each such
term):
APPRAISER. Appraiser shall mean an investment banking firm, a "Big Five"
accounting firm, or other similarly qualified Person of recognized regional
standing which conducts appraisals for any of the purposes set forth in this
Agreement, which Person shall be an
1
<PAGE>
independent, disinterested third party and shall be knowledgeable in the
business of valuing companies, including companies engaged in the industry in
which the Company then competes.
CAPITAL PARTNERS. Capital Partners shall mean Capital Partners Holdings
II-A, L.P. and Capital Partners Holdings II-B, L.P., each a Delaware limited
partnership, and any affiliates thereof.
CAUSE. Cause shall mean, with respect to any Management Stockholder, any
of the following: (1) any conviction of, or a plea of guilty or no contest to,
any charge of embezzlement, theft or fraudulent act, or any felony which the
Board of Directors of the Subsidiary, acting in good faith, determine has had or
would reasonably be expected to have a material adverse effect upon the
business, operations, financial condition or prospects of the Subsidiary; (ii)
any breach by such Management Stockholder of obligations regarding
non-competition or confidentiality set forth in any written agreement between
the Subsidiary and such Management Stockholder; (iii) willful misconduct or
gross negligence by such Management Stockholder in the course of performing any
term or condition of his employment agreement with the Subsidiary or, in the
absence of such an agreement, as the Board of Directors of the Subsidiary,
acting in good faith, has reasonably required of such Management Stockholder if
and so long as such requirement was reasonably consistent with his past duties;
(iv) material failure by such Management Stockholder in the performance of any
other term or condition of his employment agreement with the Subsidiary or, in
the absence of such an agreement, as the Board of Directors of the Subsidiary,
acting in good faith, has reasonably required of such Management Stockholder if
and so long as such requirement was reasonably consistent with his past duties
(and, in the case of either clause (iii) or (iv) above, which the Board of
Directors of the Subsidiary, acting in good faith, determines has had or would
reasonably be expected to have a material adverse effect upon the business,
operations, financial condition or prospects of the Subsidiary and for which a
cure has not been commenced and diligently pursued within 10 days of notice to
such Management Stockholder from the Board of Directors of the Subsidiary).
COMMON STOCK. Common Stock shall mean the shares of the Company's common
stock, $.01 par value per share. Shares of Common Stock will continue to be
Common Stock subject to the terms of this Agreement following any Transfer to a
subsequent holder thereof (provided that such Transfer to a subsequent holder is
permitted by this Agreement) and, except as otherwise expressly provided herein,
each such subsequent holder will succeed to the rights and obligations of a
holder of Common Stock hereunder, PROVIDED that shares of Common Stock will
cease to be shares of Common Stock subject to the terms of this Agreement when
Transferred (i) pursuant to a Public Sale or (ii) to the Company pursuant to the
terms hereof.
DISABILITY, DISABLED. Disability or Disabled shall mean a mental or
physical condition which in the reasonable opinion of the Board of Directors of
the Subsidiary renders a Management Stockholder unable or incompetent to
properly carry out his duties and responsibilities contemplated under any
employment agreement between the Subsidiary and such Management Stockholder or,
in the absence of such an agreement, as the Board of Directors of
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the Subsidiary, acting in good faith, has reasonably required of such Management
Stockholder if and so long as such requirement was reasonably consistent with
his past duties, which condition shall have existed for a period of 120 or more
consecutive days. If the Management Stockholder should dispute the determination
of the Board of Directors as to whether a Disability exists, either the
Management Stockholder or the Subsidiary may require that the Management
Stockholder be examined by a physician and, in such case, the decision of such
physician shall be conclusive and binding on all parties. The examining
physician shall be mutually satisfactory to the Management Stockholder and the
Subsidiary, except if they are unable to agree, the Management Stockholder and
the Subsidiary shall each designate a physician and the examining physician
shall be a physician mutually acceptable to each of such designees.
EMPLOYEES. Employees shall mean any employee of the Company or any
Subsidiary determined by the Company's or such Subsidiary's Board of Directors
to be eligible to participate in any stock option plan approved by the Board and
adopted by the Company or such Subsidiary.
FAIR MARKET VALUE. Fair Market Value shall mean the total value of the
consideration which would be received upon the sale of shares of Common Stock
between a willing buyer and the holder of such shares as a willing seller with
the former under no compulsion to buy and the latter under no compulsion to
sell, all parties having reasonable knowledge of all relevant facts, calculated
in the case of any sale occurring as a result of any Management Stockholder's
death, without discount for the effects of his death.
GOOD REASON. Good Reason shall mean a cessation of employment of a
Management Stockholder occurring (i) as a result of the Disability of such
Management Stockholder, (ii) as a result of a significant health or other
material problem directly involving a member of such Management Stockholder's
immediate family which the Subsidiary's Board of Directors, acting in good
faith, reasonably determines will require the long-term relocation of the
Management Stockholder or will materially interfere with the proper discharge of
his duties and responsibilities to the Subsidiary on a long-term basis, or (iii)
after the fifth anniversary of the date hereof.
INSTRUMENT OF ACCESSION. Instrument of Accession shall mean an Instrument
of Accession in the form of SCHEDULE 1 hereto.
MANAGEMENT STOCKHOLDERS. Management Stockholders shall mean, initially,
Kirchner (as a holder of Common Stock and a holder of Options and any Common
Stock issued pursuant thereto), Benowitz (as a holder of Common Stock and a
holder of Options and any Common Stock issued pursuant thereto) and Orgera (as a
holder of Common Stock and a holder of Options and any Common Stock issued
pursuant thereto) and thereafter, any other employee of the Company or any
Subsidiary who is or becomes a Stockholder for purposes of this Agreement.
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PERMITTED TRANSFEREE. Permitted Transferee shall mean, (x) with respect to
any individual Stockholder, (a) such Stockholder's executor, administrator,
spouse, children or other lineal descendants, or (b) a trust established
exclusively for the benefit of such Stockholder and/or such Stockholder's
spouse, children or other lineal descendants, and (y) with respect to any
corporate Stockholder, the stockholders of such Stockholder or a liquidating
trust established for the benefit of such stockholders or any other affiliate of
such Stockholder. Whenever reference is made in this Agreement to the rights and
obligations of a Stockholder or group of Stockholders hereunder in respect of
Common Stock or Options owned by such Stockholder or group of Stockholders, such
reference shall be deemed to include all Permitted Transferees of such
Stockholder or group of Stockholders and all shares of Common Stock and Options
held by such Permitted Transferees.
PERSON. Person shall mean an individual, partnership, limited liability
company, limited liability partnership, corporation, association, trust, joint
venture, unincorporated organization, or any government, governmental department
or agency or political subdivision thereof.
PRIME. Prime shall mean the interest rate designated by Canadian Bank of
Commerce as being its prime rate of interest from time to time.
PUBLIC SALE. Public Sale shall mean any sale of Common Stock to the public
pursuant to a public offering registered under the Securities Act.
SCC FAIR MARKET VALUE PER SHARE. SCC Fair Market Value Per Share means, as
of the date of delivery of any written notice of the exercise of an Exchange
Right referred to in Section 9, (i) the average of the closing sales prices on
such date of the Class A Common Stock on all domestic securities exchanges on
which such security is listed, or (ii) if there have been no sales on any such
exchange on any day, the average of the highest bid and lowest asked prices on
all such exchanges at the end of such day, or (iii) if on any day such security
is not so listed, the sales price for such security as of 4:00 P.M., New York
time, as reported on the Nasdaq Stock Market, or (iv) if such security is not
reported on the Nasdaq Stock Market, the average of the representative bid and
asked quotations for such security as of 4:00 P.M., New York time, as reported
on the Nasdaq interdealer quotation system, or any similar successor
organization, in each such case averaged over a period of 21 trading days
consisting of the day before "SCC Fair Market Value Per Share" is being
determined and the immediately prior 20 trading days prior to such day during
which such security was traded. Notwithstanding the foregoing, if at any time of
determination such security is not registered pursuant to Section 12 of the
Securities Exchange Act of 1934, as amended, and either listed on a national
securities exchange or authorized for quotation in the Nasdaq Stock Market, then
SCC Fair Market Value Per Share shall be determined by the Board of Directors of
Security Capital in its good faith judgment.
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SECURITIES ACT. Securities Act shall mean the Securities Act of 1933, as
amended, or any successor federal statute, and the rules and regulations of the
Securities and Exchange Commission thereunder, all as the same may be in effect
at the time.
STOCKHOLDERS. Stockholders shall mean, initially, the Management
Stockholders and Security Capital and thereafter, any Person who becomes a party
to this Agreement by executing an Instrument of Accession accepted by the
Company in connection with the issue or transfer to or acquisition by such
Person of shares of Common Stock from the Company, any Stockholder or any
subsequent transferee of a Stockholder.
TRANSFER. Transfer shall mean (i) the direct or indirect sale, assignment,
transfer, exchange, gift or other disposition of shares of Common Stock or any
Option, or (ii) the pledge, mortgage, or hypothecation of any interest in shares
of Common Stock or any Option, or (iii) the grant of any option or other right
to acquire shares of Common Stock or any Option.
TRIGGER EVENT. Trigger Event shall mean the occurrence of any of the
following: (i) the sale of assets of a Subsidiary having a fair value greater
than 80% of the fair value of all assets of such Subsidiary pursuant to any
single sale or series of related sales (other than the sale of inventory in the
ordinary course of business); (ii) the date a registration statement filed by a
Subsidiary or the Company pursuant to the Securities Act with respect to such
issuer's shares of common stock is declared effective by the Securities and
Exchange Commission; (iii) a sale of stock or series of related sales or a
merger, consolidation or similar corporate reorganization of a Subsidiary, and
as a result of which the Company shall own, directly or indirectly, less than
51% of the outstanding voting securities of such Subsidiary; (iv) a sale of
stock or series of related sales or a merger, consolidation or similar corporate
reorganization of the Company, and as a result of which Security Capital shall
own, directly or indirectly, less than 51% of the outstanding voting securities
of the Company; (v) a sale of stock or series of related sales or a merger,
consolidation or similar corporate reorganization of Security Capital, and as a
result of which Capital Partners shall own, directly or indirectly, in the
aggregate less than 50% of the outstanding voting securities of Security Capital
or (vi) Capital Partners shall cease to have the ability to elect a majority of
the Board of Directors of Security Capital (either through the ownership of
voting stock, by contract or otherwise).
(b) In addition to the foregoing definitions, the following terms shall have the
meanings ascribed to them in the Section set forth opposite such terms:
TERM SECTION DEFINED
"Adjustment Event" 4.1(d)
"Company" Preamble
"Management Call Notice" 4.1(a)
"Management Call Option" 4.1(a)
"Management Call Price" 4.1(b)
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"Management Put Notice" 4.2(a)
"Management Put Option" 4.2(a)
"Management Put Price" 4.2(a)
"Notice of Proposed Transfer" 3.1(a)
"Offer" 3.1(a)
"Offered Shares" 3.1(a)
"Offeror" 3.1(a)
"Options" 4.1(a)
"Permitted Voluntary Termination" 4.2(a)
"Proposed Purchaser" 3.1(a)
"Refusal Purchase Price" 3.1(e)
"Purchase Agreement" Recitals
"Security Capital" Preamble
"Subordinated Promissory Note" 4.3(b)
"Subsidiary" Recitals
ss.2. RESTRICTIONS ON DISPOSITIONS OF COMMON STOCK AND OPTIONS.
(a) Notwithstanding any other provision of this Agreement, except as expressly
permitted or required by Sections 3, 4, 5, 6, 7, 8 or 9 hereof, no
Stockholder shall Transfer any shares of Common Stock, including any
shares of Common Stock issued or issuable upon the exercise or conversion
of options, warrants, convertible securities or other similar instruments,
or any interest therein, to any Person other than a Permitted Transferee
of such Stockholder, without the prior written consent of the Board of
Directors of the Company.
(b) Except as expressly permitted or required by Sections 4, 5 or 8 hereof, no
Management Stockholder shall Transfer any Options nor any interest therein
to any Person other than a Permitted Transferee of such Stockholder,
without the prior written consent of the Board of Directors of the
Company.
(c) No transferee of any Stockholder (including any Permitted Transferee)
shall be entitled to the benefits of this Agreement unless and until such
transferee has executed and delivered to the Company an Instrument of
Accession and, in the case of a transferee other than a Permitted
Transferee, such Instrument of Accession has been accepted by the Company.
ss.3. RIGHTS OF REFUSAL.
3.1 Except as permitted by Section 2(a) hereof, no Stockholder shall
Transfer any shares of Common Stock, including shares of Common Stock issued or
issuable upon the exercise or conversion of options, warrants, convertible
securities or other similar instruments, or any interest therein, whether
presently owned by such Stockholder or hereafter acquired by purchase
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or by stock dividend, split up, combination, reclassification, reorganization,
consolidation or merger, except in accordance with the terms of this Section 3
as follows:
(a) In the event that at any time following the third anniversary of the
date of this Agreement any Stockholder desires to Transfer all or any
portion of his shares of Common Stock or any interest therein (hereinafter
sometimes referred to as the "Offeror"), he shall first deliver to the
Company and to each other Stockholder, a written notice (the "Notice of
Proposed Transfer") specifying the name and address of the proposed
transferee (hereinafter sometimes referred to as the "Proposed
Purchaser"), the identity and total number of shares of Common Stock which
the Offeror then desires to Transfer (the "Offered Shares"), and all of
the terms, including the price and payment terms, upon which the Offeror
proposes to Transfer the Offered Shares to the Proposed Purchaser. The
Notice of Proposed Transfer shall also state that the Company and/or the
other Stockholders shall have the right to purchase the Offered Shares in
the order specified in paragraph (b) hereof, at the price specified in
paragraph (e) hereof, and on the other terms specified in the Notice of
Proposed Transfer (an "Offer").
(b) (i) During the thirty (30) day period commencing on the date of the
Company's receipt of the Notice of Proposed Transfer, the Company shall
have the first option to purchase all or any portion of the Offered
Shares, before the same may be Transferred to any other Person. The
Company must give written notice of its election to the Offeror and the
other Stockholders during such 30-day period, specifying the number of
shares it intends to purchase and stating that it has the ability to
complete the intended purchase.
(ii) In the event that the Company does not elect to purchase all of
the Offered Shares pursuant to clause (i) of this paragraph (b), then each
other Stockholder shall have the second option to purchase, for a period
of fifteen (15) days commencing on the first day immediately following the
expiration of the 30- day period specified in clause (i) of this paragraph
(b), before the same may be Transferred to any other Person, that
proportion of the remaining Offered Shares as the number of shares of
Common Stock then owned by such Stockholder bears to the total number of
shares of Common Stock then held by all Stockholders electing to
participate in the Offer. This second option shall be exercisable by
giving written notice to the Offeror, the other Stockholders and the
Company of such election within the 15-day period specified in this clause
(ii), and shall include a statement to the effect that such Stockholder
has the ability to complete the intended purchase. To the extent a
Stockholder elects not to purchase his entire proportionate share of the
remaining Offered Shares, the right to purchase any remaining Offered
Shares shall be reallocated among the participating Stockholders, ratably.
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(c) If the Company and/or the other Stockholders have not given notice of
their intention to purchase all of the Offered Shares pursuant to
paragraph (b) hereof, neither the Company nor the other Stockholders shall
be entitled to purchase any of the Offered Shares and, during the period
of ninety (90) days commencing on the first day immediately following the
expiration of the last refusal period specified in paragraph (b), the
Offeror shall have the right to Transfer all of the Offered Shares to the
Proposed Purchaser at a price and on terms not more favorable to the
Proposed Purchaser than those specified in the Notice of Proposed
Transfer, PROVIDED that the Proposed Purchaser agrees in writing to become
a party to this Agreement by executing an Instrument of Accession accepted
by the Company. If for any reason the Offered Shares are not Transferred
to the Proposed Purchaser within such period and at such stated price and
on such stated terms, the right to Transfer in accordance with the Notice
of Proposed Transfer shall expire and the provisions of this Agreement
shall continue to be applicable to said shares.
(d) Offered Shares which are Transferred to a Proposed Purchaser shall
continue to be subject to the provisions of this Agreement, and the
Company shall not be obligated to issue any shares of Common Stock in the
name of such Proposed Purchaser unless and until he shall have become a
party to this Agreement by executing an Instrument of Accession accepted
by the Company.
(e) The Company or the Stockholder purchasing the greatest percentage of
the Offered Shares shall state in a written notice to the Offeror the time
and date for the closing of the purchase by all electing offerees, which
closing shall not be less than 30 days, nor more than 45 days, after the
first day immediately following the expiration of the last refusal period
specified in paragraph (b) hereof. The price to be paid to the Offeror for
the Offered Shares upon the exercise of the option provided for in this
Section 3.1 shall be the price at which the Offered Shares are proposed to
be Transferred as set forth in the Notice of Proposed Transfer (the
"Refusal Purchase Price").
3.2 The Refusal Purchase Price shall, unless otherwise agreed in writing
by the parties to such transaction, be paid on the same terms as are specified
in the Notice of Proposed Transfer on the date of the closing.
3.3 The closing of the purchase and sale of the Offered Shares shall be
held at the principal place of business of the Company on the date specified in
the notice described in Section 3.1(e), or at such earlier time or at such other
place as the Offeror and the participating Stockholders and/or Company, as the
case may be, shall mutually agree upon. At the closing, the participating
Stockholders or the Company, as the case may be, shall deliver the consideration
required by Section 3.2, and the Offeror shall deliver certificates representing
the Offered Shares together with stock powers duly endorsed for the transfer
thereof.
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3.4 Whenever the Company or any Stockholder agrees to purchase shares of
Common Stock of the Company pursuant to this Agreement, each Stockholder or the
personal representative of any decedent Stockholder shall do all things and
execute and deliver all papers as may be reasonably necessary to consummate such
purchase.
3.5 If any Transfer is made or attempted contrary to the provisions of
this Agreement, the other Stockholders and the Company shall have the option to
purchase the Common Stock so Transferred or attempted to be Transferred, in the
order of priority set forth in this Section 3 which would have been applicable
had there been compliance with this Agreement. Such option shall be exercisable
within one hundred eighty (180) days after the Stockholders and the Company
receive actual notice of such Transfer or attempted Transfer by giving written
notice to the owner thereof or his transferees either before or after the
Transfer.
3.6 Notwithstanding the foregoing provisions of this Section 3, no
Management Stockholder or any Permitted Transferee of any Management Stockholder
shall be entitled to participate in the purchase of the Offered Shares if such
Management Stockholder's employment has been terminated by the Subsidiary for
any reason, including, but not limited to, death, Disability or other
termination, whether with or without Cause or Good Reason.
ss.4. PUT/CALL RIGHTS IN RESPECT OF MANAGEMENT STOCKHOLDERS
(OTHER THAN BY REASON OF DEATH).
4.1 CALL. (a) In the event a Management Stockholder ceases to be employed
by each Subsidiary employing such Management Stockholder for any reason, other
than the death of such Management Stockholder, then, at any time within one year
of the occurrence of any such cessation of employment, the Company may, at its
sole option, purchase from such Management Stockholder and any Permitted
Transferees of such Management Stockholder, all of the Common Stock owned by
such Management Stockholder and Permitted Transferees of such Management
Stockholder and any rights to shares of Common Stock issuable upon exercise of
options, if any, in which such Management Stockholder had a vested interest as
of the date of the occurrence of such event ("Options"), and such Management
Stockholder and any Permitted Transferees of such Management Stockholder shall,
upon the exercise of such call option, sell all of such Common Stock and any
Options to the Company, at the applicable purchase price set forth in paragraph
(b) hereof (the "Management Call Option"). The Management Call Option shall be
exercised by delivery of written notice to such Management Stockholder and any
Permitted Transferees of such Management Stockholder within the one year period
after the occurrence of such cessation of employment (a "Management Call
Notice"), specifying a date not less than 60 and not more than 90 days after the
date of such Management Call Notice, on which date the Company will purchase the
Common Stock and any Options of such Management Stockholder and any Permitted
Transferees of such Management Stockholder.
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(b) If the Company elects to purchase Common Stock and any Options of a
Management Stockholder and his Permitted Transferees pursuant to a Management
Call Option, then
(y) in the case of a cessation of employment of such Management
Stockholder by reason of a termination by each applicable Subsidiary
without Cause or the voluntary cessation by such Management Stockholder of
his duties and responsibilities as an employee for Good Reason, the
purchase price per share of such Common Stock shall be equal to the Fair
Market Value thereof, and the purchase price for each Option, if any,
shall be equal to the Fair Market Value of each share of Common Stock
issuable thereunder net of the applicable exercise price; and
(z) in the case of a cessation of employment of such Management
Stockholder for any reason other than death and as specified in Section
4.1(b)(y), the purchase price per share of such Common Stock shall be
equal to the original cost therefor paid by such Management Stockholder
upon issuance thereof, and there shall be no consideration required to be
paid for the cancellation of any Option,
in each case as determined as at the date of the Management Call Notice (the
"Management Call Price").
(c) At the closing of the purchase of such shares of Common Stock and any
Options owned by such Management Stockholder and any Permitted Transferees of
such Management Stockholder pursuant to the exercise of a Management Call
Option, the Company shall pay in cash, or by certified or bank cashier's check,
the maximum amount of the Management Call Price then permitted to be paid in
cash by the Company's lenders, with the balance, if any, payable by delivery of
a Subordinated Promissory Note described in Section 4.3(b) hereof. The Company
will use commercially reasonable efforts (without any obligation on its part to
raise additional equity or debt for such purpose) to obtain any required waivers
from its lenders so as to permit payment of the Management Call Price in cash to
the maximum extent possible.
4.2 PUT. (a) In the event a Management Stockholder who is employed by the
Company or any of the Subsidiaries shall cease to be employed at any time prior
to the fifth anniversary of the date hereof for any reason other than death or
termination by the Company or any of the Subsidiaries with cause, then the
Management Stockholder and the Permitted Transferees of such Management
Stockholder may, at the sole option of such Management Stockholder and the
Permitted Transferees, require the Company to purchase from such Management
Stockholder and the Permitted Transferees of such Management Stockholder all of
the Common Stock owned by such Management Stockholder and the Permitted
Transferees of such Management Stockholder (the "First Management Put Option"),
and the Company shall, upon exercise of a First Management Put Option, purchase
all of such Common Stock from such Management Stockholder and the Permitted
Transferees of such Management Stockholder, at a purchase price of $500 per
share of Common Stock. In the event a Management Stockholder who is employed by
the Company or any of the Subsidiaries shall cease to be employed for any
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reason other than death or termination by the Company or any of the Subsidiaries
with cause at any time on or after the fifth anniversary of the date hereof,
then, at any time within one year after the sixth anniversary hereof, the
Management Stockholder and the Permitted Transferees of such Management
Stockholder may, at the sole option of such Management Stockholder and the
Permitted Transferees, require the Company to purchase from such Management
Stockholder and the Permitted Transferees of such Management Stockholder all of
the Common Stock and any Options owned by such Management Stockholder and the
Permitted Transferees of such Management Stockholder (the "Second Management Put
Option" and together with the First Management Put Option, the "Management Put
Option"), and the Company shall, upon exercise of a Second Management Put
Option, purchase all of such Common Stock and any Options from such Management
Stockholder and the Permitted Transferees of such Management Stockholder, at the
purchase price set forth in paragraph (b) hereof. The Management Put Option
shall be exercised by delivery of written notice to the Company within the one
year period after termination of employment by the Management Stockholder with
respect to the First Management Put Option or after the sixth anniversary hereof
with respect to the Second Management Put Option (the "Management Put Notice"),
specifying a date not less than 60 and not more than 90 days after the date of
such Management Put Notice on which date the Company shall be required to
purchase such shares of Common Stock and any Options owned by such Management
Stockholder and the Permitted Transferees of such Management Stockholder.
(b) If the Management Stockholder and the Permitted Transferees of such
Management Stockholder elect to require the Company to purchase Common Stock and
any Options of a Management Stockholder and such Permitted Transferees pursuant
to a Management Put Option, the purchase price per share of such Common Stock
shall be equal to the Fair Market Value thereof, and the purchase price for each
Option, if any, shall be equal to the Fair Market Value of each share of Common
Stock issuable thereunder net of the applicable exercise price, all as
determined as at the date of the Management Put Notice (the "Management Put
Price").
(c) At the closing of the purchase of such shares of Common Stock and any
Options owned by such Management Stockholder and the Permitted Transferees of
such Management Stockholder pursuant to the exercise of a Management Put Option,
the Company shall pay in cash, or by certified or bank cashier's check, the
maximum amount of the Management Put Price then permitted to be paid in cash by
the Company's lenders, with the balance, if any, payable by delivery of a
Subordinated Promissory Note described in Section 4.3(b) hereof. The Company
will use commercially reasonable efforts (without any obligation on its part to
raise additional equity or debt for such purpose) to obtain any required waivers
from its lenders so as to permit payment of the Management Put Price in cash to
the maximum extent possible.
4.3 (a) In the event the Fair Market Value of shares of Common Stock owned
by such Management Stockholder and the Permitted Transferees of such Management
Stockholder or issuable under any Options owned by such Management Stockholder
shall not be agreed upon by the parties under this Section 4 within 30 days
after the mailing of the Management Put or Call Notice, as applicable, then the
Fair Market Value of such shares shall be determined by an
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Appraiser reasonably satisfactory to the parties; PROVIDED, that if the parties
cannot so agree, then: (i) the Company shall designate an Appraiser; (ii) the
Management Stockholder shall designate an Appraiser, (iii) the two Appraisers
shall designate a third Appraiser; and (iv) the third Appraiser shall perform
the appraisal. In the event the two Appraisers are unable to promptly designate
the third Appraiser, the parties shall then immediately submit the issue of
determining such Fair Market Value to binding arbitration before an arbitrator
selected from a list of arbitrators practicing in Atlanta, Georgia with any
arbitration proceedings in connection therewith to be held in Atlanta, Georgia
in accordance with the rules and procedures of the American Arbitration
Association applicable to commercial transactions. Any such appraisal or
arbitration shall be final and binding on the parties. The cost of such
appraisal or arbitration shall be borne equally by the parties to such
transaction.
(b) Any Subordinated Promissory Note issued pursuant to this Section 4
shall be a Subordinated Promissory Note of the Company which (A) shall be
payable in equal annual installments, commencing one (1) year after the date of
its issuance and with a final maturity date on the sixth anniversary of the date
hereof (provided, however, that if the Subordinated Promissory Note is issued
pursuant to the exercise of a Management Put Option, the final maturity date
thereof shall be the earliest date permitted by the Company's lenders), (B)
shall bear interest at a rate per annum equal to Prime plus two percent (2%),
but in no event shall such annual rate exceed twelve percent (12%) per annum or
be less than eight percent (8%) per annum and in each case, such interest shall
be payable monthly in arrears so long as permitted by the Company's lenders; (C)
shall be subordinated in a manner acceptable to the Company's and each
Subsidiary's lenders; (D) shall be prepayable at any time without premium or
penalty; (E) shall be subject to mandatory prepayment in full without premium or
penalty upon the occurrence of a Trigger Event or the earliest date permitted by
the Company's lenders; and (F) shall include restrictive covenants identical to
those set forth in the promissory notes issued pursuant to the Purchase
Agreement.
(c) The closing of any purchase and sale of Common Stock and any Options
pursuant to this Section 4 shall be held at the principal place of business of
the Company on the date specified in the Management Put or Call Notice, or 15
days after the final determination of the Management Put or Call Price,
whichever date is later. At the closing, the Company shall deliver the purchase
consideration against delivery by such Management Stockholder and any Permitted
Transferees of such Management Stockholder of certificate(s) representing the
purchased shares of Common Stock with stock power(s) duly endorsed for the
transfer thereof and appropriate instruments terminating all rights existing
under any purchased Options.
(d) Notwithstanding anything to the contrary herein, the exercise of
rights to purchase or the requirement of the Company to purchase shares of
Common Stock and any Options pursuant to this Section 4 shall be subject to
limitations, if any, imposed upon the Company under applicable law or, subject
to the Company's obligations in respect of seeking waivers from its lenders as
provided in Section 4.1(c) or 4.2(c) hereof, by any agreements with the
Company's lenders then in effect, including, without limitation, restrictions on
the ability of the Company to
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pay the cash portion of any Management Put or Call Price and on the ability to
pay principal or interest under the Subordinated Promissory Note during the
existence of any default under such lender's agreements.
ss.5. PUT/CALL RIGHTS OF MANAGEMENT STOCKHOLDERS IN THE EVENT
OF DEATH.
5.1 PUT. (a) In the event of the death of a Management Stockholder, then
at any time within one year of such event, the estate of such Management
Stockholder and the Permitted Transferees of any such Management Stockholder
may, at their option, sell to the Company, and require the Company to purchase,
all of the Common Stock and any Options owned by the estate of such Management
Stockholder and the Permitted Transferees of such Management Stockholder, at a
price per share equal to the Fair Market Value of such share of Common Stock and
at a purchase price for each Option, if any, equal to the Fair Market Value of
each share of Common Stock issuable thereunder net of the applicable exercise
price, all as determined as of the date of such death.
(b) The put option of the estate of such Management Stockholder and the
Permitted Transferees of such Management Stockholder pursuant to paragraph (a)
above shall be exercised by delivery of written notice to the Company, within
such applicable one year period, specifying a date not less than 60 and no more
than 90 days after the date of such notice on which date the Company shall be
required to close the required purchase of such Common Stock and any Options
owned by the estate of such Management Stockholder and the Permitted
Transferees.
5.2 CALL. (a) In the event of the death of a Management Stockholder, then
at any time within one year of such event, the Company may, at its sole option,
purchase all of the Common Stock and any Options owned by the estate of such
Management Stockholder and the Permitted Transferees of such Management
Stockholder, and the estate of such Management Stockholder and the Permitted
Transferees of such Management Stockholder shall, upon the exercise of such call
option, sell to the Company all of such Common Stock and any such Options, at a
price per share equal to the Fair Market Value of such share of Common Stock and
at a purchase price for each Option, if any, equal to the Fair Market Value of
each share of Common Stock issuable thereunder net of the applicable exercise
price, all as determined as at the date of such death.
(b) The call option of the Company pursuant to paragraph (a) above shall
be exercised by delivery of written notice to the estate of such Management
Stockholder and the Permitted Transferees of such Management Stockholder, within
such applicable one year period, specifying a date not less than 60 and no more
than 90 days after the date of such notice on which date the estate of such
Management Stockholder and the Permitted Transferees of such Management
Stockholder shall be required to sell to the Company the Common Stock and any
Options owned by the estate of such Management Stockholder and his Permitted
Transferees.
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5.3 (a) At the closing of the purchase of shares of Common Stock and any
Options owned by the estate of a Management Stockholder and the Permitted
Transferees pursuant to the exercise of a put or call option under Section
5.1(a) or 5.2(a) hereof, the Company shall pay in cash, or by certified or bank
cashier's check, the maximum amount of such purchase price then permitted to be
paid in cash by the Company's lenders, with the balance payable by delivery of a
Subordinated Promissory Note of the Company as described in Section 4.3(b)
hereof. The Company will use commercially reasonable efforts (without any
obligation on its part to raise additional equity or debt for such purpose) to
obtain any required waivers from its lenders so as to permit payment of the
purchase price in cash to the maximum extent possible.
(b) In the event the Fair Market Value of shares of Common Stock owned by
the estate of such Management Stockholder and the Permitted Transferees or
issuable under any Options owned by the estate of such Management Stockholder
shall not be agreed upon by the parties within 30 days after the mailing of the
applicable put or call notice, then the Fair Market Value of such shares shall
be determined in the manner specified in Section 4.3(a) hereof, with the cost of
such determination borne in the manner set forth in such Section.
(c) The closing of any purchase and sale of Common Stock and any Options
pursuant to this Section 5 shall be held at the principal place of business of
the Company on the date specified in the applicable put or call notice, or 15
days after the final determination of the purchase price, whichever date is
later. At the closing, the Company shall deliver the purchase consideration
against delivery by the estate of such Management Stockholder and the Permitted
Transferees of certificate(s) representing the purchased shares of Common Stock
with stock power(s) duly endorsed for the transfer thereof and appropriate
instruments terminating all rights existing under any purchased Options.
(d) Notwithstanding anything to the contrary herein, the exercise of
rights to purchase or the requirement of the Company to purchase shares of
Common Stock and any Options pursuant to this Section 5 shall be subject to
limitations, if any, imposed upon the Company under applicable law or, subject
to the Company's obligations in respect of seeking waivers from its lenders as
provided in Section 5.3(a) hereof, by any agreements with the Company's lenders
then in effect, including, without limitation, restrictions on the ability of
the Company to pay the cash portion of any put or call and on the ability to pay
principal or interest under the Subordinated Promissory Note during the
existence of any default under such lender's agreements.
ss.6. TAG ALONG RIGHTS.
In the event that Security Capital shall propose to Transfer to any Person
(other than to a Permitted Transferee), in any single transaction or series of
related transactions, 20% or more of the aggregate amount of Common Stock held
by Security Capital and its Permitted Transferees immediately prior to giving
effect to such transaction or transactions, such Transfer shall be conditioned
upon receipt by each of the other Stockholders of a binding written offer (and
the proposed transferee's compliance with the terms thereof if such offer is
accepted by any of the
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other Stockholders within 30 days of its receipt) by the proposed transferee to
purchase, for the same price per share and upon the same terms and conditions as
are applicable to Security Capital, a portion of each other Stockholder's Common
Stock of the Company up to (at such other Stockholder's option) an amount equal
to the same percentage of the other Stockholder's Common Stock in the Company as
the percentage of Security Capital's Common Stock of the Company proposed to be
sold or transferred (after adjustment of such percentage to account for shares
of Common Stock of each other Stockholder, in each case to the extent thereof to
be included in such sale pursuant to the terms of this Section 6). The closing
of the sale by any participating Stockholders shall occur concurrently with the
sale by Security Capital to the proposed transferee.
ss.7. DRAG ALONG RIGHTS.
In the event that, at any time from and after the date hereof, Security
Capital receives a bona fide written offer from another Person which is not a
partner or an affiliate of Security Capital, or a stockholder of Security
Capital, or a Permitted Transferee of Security Capital, to purchase more than
80% of the issued and outstanding Common Stock of the Company held by Security
Capital, which offer Security Capital is prepared to accept, then Security
Capital may, by notice in writing to the other Stockholders, require the other
Stockholders to sell, and the other Stockholders shall then be required to sell,
to the offeror the same percentage of Common Stock owned by them as the
percentage of shares being sold by Security Capital bears to all the shares of
Common Stock owned by Security Capital on the same terms and conditions
(including, without limitation, with respect to purchase price and terms of
payment) as are offered to Security Capital and as are specified in the
offeror's offer. The closing of the sale by Security Capital shall occur
concurrently with the sale by the other Stockholders to the offeror.
ss.8. CHANGE OF CONTROL PUT.
8.1 (a) In the event there occurs (i) the sale of assets of the Company
having fair value greater than 80% of the fair value of all assets of the
Company pursuant to any single sale or series of related sales (other than the
sale of inventory in the ordinary course of business); or (ii) a sale of stock
or series of related sales, or a merger, consolidation or similar corporate
reorganization of the Company, and as a result of which Security Capital shall
own, directly or indirectly, less than 51% of the outstanding voting securities
of the Company, the Company agrees to give prompt written notice of such event
to the Management Stockholders, whereupon each of the Management Stockholders
may, at his option exercisable at any time within 90 days of the date of such
notice, require the Company to purchase all of the Common Stock and any Options
owned by such Management Stockholder and any of his Permitted Transferees, and
the Company shall, upon the exercise of such put option, purchase from such
Management Stockholder and any of his Permitted Transferees, all of such Common
Stock and any such Options, at a price per share of Common Stock equal to the
Fair Market Value thereof, and at purchase price for each Option equal to the
Fair Market Value of each share of Common Stock
15
<PAGE>
issuable thereunder net of the applicable exercise price, all as of the date of
such event, in accordance with the terms of this Section 8.
(b) The put options of the Management Stockholders pursuant to paragraph
(a) above shall be exercised by delivery of written notice(s) to the Company,
within such applicable 90 day period, specifying a date not less than 60 and no
more than 90 days after the date of such notice on which date the Company shall
purchase all of the Common Stock and any Options owned by such Management
Stockholder and any of his Permitted Transferees.
8.2 (a) At the closing of the purchase of shares of Common Stock and any
Options pursuant to the exercise of a put option under Section 8.1(a) hereof,
the Company shall pay the purchase price therefor in cash.
(b) In the event the Fair Market Value of shares of Common Stock shall not
be agreed upon by the applicable parties within 30 days after the mailing of the
put notice, then the Fair Market Value of such Common Stock and any shares
issuable under any Options shall be determined in the manner specified in
Section 4.3(a) hereof, with the cost of such determination borne in the manner
set forth in such Section.
(c) The closing of any purchase and sale of Common Stock and any Options
pursuant to this Section 8 shall be held at the principal place of business of
the Company on the date specified in the applicable put notice, or 15 days after
the final determination of the purchase price, whichever date is later. At the
closing, the Company shall deliver the purchase consideration against delivery
by such Management Stockholder and any Permitted Transferees of certificate(s)
representing the purchased shares of Common Stock with stock power(s) duly
endorsed for the transfer thereof and appropriate instruments terminating all
rights existing under any purchased Options.
(d) Notwithstanding anything to the contrary herein, the exercise of the
Company's obligations to purchase shares of Common Stock and any Options
pursuant to this Section 8 shall be subject to limitations, if any, imposed upon
the Company under applicable law or by any agreements with the Company's lenders
then in effect. The Company will utilize commercially reasonable efforts
(without any obligation on its part to raise additional equity or debt for such
purpose) to obtain any required waivers from its lenders so as to permit payment
of the purchase price in cash to the maximum extent possible.
ss.9. EXCHANGE RIGHTS.
After the fifth anniversary of the date of this Agreement, any Stockholder
may elect, during the thirty (30) day period following the filing of Security
Capital's Annual Report on Form 10-K for the then most recently completed fiscal
year, to exchange (the "Exchange Right") (i) any or all of the Common Stock
owned by such Stockholder for shares of the Class A Common Stock, par value $.01
per share (the "Class A Common Stock"), of Security Capital at
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<PAGE>
an exchange rate equal to the aggregate Fair Market Value of the shares of the
Common Stock to be exchanged by such Stockholder divided by the SCC Fair Market
Value Per Share as of the date of delivery of the written notice as described
below; and (ii) any or all of the Options owned by such Stockholder and
currently exercisable for shares of the Class A Common Stock at an exchange rate
equal to (a) the sum of the aggregate Fair Market Value of the shares of the
Common Stock receivable upon exercise of the Options to be exchanged net of the
aggregate applicable exercise price, divided by (b) the SCC Fair Market Value
Per Share. In the event that the Company, Security Capital and such Stockholder
cannot agree on the Fair Market Value of the shares of the Common Stock to be
exchanged, such Fair Market Value shall be determined as set forth in Section
4.3(a).
The Exchange Right may be exercised by delivery of written notice to the
Company and Security Capital, specifying the number of shares of Common Stock
(including shares receivable upon exercise of exchanged Options) to be exchanged
and a date not less than 10 and not more than 30 days after the date of such
notice, on which the closing of such exchange shall occur.
The closing of any such exchange pursuant to this Section 9 shall be held
at the principal place of business of the Company on the date specified in such
written notice, or 15 days after final determination of the exchange ratio,
whichever is later. At the closing, Security Capital shall deliver to such
Stockholder certificate(s) representing the shares of the Class A Common Stock
to be issued in connection with such exchange, and such Stockholder shall
deliver to Security Capital certificate(s) representing the shares of the Common
Stock to be exchanged, with stock power(s) duly endorsed for transfer thereof
and appropriate instruments terminating all rights existing under any exchanged
Options.
ss.10. PARTIES TO THE AGREEMENT.
(a) Every stockholder or holder of an Option of the Company shall, at the
option of the Company's Board of Directors, be required to become a party to
this Agreement by signing or causing to be signed on its behalf and delivering
to the Company an Instrument of Accession if such Person is not already a party
to this Agreement. Except as set forth herein, no Person shall become an owner
of record of any shares of Common Stock of the Company through a subsequent
transfer from any Stockholder unless and until the Company has received an
executed Instrument of Accession signed by such Person and, in the case of a
transferee other than a Permitted Transferee, such Instrument of Accession shall
have been accepted by the Company. No transfer of shares of Common Stock shall
be effective for any purpose unless and until recorded on the Company's record
of stockholders upon surrender of the certificates representing such Common
Stock, duly endorsed for transfer. Common Stock shall be issued and recorded
only in the name of the beneficial owner thereof or in the name or name(s) of
the trustee or nominee or trustees or nominees holding legal title thereto for
such beneficial owner on a fully disclosed basis.
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<PAGE>
(b) All certificates representing shares of Common Stock shall be endorsed
with the following legend:
"THE SALE, TRANSFER, ASSIGNMENT, PLEDGE AND ENCUMBRANCE OF THE SECURITIES
REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE TERMS AND CONDITIONS OF
A STOCKHOLDERS' AGREEMENT DATED AS OF APRIL 6, 1999, AMONG PRIMROSE
HOLDINGS, INC. AND ITS STOCKHOLDERS. COPIES OF SUCH AGREEMENT MAY BE
OBTAINED AT NO COST BY WRITTEN REQUEST MADE BY THE HOLDER OF RECORD OF
THIS CERTIFICATE TO THE SECRETARY OF PRIMROSE HOLDINGS, INC."
Each Stockholder, by signing this Agreement or causing it to be signed,
represents and warrants to the Company that such Stockholder is acquiring or has
acquired its or his shares of Common Stock for its or his own account for
investment and not with a view to, or for resale in connection with, the
distribution thereof.
ss.11. AMENDMENT AND WAIVER.
No modification, amendment or waiver of any provision of this Agreement
will be effective against the Company or any other parties hereto unless such
modification, amendment or waiver is approved in writing by all the parties
hereto. The failure of any party to enforce any of the provisions of this
Agreement will in no way be construed as a waiver of such provisions and will
not affect the right of such party thereafter to enforce each and every
provision of this Agreement in accordance with its terms.
ss.12. SEVERABILITY.
Whenever possible, each provision of this Agreement will be interpreted in
such manner as to be effective and valid under applicable law, but if any
provision of this Agreement is held to be invalid, illegal or unenforceable in
any respect under any applicable law or rule in any jurisdiction, such
invalidity, illegality or unenforceability will not affect any other provision
or other jurisdiction, but this Agreement will be reformed, construed and
enforced in such jurisdiction as if such invalid, illegal or unenforceable
provision had never been contained herein.
ss.13. ENTIRE AGREEMENT.
Except as otherwise expressly set forth herein, this document embodies the
complete agreement and understanding among the parties hereto with respect to
the subject matter hereof and supersedes and preempts any prior understandings,
agreements or representations by or among the parties, written or oral, which
may have related to the subject matter hereof in any way.
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<PAGE>
ss.14. SUCCESSORS AND ASSIGNS.
This Agreement will inure to the benefit of and be enforceable by (i) the
Company and its successors and assigns and (ii) the Stockholders and their
respective heirs, executors, administrators and permitted assigns of each of
them so long as they hold shares of Common Stock or until this Agreement is
terminated.
ss.15. SECURITIES LAWS.
No holder shall Transfer shares of Common Stock unless, prior to such
Transfer, the Company shall receive, if requested by its Board of Directors, a
written opinion reasonably satisfactory in form and substance to the Company of
counsel satisfactory to the Company that the proposed Transfer may be effected
without registration under the Securities Act. The holder of Common Stock
proposed to be Transferred will pay the reasonable fees and disbursements of
counsel in connection with all opinions rendered pursuant to this Section.
ss.16. COUNTERPARTS.
This Agreement may be executed in separate counterparts, each of which
will be an original and all of which taken together will constitute one and the
same agreement.
ss.17. REMEDIES.
The parties hereto will be entitled to enforce their rights under this
Agreement specifically (without posting a bond or other security), to recover
damages by reason of any material breach of any provision of this Agreement and
to exercise all other fights existing in their favor. The parties hereto agree
and acknowledge that money damages may not be an adequate remedy for any breach
of the provisions of this Agreement and that any party may in its sole
discretion apply to any court of law or equity of competent jurisdiction for
specific performance and/or injunctive relief in order to enforce or prevent any
violation of the provisions of this Agreement.
ss.18. EMPLOYMENT.
Nothing contained in this Agreement is intended to create for any
Stockholder who is employed by the Company a right to continued employment with
the Company or employment in the same position or on the same terms as those
currently in effect.
ss.19. NOTICES.
Any notice or other communication in connection with this Agreement shall
be deemed to be delivered and received if in writing (or in the form of a telex
or telecopy) addressed as provided below (a) when actually delivered, in person,
(b) when telexed or telecopied to said
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<PAGE>
address, and confirmed by mail or overnight courier service, (c) in the case of
delivery by mail, three business days shall have elapsed after the same shall
have been deposited in the United States mails, postage prepaid and registered
or certified, or (d) in the case of delivery by overnight courier service, one
business day shall have elapsed after the same shall have been deposited with
such courier in accordance with the standard procedures of such courier.
(i) If to the Company or to Security Capital, at:
c/o Capital Partners
One Pickwick Plaza
Suite 310
Greenwich, Connecticut 06830
Attn: Brian D. Fitzgerald
with a copy to:
Morgan, Lewis & Bockius LLP
101 Park Avenue
New York, New York 10178
Attn: Christopher T. Jensen
(ii) If to any Stockholder, at the address for such Stockholder
specified on Schedule 2 hereto.
with a copy to:
[ ]
(iii) if to any other Person who becomes a party hereto, to it at
its address set forth in the Instrument of Accession signed by such
party.
ss.20. TERMINATION.
(a) This Agreement shall terminate as to any Stockholder by the Transfer
(other than to a Permitted Transferee or an individual Stockholder's
estate) of all of such Stockholder's Common Stock and Options in
accordance with the provisions of this Agreement.
(b) This Agreement shall terminate as to all Stockholders on the earlier of
(i) the effective date of a registration statement covering the Company's
first public offering of Common Stock, and (ii) ten (10) years from the
date hereof, unless all parties hereto renew the same for an additional
term specified in writing.
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<PAGE>
ss.21. GOVERNING LAW.
ALL QUESTIONS CONCERNING THE CONSTRUCTION, VALIDITY AND INTERPRETATION OF
THIS AGREEMENT WILL BE GOVERNED BY THE LAWS OF THE STATE OF DELAWARE APPLICABLE
TO CONTRACTS MADE AND TO BE PERFORMED WITHIN SUCH STATE.
[THE REST OF THIS PAGE INTENTIONALLY LEFT BLANK]
21
<PAGE>
ss.22. DESCRIPTIVE HEADINGS.
The descriptive headings of this Agreement are inserted for convenience
only and do not constitute a part of this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
COMPANY:
PRIMROSE HOLDINGS, INC.
By: /S/ A. GEORGE GEBAUER
A. George Gebauer
Vice President
STOCKHOLDERS:
SECURITY CAPITAL CORPORATION
By: /S/ A. GEORGE GEBAUER
Title: President
/S/ JO KIRCHNER
Jo Kirchner
/S/ ROBERT BENOWITZ
Robert Benowitz
/S/ RAYMOND ORGERA
Raymond Orgera
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<PAGE>
List of Schedules
Schedule 1 - Instrument of Accession
Schedule 2 - Addresses for Stockholder Notices
<PAGE>
Schedule 1
to Stockholders'
AGREEMENT
INSTRUMENT OF ACCESSION
Reference is made to that certain Stockholders' Agreement dated as of
April 6, 1999, a copy of which is attached hereto (as amended and in effect from
time to time, the "Stockholders' Agreement"), among Primrose Holdings, Inc., a
Delaware corporation (the "Company"), and the persons set forth therein.
The undersigned, in order to become the owner or holder of ___ shares (the
"Shares") of Common Stock, $.01 par value per share, of the Company, hereby
agrees that by the undersigned's execution hereof, the undersigned shall become
a party to the Stockholders' Agreement and subject to all of the restrictions,
conditions and obligations applicable to Stockholders set forth in the
Stockholders' Agreement. This Instrument of Accession shall take effect and
shall become a part of said Stockholders' Agreement immediately upon execution
by the undersigned.
Executed as of the date set forth below under the laws of the State of Delaware.
Name:___________________________________
Signature:______________________________
Address:________________________________
Date:___________________________________
Accepted:
PRIMROSE HOLDINGS, INC.
By:_________________________________
Title:______________________________
Date:_______________________________
<PAGE>
Schedule 2
to Stockholders'
AGREEMENT
ADDRESSES FOR STOCKHOLDER'S NOTICES
EXHIBIT 5
MANAGEMENT ADVISORY SERVICES AGREEMENT
AGREEMENT dated as of April 6, 1999 between The Jewel I, Inc. d/b/a
Primrose Country Day School ("Country Day"), Metrocorp Properties, Inc.
("Metrocorp") and Primrose School Franchising Company ("Primrose") (Primrose,
Country Day and Metrocorp are referred to individually as a "Company" and
collectively as the "Companies") and Security Capital Corporation, a Delaware
corporation ("Security Capital").
W I T N E S S E T H:
WHEREAS, Security Capital desires to provide or cause to be provided
management advisory services to the Companies in the areas of corporate
development, strategic planning, investment and financial matters and general
business policies, and the Companies desires to obtain such services.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants and agreements hereinafter set forth, the parties hereto agree,
intending to be legally bound, as follows:
1. MANAGEMENT ADVISORY SERVICES. Security Capital shall during the term of
this Agreement provide or cause to be provided such management advisory services
to the Companies in the areas of corporate development, strategic planning,
investment and financial matters and general business policies as the Companies
shall from time to time reasonably request.
2. MANAGEMENT ADVISORY SERVICES FEE. (a) Subject to Section 6 below, the
Companies shall during the term of this Agreement pay to Security Capital an
annual management advisory services fee (the "Fee") equal to the greater of
$250,000 (the "Minimum Fee") or 5% of the annual EBITDA (as defined in the Stock
Purchase Agreement, dated as of April 6, 1999, by and among Security Capital,
Primrose Holdings, Inc. ("Holdings"), Paul L. Erwin and The Paul L. Erwin
Grantor Retained Annuity Trust) of the Companies (the "Maximum Fee") for the
services described in Section 1 hereto.
(b) The Minimum Fee shall be payable in monthly installments on the fifth
day of each month of each year during the term hereof. The Fee due for April
1999 shall be the pro rata portion of the Fee allocable to the period of time
from the date hereof through April 30, 1999. Such pro rata monthly fee shall be
due on the date hereof. The difference between the Maximum Fee and the Minimum
Fee, if positive, for any year during the term hereof shall be payable on the
fifth day of the April immediately following the year for which the Maximum Fee
has last been determined.
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<PAGE>
(c) The Fee shall be exclusive of out-of-pocket costs.
3. COSTS. The Companies shall reimburse Security Capital for all
reasonable out-of-pocket costs incurred by or on behalf of Security Capital in
connection with the services described in Section 1. For purposes of this
Agreement, an acquisition, divestiture, public offering of securities or any
other extraordinary transaction of any type will not be deemed to be a matter
for which management advisory services have been bargained for hereunder and,
therefore, all out-of-pocket costs incurred in connection with any such
transaction will not be subject to such limitation. Security Capital shall
furnish such evidence that such costs were incurred as the Companies may from
time to time reasonably request.
4. ACCESS. The Companies will provide to Security Capital and its
representatives reasonable access during normal business hours, upon reasonable
notice and in such manner as will not unreasonably interfere with the conduct of
the business of the Companies, to the books, records, tax returns and other
information with respect to the business of the Companies as Security Capital or
such representatives consider necessary or appropriate for the purpose of
furnishing advisory services as provided in Section 1.
5. TERM. The term of this Agreement shall commence as of the date hereof
and shall terminate on April 6, 2009 or such later date as may be approved by
Security Capital and the Companies.
6. SUBORDINATION. Each of Security Capital and the Companies hereby
agrees, for itself and its successors and assigns, that the Fee and all other
amounts payable to Security Capital hereunder (the "Subordinated Obligations")
are expressly "subordinate and junior in right of payment" to any obligations,
indebtedness and liabilities of the Companies under that certain Credit
Agreement dated as of April 6, 1999 (as amended, supplemented, waived, modified,
refinanced, increased, assigned or replaced from time to time, whether with the
same or different lenders (the "Credit Agreement"), among Primrose Holdings,
Inc., a Delaware corporation ("Holdings"), Primrose, the lenders from time to
time parties thereto (the "Lenders") and Canadian Imperial Bank of Commerce, as
administrative agent (in such capacity, the "Administrative Agent"), and the
other Loan Documents (as defined in the Credit Agreement to which any of the
Companies is a party (the "Senior Obligations"). "Subordinate and junior in
right of payment" means that (1) no part of the Subordinated Obligations shall
have any claim to the assets of any of the Companies on a parity with or prior
to the claim of the Senior Obligations, (2) unless and until the Senior
Obligations have been paid in full, without the express prior written consent of
the Administrative Agent, Security Capital will not take, demand or receive from
the Companies, and the Companies will not make, give or permit, directly or
indirectly, by set-off, redemption, purchase or in any other manner, any payment
of or security for the whole or any part of the Subordinated Obligations, (3)
unless and until the Senior Obligations have been paid in full, without the
express prior written consent of the Administrative Agent, Security Capital will
not accelerate for any reason payment of any portion of the Subordinated
Obligations and (4) in the event of any distribution of any assets of any of
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<PAGE>
the Companies or the proceeds thereof in any liquidation, receivership,
bankruptcy proceeding or like occurrence, any payment or distribution which, but
for the provisions of this paragraph, would otherwise be payable or
distributable to Security Capital or otherwise in respect of the Subordinated
Obligations shall be instead paid over or delivered to the Administrative Agent
for application on account of the Senior Obligations, and Security Capital
irrevocably authorizes the Administrative Agent to file proofs of claim, vote,
and otherwise take action in connection with any such liquidation, receivership,
bankruptcy proceeding or other like occurrence. Notwithstanding the foregoing
sentence, at any time EXCEPT when any Event of Default (as defined under the
Credit Agreement) has occurred and is continuing, the Companies may make , and
Security Capital may receive, scheduled payments on account of the Fee in
accordance with the terms of Section 2 hereof. Any amounts which pursuant to
this Section 6 are not paid to Security Capital shall accrue and shall be
payable to Security Capital upon the earlier of the date the Senior Obligations
shall have been paid in full in cash or the event as a result of which such
payment was deferred pursuant to this Section 6 ceases to exist (unless such
payment at such time would result in an Event of Default under the Credit
Agreement). The expressions "prior payment in full", "payment in full", "paid in
full" and other similar phrases when used herein with respect to the Senior
Obligations mean the payment in full in cash, in immediately available funds, of
all of the Senior Obligations.
7. AMENDMENT AND MODIFICATION. Subject to applicable law, this Agreement
may be amended, modified or supplemented only by a written agreement of Security
Capital and the Companies.
8. HEADINGS. The Section headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
9. EXECUTION IN COUNTERPARTS. This Agreement may be executed in
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
10. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the law of the State of Connecticut applicable to agreements
made and to be performed in Connecticut without regard to such State's conflicts
of laws principles and shall be construed without regard to any presumption or
other rule requiring the construction of an agreement against the party causing
it to be drafted.
[Signature Page to Follow]
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the date first above written.
SECURITY CAPITAL CORPORATION
By:/S/ A. GEORGE GEBAUER
Name: A. George Gebauer
Title: President
JEWEL I, INC.
By: /S/ CALVIN A. NEIDER
Name: Calvin A. Neider
Title:President
PRIMROSE SCHOOL FRANCHISING
COMPANY
By: /S/ CALVIN A. NEIDER
Name: Calvin A. Neider
Title:President
METROCORP PROPERTIES, INC.
By: /S/ CALVIN A. NEIDER
Name: Calvin A. Neider
Title:President
-4-
EXHIBIT 6
THIRD AMENDMENT TO ADVISORY SERVICES AGREEMENT
This THIRD AMENDMENT TO ADVISORY SERVICES AGREEMENT, dated as of April 6,
1999, by and between SECURITY CAPITAL CORPORATION, a Delaware corporation
("Security Capital"), and CAPITAL PARTNERS, INC., a Connecticut corporation
("Capital Partners").
WITNESSETH
WHEREAS, Capital Partners and Security Capital entered into a certain
Advisory Services Agreement dated as of January 26, 1990 (the "Original
Agreement"), pursuant to which Capital Partners agreed to provide advisory and
other services to Security Capital and its subsidiaries in the areas of
investments, general administration, corporate development, strategic planning,
stockholder relations, financial matters and general business policy; and
WHEREAS, Capital Partners presented to Security Capital a potential
acquisition of all of the issued and outstanding shares of capital stock of
Jewel I, Inc. d/b/a Primrose Country Day School ("Country Day"), Metrocorp
Properties, Inc. ("Metrocorp") and Primrose School Franchising Company
("Primrose") (Primrose, Country Day and Metrocorp are referred to individually
as a "Company" and collectively as the "Companies") (the shares of all of the
Companies are referred to collectively as the "Shares"); and
WHEREAS, Security Capital formed Primrose Holdings, Inc. ("Holdings") to
acquire the Shares; and
WHEREAS, the purchase of the Shares by Holdings has been consummated as of
the date hereof and, concurrently therewith, the Companies and Security Capital
entered into a Management Advisory Services Agreement pursuant to which Security
Capital will provide or will cause to be provided to the Companies management
advisory services in the areas of corporate development, strategic planning,
investment and financial matters and general business policies; and
WHEREAS, Security Capital intends to request the assistance of Capital
Partners in providing such management advisory services to the Companies from
time to time and, in connection therewith, Capital Partners and Security Capital
desire to amend their Original Agreement to assure Capital Partners of adequate
compensation in respect of such additional services.
NOW THEREFORE, in consideration of the premises and for good and valuable
other consideration, receipt of which is hereby acknowledged, the parties hereto
agree, intending to be legally bound, as follows:
<PAGE>
1. Section 2 of the Original Agreement is hereby amended to increase the
"Fee" payable thereunder by amending the first paragraph of said Section 2
to read in its entirety as
follows:
"Security Capital shall, during the term of this Agreement, pay to
Capital Partners as annual advisory fee (the "Fee") in an initial
amount of $400,000 plus an amount equal to the greater of $ 250,000
(the "Minimum") or 5% of the annual EBITDA (as defined in the Stock
Purchase Agreement dated as of April 6, 1999, by and among Security
Capital, Holdings, Paul L. Erwin and The Paul L. Erwin Grantor
Retained Annuity Trust) of the Companies (the "Maximum"), for the
services described in Section 1 of the Management Advisory Services
Agreement. A portion of the Fee, in the amount of $20,833.33, shall
be payable monthly on the fifth day of each month of each year
during the term hereof. The Fee due for April 1999 shall be the pro
rata portion of the Fee allocable to the period of time from the
date hereof through April 30, 1999. Such pro rata monthly fee shall
be due on the date hereof. The difference between the Maximum and
the Minimum, if positive, for any year during the term hereof shall
be payable on the fifth day of April immediately following the year
for which the Maximum has last been determined."
2. The parties hereto recognize that the scope of operations of Security
Capital and, in particular, changes in the scope of such operations
resulting from the acquisition of the stock and operations of the
Companies made indirectly by Security Capital, warrant an adjustment to
the "Fee" payable under the Original Agreement.
3. Security Capital hereby represents that, in accordance with Section 7 of
the Original Agreement, for purposes of this Second Amendment, Security
Capital has acted through its independent directors.
4. Each of Capital Partners and Security Capital hereby ratifies and confirms
the Original Agreement in all respects, except as amended hereby.
<PAGE>
IN WITNESS WHEREOF, the undersigned have hereunto set their hands as of the day
and year first above written.
SECURITY CAPITAL CORPORATION
By: /S/ A. GEORGE GEBAUER
Name: A. George Gebauer
Title:President
CAPITAL PARTNERS, INC.
By:/S/ A. GEORGE GEBAUER
Name: A. George Gebauer
Title: Vice President
EXHIBIT 7
TAX SHARING JOINDER AGREEMENT
Agreement dated as of April 6, 1999 among Security Capital
Corporation, a Delaware corporation ("SCC"), Primrose Holdings, Inc., a Delaware
corporation ("Holdings"), The Jewel I, Inc. d/b/a Primrose Country Day School
("Jewel"), Primrose School Franchising Company ("Primrose") and Metrocorp
Properties, Inc. ("Metrocorp").
WHEREAS, as of the date of this Agreement, SCC directly owns 98% of
the outstanding shares of stock of Holdings and Holdings directly owns 100% of
Jewel, Primrose and Metrocorp;
WHEREAS, each directly or indirectly owned subsidiary of SCC that is
or that becomes eligible as an "includible corporation" to join in the
consolidated federal income tax return of SCC under Section 1501 of the Internal
Revenue Code of 1986 (the "Code"), as amended, by virtue of being a member of an
"affiliated group" (the "Group") of which SCC is the "common parent," as those
terms are defined in Section 1504 of the Code, consents or may consent to the
filing of such a return;
WHEREAS, SCC is a party to a Consolidated Income Tax Sharing
Agreement dated May 17, 1996 (the "Tax Sharing Agreement") between SCC and P.H.
Holdings, Inc., a Delaware corporation, and Possible Dreams Ltd., a Delaware
corporation, which provides for the proper allocation of federal income tax
liability of such parties, all of which are members of the Group, among
themselves;
WHEREAS, Pumpkin Masters Holdings, Inc., a Delaware corporation
("Holdings") and Pumpkin Ltd., a Delaware corporation ("Pumpkin") became parties
to the Tax Sharing Agreement pursuant to a Joinder Agreement dated as of June
27, 1997 between SCC, Holdings and Pumpkin;
WHEREAS, the Tax Sharing Agreement provides that, upon the joint
consent of SCC and any corporation that becomes a directly or indirectly owned
subsidiary of the Company, such corporation may become a party to the Tax
Sharing Agreement;
NOW THEREFORE, in consideration of the premises and the mutual
covenants contained herein, the parties hereto agree as follows:
1. JOINDER. SCC consents to each of Holdings, Jewel, Primrose and
Metrocorp being bound by and becoming a party to, and each of Holdings, Jewel,
Primrose and Metrocorp agrees to be bound by and become a party to, the terms
and principles of the Tax Sharing Agreement, and each party to this Agreement
shall use its best efforts to effectuate such intention.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the date first written above.
SECURITY CAPITAL CORPORATION
By: /S/ A. GEORGE GEBAUER
Name: A. George Gebauer
Title: President
PRIMROSE HOLDINGS, INC.
By: /S/ CALVIN NEIDER
Name: Calvin Neider
Title: President
THE JEWEL I, INC.
By:/S/ CALVIN NEIDER
Name:Calvin Neider
Title:President
PRIMROSE SCHOOL FRANCHISING COMPANY
By:/S/ CALVIN NEIDER
Name:Calvin Neider
Title: President
METROCORP PROPERTIES, INC.
By: /S/ CALVIN NEIDER
Name: Calvin Neider
Title: President
2
EXHIBIT 8
STATE OF GEORGIA,
COUNTY OF BARTOW:
LEASE AGREEMENT
THIS LEASE AGREEMENT, made this 6th day of April, 1999 by and between
ERWIN FAMILY PARTNERSHIP, LLLP, A GEORGIA LIMITED PARTNERSHIP (hereinafter
called "Landlord"), and PRIMROSE SCHOOL FRANCHISING COMPANY, A GEORGIA
CORPORATION, (hereinafter called "Tenant").
WITNESSETH:
WHEREAS, Landlord owns certain real property located in Cartersville,
Georgia, located at 199 South Erwin Street, Bartow County, Cartersville,
Georgia, which is more particularly described in Exhibit "A", attached hereto
and made a part hereof (the "Real Property"); and
WHEREAS, there are certain improvements located on the Real Property, the
same being an office building (the Real Property and said building and parking
lot being hereinafter referred to collectively as the "Premises"); and
WHEREAS, Landlord wishes to lease the Premises to Tenant and Tenant wishes
to take the Premises from Landlord under the terms and conditions as stated
herein;
NOW, THEREFORE, in consideration of the mutual promises and covenants
contained herein, Ten ($10.00) Dollars, and other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, the
parties agree as follows:
SECTION 1
THE PREMISES
1.01. Landlord does hereby demise and lease the Premises to Tenant and
Tenant does hereby accept and lease the Premises from Landlord, for the term,
and subject to the covenants, agreements, and conditions herein.
1.02. Tenant paying the rent and other charges hereby reserved, and
performing and observing all of the several covenants by it to be kept and
performed, may peaceably hold and enjoy the Premises with exclusive control and
possession during the term of this Lease.
1.03. Tenant acknowledges that it has inspected the Premises, knows the
condition
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thereof, and accepts the Premises in its present condition as suitable for the
purposes which the Premises are leased, subject to its right to make alterations
and to remodel as provided in paragraph 8.01 herein.
SECTION 2
THE TERM AND MONTHLY RENTAL
2.01. The term of this Lease will commence on the 6th day of April, 1999
("the Commencement Date"), and shall continue for a period of two (2) years from
and after the Commencement Date (such period being hereinafter called the
"Term"). Provided this Lease is in full force and effect, Tenant shall have the
option to renew this Lease for three, one-year terms. Tenant shall exercise each
option by notice to Landlord on or before the date which is ninety (90) days
prior to the then expiration date of this Lease, as the same may have been
extended. If Tenant shall exercise a renewal option, this Lease shall be
extended for an additional one-year term on the same covenants and conditions of
this Lease except that the annual rent shall be as set forth in Section 2.03
below and Tenant shall have one less option to renew this Lease for an
additional one-year term.
2.02. During the initial term, the annual rent paid by Tenant to Landlord
shall be the sum of Sixty-Six Thousand and No/100 ($66,000.00) Dollars, payable
in equal monthly installments of Five Thousand Five Hundred and No/100
($5,500.00) Dollars. All rental payments shall be due and payable on the tenth
(10th) day of each month at Landlord's principal office located at 5555 Cave
Spring Road, Cave Spring, Georgia 30124, or at such other place as Landlord may
designate in writing. Any payment not made by the due date shall be subject to a
late fee of two percent (2%) of such rental payment.
2.03. During any renewal term the annual rent shall be increased by the
percentage increase, if any, in the Index (as hereinafter defined). The new
annual fixed rent during such renewal term shall equal the sum of (i) the then
current annual rent for the then expired term and (ii) the product of the annual
rent for the then expired term and the percentage change, if any, in the Index
for the month immediately preceding the month in which the then current renewal
term commences and the Index for the month immediately preceding the
commencement of the then expired term. The term "Index" shall mean the
"All-Items Figures for All Urban Consumers" in
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the "Consumer Price Index U.S. City Average (1982-84=100)" issued by the Bureau
of Labor Statistics of the United States Department of Labor. If the Index, as
published by the Bureau of Labor Statistics, is discontinued, then the "Index"
published by the United States Department of Commerce shall be used (with proper
adjustment), and if the Department of Commerce Index is discontinued, then the
parties shall agree on a suitable substitute. If Landlord and Tenant are unable
to agree on a suitable substitute, the substitute shall be determined by
arbitration in the manner provided by law. As soon as practicable after the
publication of the Index or the determination of a substitute index, Landlord
shall determine the change in the Index, if any. Pending such determination,
Tenant shall continue to pay annual rent at the same rate as the then expired
term. When the change has been determined, Tenant shall promptly pay the
increase to Landlord.
SECTION 3
USE OF THE PREMISES
3.01. During the continuation of this Lease, including any assignment or
subletting, the Premises may be used and occupied only as office space;
provided, that Tenant will not knowingly use or permit any person to use the
Premises or any part thereof for any use or purposes in violation of any
applicable laws, ordinances, or other regulations, including, but not limited
to, environmental laws. During the continuation of this Lease, Tenant shall keep
the Premises and every part thereof in a clean and wholesome condition and
generally will comply with all laws, rules, ordinances and regulations;
provided, however, Tenant shall not be required to perform structural repairs
unless such structural repairs are required as a result of Tenant's manner of
use. Tenant and its assignees and sub-lessees shall have the right to display
signs on the Premises, but only such as advertise the business carried on in the
Premises by the Tenant and its assignee or sub-lessee and such signs shall
comply in all respects with applicable laws, regulations and ordinances. Upon
termination of this Lease, Landlord may require Tenant to remove, at Tenant's
sole expense, all signs erected by Tenant on the Premises during the
continuation of this Lease.
SECTION 4
TAXES, ASSESSMENTS & UTILITIES
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4.01. Tenant shall pay 100% of all of the ad valorem and other taxes
assessed against the Premises during the term of this Lease.
4.02. Tenant shall pay 100% of all of the ad valorem and other personal
property taxes assessed against the furniture, fixtures and equipment placed or
located in the Premises by Tenant during the term of the Lease.
4.03. Tenant agrees to pay all charges made against the Premises for gas,
water, heat, electricity, and all other utilities as and when due during the
continuation of the Lease, and shall pay all charges for trash collection, if
any.
SECTION 5
INSURANCE; WAIVER OF SUBROGATION
5.01. Tenant will obtain and maintain fire and casualty insurance on the
Premises during the term of the Lease in the amount equal to the amounts
maintained on the date hereof, naming Landlord and Tenant as insureds thereunder
as their respective interest may appear, and also naming all lienholders as
mortgagees.
5.02. Tenant shall procure and maintain throughout the term of this lease
a policy of insurance, at its sole cost and expense, insuring Tenant, Landlord,
and all other persons designated by Landlord against any and all liability for
injury to or death of a person, or persons, and for damage to or destruction of
property occasioned by or arising out of or in connection with the use and
occupancy of the Premises, or by the condition of the Premises, the limits of
such policy or policies shall be equal to the amounts currently maintained by
Tenant.
5.03. Tenant shall insure the contents of the Premises. Landlord shall
not, except in the event of his gross negligence, have any liability or
obligations to Tenant, its employees, agents, customers, contractors or any
other third party for the contents of the Premises.
5.04. The insurance policy or policies to be provided by Tenant hereunder
shall be issued by an insurance company or companies authorized to do business
in the State of Georgia. At Landlord's request, certificates of insurance
evidencing the insurance coverage will be delivered by Tenant to Landlord prior
to the Commencement Date, together with receipts, evidence and payment of the
premiums therefor.
5.05. If Tenant fails to provide all or any of the insurance required by
this Section, or
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<PAGE>
subsequently fails to maintain such insurance in accordance with the
requirements of this Section, Landlord may (but will not be required to), and
without waiving or releasing Tenant from any of Tenant's obligations, procure or
renew such insurance, and any amounts paid by Landlord for such insurance will
be additional rental due and payable on or before the next rental date, together
with late charges and interest, if any, as provided in Section 2.
5.06. Landlord and Tenant shall each cause all policies of insurance
maintained with respect to the Premises, respectively, to contain provisions
that the insurance shall not be invalidated by each releasing the other of
liability if such a provision is obtainable without any additional premium
therefor or if such provision is obtainable with an additional premium therefor
and the released party elects to pay and does pay such additional premium. If
such provision is contained in such policies and is in force, Landlord and
Tenant shall each be deemed to have released the other for damage normally
covered by such insurance.
SECTION 6
DAMAGE BY FIRE OR OTHER CASUALTY
6.01. If the Premises are totally destroyed by storm, fire, lightning,
earthquake or other casualty, this Lease shall terminate as of the date of such
destruction, and rental shall be accounted for as between Landlord and Tenant as
of that date. If the Premises are damaged, but not wholly destroyed by any such
casualties, rental shall abate in such proportion as use of the Premises has
been destroyed, and Landlord shall restore the Premises as quickly as possible
to the same condition as before the damage was incurred, whereupon full rental
shall recommence. Notwithstanding the foregoing if more than 35% of the Premises
are damaged by storm, fire, lightning, earthquake or other casualty then either
party may terminate this Lease by notice to the other party given not later than
thirty (30) days after the date of such casualty.
SECTION 7
REPAIRS
7.01. Tenant shall be responsible for all non structural repairs to the
Premises, all ordinary maintenance or repairs to the building systems and all
repairs to the Premises resulting from the negligence or willful misconduct of
Tenant.
7.02. Except as set forth in Section 7.01, Landlord shall be responsible
for all repairs to
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the roof, the structural elements of the Premises and the building systems.
SECTION 8
ALTERATIONS
8.01. Tenant shall have the right to make such alterations, additions, or
improvements to the Premises only with the consent of Landlord. Notwithstanding
the foregoing, Landlord shall not unreasonably withhold its consent in
connection with any nonstructural alterations, additions or improvements to the
Premises and Landlord's consent shall not be required in connection with
decorative changes to the Premises (such as painting, carpeting, etc.). All
alterations, additions, and improvements made by Tenant shall remain the
property of the Tenant until the termination of the Lease; provided, that said
alterations, additions, or improvements shall become the property of Landlord at
the termination of the Lease and shall remain on and be surrendered with the
Premises.
SECTION 9
EMINENT DOMAIN
9.01. If all or a portion of the Premises is taken in any manner for any
public or quasi-public use, and the remainder of the Premises is unsuitable for
the conduct of Tenant's business in Tenant's reasonable opinion then Tenant
shall have the option to terminate this Lease within 30 days after the date
title is vested in the condemning authority.
SECTION 10
ASSIGNMENT OR SUBLETTING
10.01. Tenant may not assign this Lease or sublet the whole or any part of
the Premises without the written consent of Landlord which consent shall not be
unreasonably withheld. Notwithstanding anything contained herein to the contrary
the foregoing shall not apply to and Tenant may, without Landlord's written
consent, assign this Lease or sublet all or any portion of the Premises to (i)
any entity that merges with Tenant, (ii) any entity that acquires all or
substantially all of the stock or assets of Tenant or (iii) any entity which is
controlled by, controls or under common control with Tenant.
SECTION 11
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INSPECTION OF PREMISES
11.01. Tenant agrees to permit Landlord and his authorized representatives
to enter the Premises at all reasonable times, upon reasonable notice for the
purpose of inspecting the same. Landlord and its authorized representatives
shall have the right to enter the Premises at any time without prior notice (but
Landlord shall promptly notify Tenant after such entry) in the event of an
emergency (i.e. imminent danger to persons or property).
SECTION 12
FIXTURES AND EQUIPMENT
12.01. All furnishings and equipment, which are paid for and placed in or
on the Premises by Tenant from time to time will remain the property of Tenant.
Provided however, all fixtures placed in or on the Premises shall become a part
of the Premises and the property of Landlord upon termination of this Lease.
SECTION 13
NOTICE OR DEMANDS
13.01. All bills, notices, statements, communications to or demands
(collectively, "notices or demands") upon Landlord or Tenant desired or required
to be given under any of the provisions hereof must be in writing. Any such
notices or demands from Landlord to Tenant will be given by personal delivery or
by United States certified mail, return receipt requested, in an envelope
properly stamped and addressed to Tenant at Primrose Holdings, c/o Capital
Partners, 1 Pickwick Plaza, Suite 310, Greenwich, Connecticut 06830, Attention:
James G. Anderson, with a copy to Morgan, Lewis & Bacchus LP, 101 Park Avenue,
New York, New York, 10178, Attention: Christopher Jensen, Esq., or such other
address as Tenant may have last furnished by written notice to Landlord, and any
such notices or demands from Tenant to Landlord will be given by personal
delivery or by United States certified mail, return receipt requested, in an
envelope properly stamped and addressed to Landlord at 5555 Cave Spring Road,
Cave Spring, Georgia 30124, or such other address as Landlord may have last
furnished by written notice to Tenant. The effective date of such notice or
demand will be deemed to be the time when personally delivered or three (3)
business days after so mailed as herein provided.
SECTION 14
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BREACH: INSOLVENCY: RE-ENTRY
14.01. If any rent payable by Tenant to Landlord remains unpaid for more
than ten (10) days after it is due, and if such default continues for a period
of five (5) days after written notice thereof to Tenant or if Tenant violates or
defaults in the performance of any of its obligations in this Lease and the
violation of default continues for a period of thirty (30) days after written
notice, by Landlord to Tenant, (or if such default is not capable of being cured
within such thirty (30) day period and Tenant fails to commence to cure such
default within said thirty (30) day period and thereafter diligently prosecute
such cure to completion) then Landlord may (but will not be required to) declare
this Lease forfeited and the term ended, or re-enter the Premises, or may
exercise all other remedies available under Georgia law. Landlord will not be
liable for damages to person or property by reason of any legitimate re-entry or
forfeiture, and Landlord will be aided and assisted by Tenant, its agents,
representatives, and employees. Tenant, by the execution of this Lease, waives
notice of re-entry by Landlord. In the event of re-entry by Landlord without
declaration of forfeiture, the liability of Tenant for the rent provided herein
will not be relinquished or extinguished for the balance of the Lease term, and
any rentals prepaid may be retained by Landlord and applied against the costs of
re-entry, or as liquidated damages, or both. Tenant will pay, in addition to the
rentals and other sums agreed to be paid hereunder, reasonable attorneys' fees,
costs and actual expenses incurred by or on behalf of Landlord in any suit or
action instituted by or involving Landlord to enforce the provisions of, or the
collection of the rentals due Landlord under this Lease, including any
proceeding under the Federal Bankruptcy Code.
In the event of declaration of forfeiture at or after the time of
re-entry, Landlord may re-lease the Premises or any portion(s) of the Premises
for a term or terms and at a rent which may be less than or exceed the balance
of the term of and the rent reserved under this Lease. In such event, Tenant
will pay to Landlord as liquidated damages for Tenant's default any deficiency
between the total rent reserved herein and the net amount, if any, of the rents
collected on account of the lease or leases of the Premises which otherwise
would have constituted the balance of the Lease term. In computing such
liquidated damages, there will be added to the deficiency any expenses which
Landlord may incur in connection with releasing, such as legal
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expenses, attorneys' fees, brokerage fees and expenses, advertising and for
keeping the Premises in good order or for preparing the Premises for re-leasing.
Any such liquidated damages will be paid in monthly installments by Tenant on
the Rent Day and any suit brought to collect the deficiency for any month will
not prejudice Landlord's right to collect the deficiency for any subsequent
month by a similar proceeding. In lieu of the foregoing computation of
liquidated damages, Landlord may elect, at its sole option, to receive
liquidated damages in one payment equal to any deficiency between the total rent
reserved hereunder and the fair and reasonable rental of the Premises, both
discounted at ten percent (10%) per annum to present value at the time of
declaration of forfeiture.
Whether or not forfeiture has been declared, Landlord will not be obliged
or be responsible in any way for failure to re-lease the Premises or, in the
event that the Premises are released, for failure to collect the rent under such
re-leasing, provided that Landlord shall attempt to re-lease the Premises. The
failure of Landlord to re-lease all or any part of the Premises will not release
or affect Tenant's liability for rent or damages.
SECTION 15
SURRENDER OF PREMISES ON TERMINATION
15.01. At the expiration (or earlier termination) of this Lease, Tenant
will surrender the Premises broom clean and in as good condition and repair as
they were on the date of this Lease, reasonable wear and tear and damage by
casualty excepted, and promptly upon surrender will deliver all keys for the
Premises to Landlord at the place then fixed for payment of rent.
SECTION 16
PERFORMANCE BY LANDLORD OF THE COVENANTS OF TENANT
16.01. If Tenant fails to pay any sum of money, other than rental,
required to be paid hereunder or fails to perform any act on its part to be
performed hereunder, and such failure shall continue for a period of thirty (30)
days (or a reasonable period of less than thirty (30) days when life, person, or
property are in jeopardy) after notice thereof by Landlord, Landlord may (but
shall not be required to), and without waiving or releasing Tenant from any of
Tenant's obligations, make any such payment or perform any such other act. All
sums so paid by Landlord and all necessary incidental costs, including without
limitation the cost of repair,
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maintenance or restoration of the Premises, if so performed by Landlord
hereunder, shall be deemed additional rental and shall be payable to Landlord
within five (5) days after receipt of invoice by Tenant. On default in such
payment, Landlord shall have the same remedies as on default in payment of rent.
The rights and remedies granted to Landlord under this Section 17 shall be in
addition to, and not in lieu of all other remedies, if any, available to
Landlord under this Lease or otherwise, and nothing herein contained shall be
construed to limit such other remedies of Landlord with respect to any matters
covered herein.
SECTION 17
SUBORDINATION: ESTOPPEL CERTIFICATES
17.01. Tenant agrees that Landlord may choose to make this lease
subordinate or paramount to any mortgages and ground or underlying leases now or
hereafter affecting the Premises and to any and all advances to be made
thereunder or to be secured thereby and to the interest and charges thereon, and
all renewals, replacements and extensions thereof, provided the mortgagee or
lessor named in any such mortgages or leases agrees to recognize the lease of
Tenant in the event of foreclosure if Tenant is not in default. Without limiting
the foregoing Landlord shall use its reasonable efforts to obtain a
Subordination, Non-Disturbance and Attornment agreement in form and substance
reasonably acceptable to Tenant from the holder of any such mortgage or lease.
17.02. Either party shall, without charge, within ten (10) business days
after request of the other, certify by written instrument to the best of their
knowledge: (a) as to whether this Lease has been modified or amended, and if so,
the substance and manner of such modification or amendment; (b) as to the
validity and force and effect of this Lease, in accordance with its tenor as
then constituted; (c) as to the existence of any default under this Lease; (d)
as to the existence of any offsets, counterclaims or defenses thereto on the
part of either party; (e) as to the commencement and expiration dates of the
term of this Lease; and (f) as to any other matters as may reasonably be so
requested. Any such certificate may be relied upon by the party requesting it
and any other person, firm or corporation to whom the same may be exhibited or
delivered, and the contents of such certificate shall be binding on the party
executing same.
SECTION 18
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QUIET ENJOYMENT
18.01. Landlord agrees that at all times when Tenant is not in default
under any of the terms or provisions of this Lease beyond any applicable notice
and cure period, Tenant's quiet and peaceable enjoyment of the Premises will not
be disturbed or interfered with by Landlord or any person claiming by, through
or under Landlord.
SECTION 19
HOLDING OVER
19.01. Tenant shall pay to Landlord an amount as minimum rent equal to the
regular monthly rental rate in effect each month or portion thereof for which
Tenant shall retain possession of the Premises after the expiration or
termination of the Initial Term or the Option Term, or of Tenant's right of
possession, whether by lapse of time or otherwise.
to have released the other for damage normally covered by such insurance.
SECTION 20
ENTIRE AGREEMENT
20.01. This Lease and the Exhibits attached hereto and forming a part
hereof, set forth all of the covenants, agreements, stipulations, promises,
conditions and understandings among Landlord and Tenant concerning the Premises
and there are no covenants, agreements, stipulations, promises, conditions or
understandings, either oral or written, between them other than herein set
forth.
SECTION 21
ENVIRONMENTAL
21.01. Landlord represents and warrants that to the best of its knowledge
no Hazardous Substance (as hereinafter defined) has been used, manufactured,
generated, stored, treated, processed or released at, in, on, over, under, to or
from any portion of the Premises or any contiguous real property.
21.02. Tenant shall not cause or permit, as the result of any act or
omission on the part of Tenant, its agents, employees, tenants, subtenants or
other occupants of the Premises to release Hazardous Substances in, on, over,
under, to or from any portion of the Premises in violation of any Environmental
Laws.
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21.03. "Hazardous Substance" shall mean "solid waste" or "hazardous
waste", "hazardous material", "hazardous substance", and "petroleum product" as
defined in the Resource Conservation and Recovery Act, the Comprehensive
Environmental Response, Compensation and Liability Act, the Hazardous Material
Transportation Act, the Federal Water Pollution Control Act and the Superfund
Amendments and Reauthorization Act of 1986, any laws relating to underground
storage tanks, and any similar or successor federal law or applicable state and
local statutes and ordinances and any rules, regulations and policies
promulgated thereunder, as any of such federal, state and local statutes,
ordinances and regulations may be amended from time to time (collectively,
"Environmental Laws").
SECTION 22
GENERAL
22.01. Many references in this Lease to persons, entities and items have
been generalized for ease of reading. Therefore, references to a single person,
entity or item shall also mean more than one person, entity or thing whenever
such usage is appropriate. Similarly, pronouns of any gender should be
considered interchangeable with pronouns of other genders.
22.02. Any waiver or waivers by Landlord of any of the provisions of this
Lease will not constitute a waiver of any later breach of that provisions and
any consent or approval given by Landlord with respect to any act, neglect or
default by Tenant will not waive or make unnecessary Landlord's consent or
approval with respect to any later similar act, neglect or default by Tenant.
22.03. Topical headings appearing in this Lease are for convenience only.
They do not define, limit or construe the contents of any paragraphs or clauses.
22.04. This Lease can be modified or amended only by a written agreement
signed by Landlord and Tenant.
22.05. All provisions of this Lease are and will be binding on the heirs,
executors, administrators, personal representatives, successors and assigns of
Landlord and Tenant.
22.06. This Lease shall be governed by, construed and enforced in
accordance with the laws of the State of Georgia and any action brought
hereunder shall be brought in Georgia, notwithstanding any conflict of laws
provision.
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IN WITNESS WHEREOF, the Landlord and Tenant have executed this Lease as of
the date set forth above.
LANDLORD:
Subscribed before me ERWIN FAMILY PARTNERSHIP, LLLP, A
this 6th day of April, 1999. GEORGIA LIMITED PARTNERSHIP
BY: ERWIN FAMILY HOLDINGS, INC.,
GENERAL PARTNER
/S/ STEPHEN P. EWALD
WITNESS
BY:/S/PAUL L. ERWIN (SEAL)
PRESIDENT
/S/ MAN WAI LAU
NOTARY PUBLIC
My Commission Expires:______
{SEAL}
TENANT:
Subscribed before me PRIMROSE SCHOOL FRANCHISING
this 6th day of April, 1999. COMPANY
/S/ STEPHEN P. EWALD
WITNESS BY: /S/ PAUL L. ERWIN (SEAL)
TITLE: PRESIDENT
/S/ MAN WAI LAU
NOTARY PUBLIC
My Commission Expires:______
{SEAL}
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<PAGE>
EXHIBIT "A"
All that tract or parcel of land lying and being in the City of Cartersville,
Bartow County, Georgia, located at the northwest intersection of South Erwin
Street and Leake Street and being TRACT NO. FOUR, of plat of William C. Smith,
G.R.L.S., recorded in plat book 32, page 1, Clerk's Office, Superior Court of
Bartow County, Georgia, to which reference is made for a more full and complete
description of the land conveyed. Said property more particularly described as
follows:
BEGINNING at an iron stake located at the southeast corner of Tract No. Two, as
shown on the plat above referred to, which iron pin is located on the west right
of way line of South Erwin Street and running thence along said right of way
line of South Erwin Street south 20 degrees 19 minutes 16 seconds east 92.05
feet to a point located on the west right of way of South Erwin Street; thence
southerly, southwesterly and westerly along the arc of the curvature of the
intersection of the west right of way of South Erwin Street and the north right
of way of Leake Street 27.86 feet to a point located on the north right of way
line of Leake Street, which point is located 25.01 feet south 25 degrees 13
minutes 55 seconds west of the previous point; thence along the north right of
way line of Leake Street south 70 degrees 47 minutes 05 seconds west 175 feet to
an iron pin; thence north 17 degrees 11 minutes 50 seconds west 114.85 feet to
an iron pin; thence north 72 degrees 17 minutes 09 seconds east 186.77 feet to
the beginning point. Said tract containing 0.488 acres.
14
EXHIBIT 9
STATE OF GEORGIA,
COUNTY OF COBB:
LEASE AGREEMENT
THIS LEASE AGREEMENT, made this 6th day of April, 1999 by and between PAUL
L. ERWIN (hereinafter called "Landlord"), and THE JEWEL I, INC. D/B/A
PRIMROSE COUNTRY DAY SCHOOL, A GEORGIA CORPORATION, (hereinafter called
"Tenant").
WITNESSETH:
WHEREAS, Landlord owns certain real property located in Marietta, Georgia,
located at 5121 Roswell Road, Cobb County, Marietta, Georgia, which is more
particularly described in Exhibit "A", attached hereto and made a part hereof
(the "Real Property"); and
WHEREAS, there are certain improvements located on the Real Property, the
same being an office building (the Real Property and said building and parking
lot being hereinafter referred to collectively as the "Premises"); and
WHEREAS, Landlord wishes to lease the Premises to Tenant and Tenant wishes
to take the Premises from Landlord under the terms and conditions as stated
herein;
NOW, THEREFORE, in consideration of the mutual promises and covenants
contained herein, Ten ($10.00) Dollars, and other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, the
parties agree as follows:
SECTION 1
THE PREMISES
1.01. Landlord does hereby demise and lease the Premises to Tenant and
Tenant does hereby accept and lease the Premises from Landlord, for the term,
and subject to the covenants, agreements, and conditions herein. It is agreed
that Landlord reserves a right of ingress and egress across the existing drive
located on the Premises for reaching additional property of Landlord, for the
benefit of Landord and Landlord's tenants.
1.02. Tenant paying the rent and other charges hereby reserved, and
performing and observing all of the several covenants by it to be kept and
performed, may peaceably hold and enjoy the Premises with exclusive control and
possession during the term of this Lease.
1.03. Tenant acknowledges that it has inspected the Premises, knows the
condition
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thereof, and accepts the Premises in its present condition as suitable for the
purposes which the Premises are leased, subject to its right to make alterations
and to remodel as provided in paragraph 8.01 herein.
SECTION 2
THE TERM AND MONTHLY RENTAL
2.01. The term of this Lease will commence on the 6th day of April, 1999
("the Commencement Date"), and shall continue for a period of three (3) years
from and after the Commencement Date (such period being hereinafter called the
"Term"). Provided this Lease is in full force and effect, Tenant shall have the
option to renew this Lease for three, one-year terms. Tenant shall exercise each
option by notice to Landlord on or before the date which is one hundred twenty
(120) days prior to the then expiration date of this Lease, as the same may have
been extended. If Tenant shall exercise a renewal option, this Lease shall be
extended for an additional one-year term on the same covenants and conditions of
this Lease except that the annual rent shall be as set forth in Section 2.03
below and Tenant shall have one less option to renew this Lease for an
additional one-year term.
2.02. During the initial term, the annual rent paid by Tenant to Landlord
shall be the sum of Nine Thousand and No/100 ($9,000.00) Dollars, payable in
equal monthly installments of Seven Hundred Fifty and No/100 ($750.00) Dollars.
All rental payments shall be due and payable on the tenth (10th) day of each
month at Landlord's principal office located at 5555 ave Spring Road, Cave
Spring, Georgia 30124, or at such other place as Landlord may designate in
writing. Any payment not made by the due date shall be subject to a late fee of
two percent (2%) of such rental payment.
2.03. During any renewal term the annual rent shall be increased by the
percentage increase, if any, in the Index (as hereinafter defined). The new
annual fixed rent during such renewal term shall equal the sum of (i) the then
current annual rent for the then expired term and (ii) the product of the annual
rent for the then expired term and the percentage change, if any, in the Index
for the month immediately preceding the month in which the then current renewal
term commences and the Index for the month immediately preceding the
commencement of the then expired term. The term "Index" shall mean the
"All-Items Figures for All Urban Consumers" in
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the "Consumer Price Index U.S. City Average (1982-84=100)" issued by the Bureau
of Labor Statistics of the United States Department of Labor. If the Index, as
published by the Bureau of Labor Statistics, is discontinued, then the "Index"
published by the United States Department of Commerce shall be used (with proper
adjustment), and if the Department of Commerce Index is discontinued, then the
parties shall agree on a suitable substitute. If Landlord and Tenant are unable
to agree on a suitable substitute, the substitute shall be determined by
arbitration in the manner provided by law. As soon as practicable after the
publication of the Index or the determination of a substitute index, Landlord
shall determine the change in the Index, if any. Pending such determination,
Tenant shall continue to pay annual rent at the same rate as the then expired
term. When the change has been determined, Tenant shall promptly pay the
increase to Landlord.
SECTION 3
USE OF THE PREMISES
3.01. During the continuation of this Lease, including any assignment or
subletting, the Premises may be used and occupied only as office space and a
child care facility; provided, that Tenant will not knowingly use or permit any
person to use the Premises or any part thereof for any use or purposes in
violation of any applicable laws, ordinances, or other regulations, including,
but not limited to, environmental laws. During the continuation of this Lease,
Tenant shall keep the Premises and every part thereof in a clean and wholesome
condition and generally will comply with all laws, rules, ordinances and
regulations; provided, however, Tenant shall not be required to perform
structural repairs unless such structural repairs are required as a result of
Tenant's manner of use. Tenant and its assignees and sub-lessees shall have the
right to display signs on the Premises, but only such as advertise the business
carried on in the Premises by the Tenant and its assignee or sub-lessee and such
signs shall comply in all respects with applicable laws, regulations and
ordinances. Upon termination of this Lease, Landlord may require Tenant to
remove, at Tenant's sole expense, all signs erected by Tenant on the Premises
during the continuation of this Lease.
SECTION 4
TAXES, ASSESSMENTS & UTILITIES
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4.01. Tenant shall pay 65% of all of the ad valorem and other taxes
assessed against the Premises during the term of this Lease.
4.02. Tenant shall pay 100% of all of the ad valorem and other personal
property taxes assessed against the furniture, fixtures and equipment placed or
located in the Premises by Tenant during the term of the Lease.
4.03. Tenant agrees to pay all charges made against the Premises for gas,
water, heat, electricity, and all other utilities as and when due during the
continuation of the Lease, and shall pay all charges for trash collection, if
any.
SECTION 5
INSURANCE; WAIVER OF SUBROGATION
5.01. Tenant will obtain and maintain fire and casualty insurance on the
Premises during the term of the Lease in the amount equal to the amounts
maintained on the date hereof, naming Landlord and Tenant as insureds thereunder
as their respective interest may appear, and also naming all lienholders as
mortgagees.
5.02. Tenant shall procure and maintain throughout the term of this lease
a policy of insurance, at its sole cost and expense, insuring Tenant, Landlord,
and all other persons designated by Landlord against any and all liability for
injury to or death of a person, or persons, and for damage to or destruction of
property occasioned by or arising out of or in connection with the use and
occupancy of the Premises, or by the condition of the Premises, the limits of
such policy or policies shall be equal to the amounts currently maintained by
Tenant.
5.03. Tenant shall insure the contents of the Premises. Landlord shall
not, except in the event of his gross negligence, have any liability or
obligations to Tenant, its employees, agents, customers, contractors or any
other third party for the contents of the Premises.
5.04. The insurance policy or policies to be provided by Tenant hereunder
shall be issued by an insurance company or companies authorized to do business
in the State of Georgia. At Landlord's request, certificates of insurance
evidencing the insurance coverage will be delivered by Tenant to Landlord prior
to the Commencement Date, together with receipts, evidence and payment of the
premiums therefor.
5.05. If Tenant fails to provide all or any of the insurance required by
this Section, or
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<PAGE>
subsequently fails to maintain such insurance in accordance with the
requirements of this Section, Landlord may (but will not be required to), and
without waiving or releasing Tenant from any of Tenant's obligations, procure or
renew such insurance, and any amounts paid by Landlord for such insurance will
be additional rental due and payable on or before the next rental date, together
with late charges and interest, if any, as provided in Section 2.
5.06. Landlord and Tenant shall each cause all policies of insurance
maintained with respect to the Premises, respectively, to contain provisions
that the insurance shall not be invalidated by each releasing the other of
liability if such a provision is obtainable without any additional premium
therefor or if such provision is obtainable with an additional premium therefor
and the released party elects to pay and does pay such additional premium. If
such provision is contained in such policies and is in force, Landlord and
Tenant shall each be deemed to have released the other for damage normally
covered by such insurance.
SECTION 6
DAMAGE BY FIRE OR OTHER CASUALTY
6.01. If the Premises are totally destroyed by storm, fire, lightning,
earthquake or other casualty, this Lease shall terminate as of the date of such
destruction, and rental shall be accounted for as between Landlord and Tenant as
of that date. If the Premises are damaged, but not wholly destroyed by any such
casualties, rental shall abate in such proportion as use of the Premises has
been destroyed, and Landlord shall restore the Premises as quickly as possible
to the same condition as before the damage was incurred, whereupon full rental
shall recommence. Notwithstanding the foregoing if more than 35% of the Premises
are damaged by storm, fire, lightning, earthquake or other casualty then either
party may terminate this Lease by notice to the other party given not later than
thirty (30) days after the date of such casualty.
SECTION 7
REPAIRS
7.01. Tenant shall be responsible for all non structural repairs to the
Premises, all ordinary maintenance or repairs to the building systems and all
repairs to the Premises resulting from the negligence or willful misconduct of
Tenant.
7.02. Except as set forth in Section 7.01, Landlord shall be responsible
for all repairs to
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<PAGE>
the roof, the structural elements of the Premises and the building systems.
SECTION 8
ALTERATIONS
8.01. Tenant shall have the right to make such alterations, additions, or
improvements to the Premises only with the consent of Landlord. Notwithstanding
the foregoing, Landlord shall not unreasonably withhold its consent in
connection with any nonstructural alterations, additions or improvements to the
Premises and Landlord's consent shall not be required in connection with
decorative changes to the Premises (such as painting, carpeting, etc.). All
alterations, additions, and improvements made by Tenant shall remain the
property of the Tenant until the termination of the Lease; provided, that said
alterations, additions, or improvements shall become the property of Landlord at
the termination of the Lease and shall remain on and be surrendered with the
Premises.
SECTION 9
EMINENT DOMAIN
9.01. If all or a portion of the Premises is taken in any manner for any
public or quasi-public use, and the remainder of the Premises is unsuitable for
the conduct of Tenant's business in Tenant's reasonable opinion then Tenant
shall have the option to terminate this Lease within 30 days after the date
title is vested in the condemning authority.
SECTION 10
ASSIGNMENT OR SUBLETTING
10.01. Tenant may not assign this Lease or sublet the whole or any part of
the Premises without the written consent of Landlord which consent shall not be
unreasonably withheld. Notwithstanding anything contained herein to the contrary
the foregoing shall not apply to and Tenant may, without Landlord's written
consent, assign this Lease or sublet all or any portion of the Premises to (i)
any entity that merges with Tenant, (ii) any entity that acquires all or
substantially all of the stock or assets of Tenant or (iii) any entity which is
controlled by, controls or under common control with Tenant.
SECTION 11
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INSPECTION OF PREMISES
11.01. Tenant agrees to permit Landlord and his authorized representatives
to enter the Premises at all reasonable times, upon reasonable notice for the
purpose of inspecting the same. Landlord and its authorized representatives
shall have the right to enter the Premises at any time without prior notice (but
Landlord shall promptly notify Tenant after such entry) in the event of an
emergency (i.e. imminent danger to persons or property).
SECTION 12
FIXTURES AND EQUIPMENT
12.01. All furnishings and equipment, which are paid for and placed in or
on the Premises by Tenant from time to time will remain the property of Tenant.
Provided however, all fixtures placed in or on the Premises shall become a part
of the Premises and the property of Landlord upon termination of this Lease.
SECTION 13
NOTICE OR DEMANDS
13.01. All bills, notices, statements, communications to or demands
(collectively, "notices or demands") upon Landlord or Tenant desired or required
to be given under any of the provisions hereof must be in writing. Any such
notices or demands from Landlord to Tenant will be given by personal delivery or
by United States certified mail, return receipt requested, in an envelope
properly stamped and addressed to Tenant at Primrose Holdings, c/o Capital
Partners, 1 Pickwick Plaza, Suite 310, Greenwich, Connecticut 06830, Attention:
James G. Anderson, with a copy to Morgan, Lewis & Bacchus LP, 101 Park Avenue,
New York, New York, 10178, Attention: Christopher Jensen, Esq., or such other
address as Tenant may have last furnished by written notice to Landlord, and any
such notices or demands from Tenant to Landlord will be given by personal
delivery or by United States certified mail, return receipt requested, in an
envelope properly stamped and addressed to Landlord at 5555 Cave Spring Road,
Cave Spring, Georgia 30124, or such other address as Landlord may have last
furnished by written notice to Tenant. The effective date of such notice or
demand will be deemed to be the time when personally delivered or three (3)
business days after so mailed as herein provided.
SECTION 14
7
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BREACH: INSOLVENCY: RE-ENTRY
14.01. If any rent payable by Tenant to Landlord remains unpaid for more
than ten (10) days after it is due, and if such default continues for a period
of five (5) days after written notice thereof to Tenant or if Tenant violates or
defaults in the performance of any of its obligations in this Lease and the
violation of default continues for a period of thirty (30) days after written
notice, by Landlord to Tenant, (or if such default is not capable of being cured
within such thirty (30) day period and Tenant fails to commence to cure such
default within said thirty (30) day period and thereafter diligently prosecute
such cure to completion) then Landlord may (but will not be required to) declare
this Lease forfeited and the term ended, or re-enter the Premises, or may
exercise all other remedies available under Georgia law. Landlord will not be
liable for damages to person or property by reason of any legitimate re-entry or
forfeiture, and Landlord will be aided and assisted by Tenant, its agents,
representatives, and employees. Tenant, by the execution of this Lease, waives
notice of re-entry by Landlord. In the event of re-entry by Landlord without
declaration of forfeiture, the liability of Tenant for the rent provided herein
will not be relinquished or extinguished for the balance of the Lease term, and
any rentals prepaid may be retained by Landlord and applied against the costs of
re-entry, or as liquidated damages, or both. Tenant will pay, in addition to the
rentals and other sums agreed to be paid hereunder, reasonable attorneys' fees,
costs and actual expenses incurred by or on behalf of Landlord in any suit or
action instituted by or involving Landlord to enforce the provisions of, or the
collection of the rentals due Landlord under this Lease, including any
proceeding under the Federal Bankruptcy Code.
In the event of declaration of forfeiture at or after the time of
re-entry, Landlord may re-lease the Premises or any portion(s) of the Premises
for a term or terms and at a rent which may be less than or exceed the balance
of the term of and the rent reserved under this Lease. In such event, Tenant
will pay to Landlord as liquidated damages for Tenant's default any deficiency
between the total rent reserved herein and the net amount, if any, of the rents
collected on account of the lease or leases of the Premises which otherwise
would have constituted the balance of the Lease term. In computing such
liquidated damages, there will be added to the deficiency any expenses which
Landlord may incur in connection with releasing, such as legal
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<PAGE>
expenses, attorneys' fees, brokerage fees and expenses, advertising and for
keeping the Premises in good order or for preparing the Premises for re-leasing.
Any such liquidated damages will be paid in monthly installments by Tenant on
the Rent Day and any suit brought to collect the deficiency for any month will
not prejudice Landlord's right to collect the deficiency for any subsequent
month by a similar proceeding. In lieu of the foregoing computation of
liquidated damages, Landlord may elect, at its sole option, to receive
liquidated damages in one payment equal to any deficiency between the total rent
reserved hereunder and the fair and reasonable rental of the Premises, both
discounted at ten percent (10%) per annum to present value at the time of
declaration of forfeiture.
Whether or not forfeiture has been declared, Landlord will not be obliged
or be responsible in any way for failure to re-lease the Premises or, in the
event that the Premises are released, for failure to collect the rent under such
re-leasing, provided that Landlord shall attempt to re-lease the Premises. The
failure of Landlord to re-lease all or any part of the Premises will not release
or affect Tenant's liability for rent or damages.
SECTION 15
SURRENDER OF PREMISES ON TERMINATION
15.01. At the expiration (or earlier termination) of this Lease, Tenant
will surrender the Premises broom clean and in as good condition and repair as
they were on the date of this Lease, reasonable wear and tear and damage by
casualty excepted, and promptly upon surrender will deliver all keys for the
Premises to Landlord at the place then fixed for payment of rent.
SECTION 16
PERFORMANCE BY LANDLORD OF THE COVENANTS OF TENANT
16.01. If Tenant fails to pay any sum of money, other than rental,
required to be paid hereunder or fails to perform any act on its part to be
performed hereunder, and such failure shall continue for a period of thirty (30)
days (or a reasonable period of less than thirty (30) days when life, person, or
property are in jeopardy) after notice thereof by Landlord, Landlord may (but
shall not be required to), and without waiving or releasing Tenant from any of
Tenant's obligations, make any such payment or perform any such other act. All
sums so paid by Landlord and all necessary incidental costs, including without
limitation the cost of repair,
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<PAGE>
maintenance or restoration of the Premises, if so performed by Landlord
hereunder, shall be deemed additional rental and shall be payable to Landlord
within five (5) days after receipt of invoice by Tenant. On default in such
payment, Landlord shall have the same remedies as on default in payment of rent.
The rights and remedies granted to Landlord under this Section 17 shall be in
addition to, and not in lieu of all other remedies, if any, available to
Landlord under this Lease or otherwise, and nothing herein contained shall be
construed to limit such other remedies of Landlord with respect to any matters
covered herein.
SECTION 17
SUBORDINATION: ESTOPPEL CERTIFICATES
17.01. Tenant agrees that Landlord may choose to make this lease
subordinate or paramount to any mortgages and ground or underlying leases now or
hereafter affecting the Premises and to any and all advances to be made
thereunder or to be secured thereby and to the interest and charges thereon, and
all renewals, replacements and extensions thereof, provided the mortgagee or
lessor named in any such mortgages or leases agrees to recognize the lease of
Tenant in the event of foreclosure if Tenant is not in default. Without limiting
the foregoing Landlord shall use its reasonable efforts to obtain a
Subordination, Non-Disturbance and Attornment agreement in form and substance
reasonably acceptable to Tenant from the holder of any such mortgage or lease.
17.02. Either party shall, without charge, within ten (10) business days
after request of the other, certify by written instrument to the best of their
knowledge: (a) as to whether this Lease has been modified or amended, and if so,
the substance and manner of such modification or amendment; (b) as to the
validity and force and effect of this Lease, in accordance with its tenor as
then constituted; (c) as to the existence of any default under this Lease; (d)
as to the existence of any offsets, counterclaims or defenses thereto on the
part of either party; (e) as to the commencement and expiration dates of the
term of this Lease; and (f) as to any other matters as may reasonably be so
requested. Any such certificate may be relied upon by the party requesting it
and any other person, firm or corporation to whom the same may be exhibited or
delivered, and the contents of such certificate shall be binding on the party
executing same.
SECTION 18
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QUIET ENJOYMENT
18.01. Landlord agrees that at all times when Tenant is not in default
under any of the terms or provisions of this Lease beyond any applicable notice
and cure period, Tenant's quiet and peaceable enjoyment of the Premises will not
be disturbed or interfered with by Landlord or any person claiming by, through
or under Landlord.
SECTION 19
HOLDING OVER
19.01. Tenant shall pay to Landlord an amount as minimum rent equal to the
regular monthly rental rate in effect each month or portion thereof for which
Tenant shall retain possession of the Premises after the expiration or
termination of the Initial Term or the Option Term, or of Tenant's right of
possession, whether by lapse of time or otherwise.
to have released the other for damage normally covered by such insurance.
SECTION 20
ENTIRE AGREEMENT
20.01. This Lease and the Exhibits attached hereto and forming a part
hereof, set forth all of the covenants, agreements, stipulations, promises,
conditions and understandings among Landlord and Tenant concerning the Premises
and there are no covenants, agreements, stipulations, promises, conditions or
understandings, either oral or written, between them other than herein set
forth.
SECTION 21
ENVIRONMENTAL
21.01. Landlord represents and warrants that to the best of its knowledge
no Hazardous Substance (as hereinafter defined) has been used, manufactured,
generated, stored, treated, processed or released at, in, on, over, under, to or
from any portion of the Premises or any contiguous real property.
21.02. Tenant shall not cause or permit, as the result of any act or
omission on the part of Tenant, its agents, employees, tenants, subtenants or
other occupants of the Premises to release Hazardous Substances in, on, over,
under, to or from any portion of the Premises in violation of any Environmental
Laws.
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21.03. "Hazardous Substance" shall mean "solid waste" or "hazardous
waste", "hazardous material", "hazardous substance", and "petroleum product" as
defined in the Resource Conservation and Recovery Act, the Comprehensive
Environmental Response, Compensation and Liability Act, the Hazardous Material
Transportation Act, the Federal Water Pollution Control Act and the Superfund
Amendments and Reauthorization Act of 1986, any laws relating to underground
storage tanks, and any similar or successor federal law or applicable state and
local statutes and ordinances and any rules, regulations and policies
promulgated thereunder, as any of such federal, state and local statutes,
ordinances and regulations may be amended from time to time (collectively,
"Environmental Laws").
SECTION 22
GENERAL
22.01. Many references in this Lease to persons, entities and items have
been generalized for ease of reading. Therefore, references to a single person,
entity or item shall also mean more than one person, entity or thing whenever
such usage is appropriate. Similarly, pronouns of any gender should be
considered interchangeable with pronouns of other genders.
22.02. Any waiver or waivers by Landlord of any of the provisions of this
Lease will not constitute a waiver of any later breach of that provisions and
any consent or approval given by Landlord with respect to any act, neglect or
default by Tenant will not waive or make unnecessary Landlord's consent or
approval with respect to any later similar act, neglect or default by Tenant.
22.03. Topical headings appearing in this Lease are for convenience only.
They do not define, limit or construe the contents of any paragraphs or clauses.
22.04. This Lease can be modified or amended only by a written agreement
signed by Landlord and Tenant.
22.05. All provisions of this Lease are and will be binding on the heirs,
executors, administrators, personal representatives, successors and assigns of
Landlord and Tenant.
22.06. This Lease shall be governed by, construed and enforced in
accordance with the laws of the State of Georgia and any action brought
hereunder shall be brought in Georgia, notwithstanding any conflict of laws
provision.
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IN WITNESS WHEREOF, the Landlord and Tenant have executed this Lease as of
the date set forth above.
LANDLORD:
Subscribed before me PAUL L. ERWIN
this 6th day of April, 1999.
/S/ STEPHEN P. EWALD
WITNESS
/S/ PAUL L. ERWIN
Paul L. Erwin
/S/ MAN WAI LAU
NOTARY PUBLIC
My Commission Expires:______
{SEAL}
TENANT:
Subscribed before me THE JEWEL I, INC. d/b/a Primrose Country
this 6th day of April, 1999. Day School
/S/ STEPHEN P. EWALD
WITNESS BY: /S/ PAUL L. ERWIN (SEAL)
TITLE: PRESIDENT
/S/ MAN WAI LAU
NOTARY PUBLIC
My Commission Expires:______
{SEAL}
13
<PAGE>
EXHIBIT "A"
All that tract or parcel of land lying and being in the City of Cartersville,
Bartow County, Georgia, located at the northwest intersection of South Erwin
Street and Leake Street and being TRACT NO. FOUR, of plat of William C. Smith,
G.R.L.S., recorded in plat book 32, page 1, Clerk's Office, Superior Court of
Bartow County, Georgia, to which reference is made for a more full and complete
description of the land conveyed. Said property more particularly described as
follows:
BEGINNING at an iron stake located at the southeast corner of Tract No. Two, as
shown on the plat above referred to, which iron pin is located on the west right
of way line of South Erwin Street and running thence along said right of way
line of South Erwin Street south 20 degrees 19 minutes 16 seconds east 92.05
feet to a point located on the west right of way of South Erwin Street; thence
southerly, southwesterly and westerly along the arc of the curvature of the
intersection of the west right of way of South Erwin Street and the north right
of way of Leake Street 27.86 feet to a point located on the north right of way
line of Leake Street, which point is located 25.01 feet south 25 degrees 13
minutes 55 seconds west of the previous point; thence along the north right of
way line of Leake Street south 70 degrees 47 minutes 05 seconds west 175 feet to
an iron pin; thence north 17 degrees 11 minutes 50 seconds west 114.85 feet to
an iron pin; thence north 72 degrees 17 minutes 09 seconds east 186.77 feet to
the beginning point. Said tract containing 0.488 acres.
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