<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended December 31, 1997
------------------------------
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
-------------------- -------------------
--------------------
For Quarter Ended December 31, 1997 Commission file number 011230
-------------------- ----------
Regis Corporation
------------------------------------------------
(Exact name of registrant as specified in its charter)
Minnesota 41-0749934
--------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
7201 Metro Boulevard, Edina, Minnesota 55439
------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(612)947-7777
----------------------------------------------------------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
------- -------
Indicate the number of shares outstanding of each of the issuer's classes of
common stock as of February 3, 1998:
Common Stock, $.05 par value 23,369,321
- ---------------------------- -----------------------
Class Number of Shares
1
<PAGE>
REGIS CORPORATION
INDEX
PART I. FINANCIAL INFORMATION PAGE NO.
Item 1. Consolidated Financial Statements:
Balance Sheet as of December 31, 1997
and June 30, 1997 3
Statement of Operations for the three
months ended December 31, 1997 and 1996 4
Statement of Operations for the six
months ended December 31, 1997 and 1996 5
Statement of Cash Flows for the six
months ended December 31, 1997 and 1996 6
Notes to Consolidated Financial Statements 7-8
Review Report of Independent Accountants 9
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 10-21
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 22-23
Signature 24
2
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
REGIS CORPORATION
CONSOLIDATED BALANCE SHEET
AS OF DECEMBER 31, 1997 AND JUNE 30, 1997
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
DECEMBER 31, 1997 JUNE 30, 1997
------------------ -------------
ASSETS
Current assets:
Cash $ 10,845 $ 8,935
Accounts receivable, net 13,770 12,388
Inventories 42,232 42,596
Deferred income taxes 6,083 6,335
Other current assets 10,359 6,819
---------- ----------
Total current assets 83,289 77,073
Property and equipment, net 158,965 139,573
Goodwill 99,572 99,818
Other assets 7,659 15,071
---------- ----------
Total assets $ 349,485 $ 331,535
---------- ----------
---------- ----------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Long-term debt, current portion $ 39,866 $ 30,722
Accounts payable 16,900 24,111
Accrued expenses 38,505 37,291
---------- ----------
Total current liabilities 95,271 92,124
Long-term debt 83,775 82,740
Other noncurrent liabilities 7,915 7,557
Shareholders' equity:
Common stock, $.05 par value;
issued and outstanding, 23,353,560 and
23,317,924 shares at December 31, 1997
and June 30, 1997, respectively 1,168 1,166
Additional paid-in capital 121,043 120,483
Retained earnings 40,313 27,465
---------- ----------
Total shareholders' equity 162,524 149,114
---------- ----------
Total liabilities and shareholders' equity $ 349,485 $ 331,535
---------- ----------
---------- ----------
See accompanying notes to unaudited Consolidated Financial Statements.
3
<PAGE>
REGIS CORPORATION
CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED)
FOR THE THREE MONTHS ENDED DECEMBER 31, 1997 AND 1996
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
1997 1996
---- ----
Revenues:
Company-owned salons:
Service $134,032 $120,955
Product 58,288 48,862
---------- ----------
192,320 169,817
Franchise income 6,632 6,641
---------- ----------
198,952 176,458
Operating expenses:
Company-owned:
Cost of service 76,657 70,813
Cost of product 31,828 26,699
Direct salon 17,862 16,905
Rent 26,273 23,510
Depreciation 6,099 5,645
---------- ----------
158,719 143,572
Selling, general and administrative 21,812 19,786
Depreciation and amortization 2,198 1,833
Nonrecurring charges 18,731
Other 402 502
---------- ----------
Total operating expenses 183,131 184,424
---------- ----------
Operating income (loss) 15,821 (7,966)
Other income (expense):
Interest (2,470) (2,524)
Nonrecurring gains 222
Other, net 171 95
---------- ----------
Income (loss) before income taxes 13,522 (10,173)
Income taxes (benefit) 5,565 (1,293)
---------- ----------
Net income (loss) $ 7,957 $ (8,880)
---------- ----------
---------- ----------
Net income (loss) per share:
Basic $ .34 $ (.39)
---------- ----------
---------- ----------
Diluted $ .33 $ (.39)
---------- ----------
---------- ----------
See accompanying notes to unaudited Consolidated Financial Statements.
4
<PAGE>
REGIS CORPORATION
CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED)
FOR THE SIX MONTHS ENDED DECEMBER 31, 1997 AND 1996
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
1997 1996
---- ----
Revenues:
Company-owned salons:
Service $264,110 $242,495
Product 110,152 91,243
---------- ----------
374,262 333,738
Franchise income 13,371 13,325
---------- ----------
387,633 347,063
Operating expenses:
Company-owned:
Cost of service 151,177 140,824
Cost of product 60,422 50,092
Direct salon 35,137 33,137
Rent 51,743 46,579
Depreciation 12,136 10,952
---------- ----------
310,615 281,584
Selling, general and administrative 42,045 37,573
Depreciation and amortization 4,268 3,775
Nonrecurring charges 1,979 18,731
Other 790 1,006
---------- ----------
Total operating expenses 359,697 342,669
---------- ----------
Operating income 27,936 4,394
Other income (expense):
Interest (4,887) (4,974)
Nonrecurring gains 156 440
Other, net 308 305
---------- ----------
Income before income taxes 23,513 165
Income taxes 9,760 4,504
---------- ----------
Net income (loss) $ 13,753 $ (4,339)
---------- ----------
---------- ----------
Net income (loss) per share:
Basic $ .59 $ (.19)
---------- ----------
---------- ----------
Diluted $ .57 $ (.19)
---------- ----------
---------- ----------
See accompanying notes to unaudited Consolidated Financial Statements.
5
<PAGE>
REGIS CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
FOR THE SIX MONTHS ENDED DECEMBER 31, 1997 AND 1996
(DOLLARS IN THOUSANDS)
1997 1996
---- ----
Cash flows from operating activities:
Net income (loss) $ 13,753 $ (4,339)
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 16,572 14,890
Deferred income taxes 8,267 (4,084)
Nonrecurring charges 1,979 18,731
Changes in assets and liabilities, exclusive
of investing and financing activities (8,723) (12,792)
Other 365 751
---------- ----------
Net cash provided by operating activities 32,213 13,157
---------- ----------
Cash flows from investing activities:
Capital expenditures (27,729) (17,333)
Purchases of salon assets, net of cash acquired and
certain obligations assumed (4,251) (6,049)
---------- ----------
Net cash used in investing activities (31,980) (23,382)
---------- ----------
Cash flows from financing activities:
Borrowings on revolving credit facilities 62,194 94,514
Payments on revolving credit facilities (69,896) (117,600)
Proceeds from issuance of long-term debt 13,700 37,000
Repayment of long-term debt (2,892) (6,309)
Decrease in negative book cash balances (797)
Dividends paid (934) (813)
Proceeds from issuance of common stock 359 737
---------- ----------
Net cash provided by financing activities 1,734 7,529
---------- ----------
Effect of exchange rate changes on cash (57) 6
---------- ----------
Increase (decrease) in cash 1,910 (2,690)
Cash:
Beginning of year 8,935 7,558
---------- ----------
End of period $ 10,845 $ 4,868
---------- ----------
---------- ----------
Changes in assets and liabilities, exclusive of
investing and financing activities:
Accounts receivable $ (352) $ (1,512)
Inventories 263 (3,170)
Other current assets (3,678) 704
Other assets (1,040) (691)
Accounts payable (6,808) 3,294
Accrued expenses 2,246 (11,313)
Other noncurrent liabilities 646 (104)
---------- ----------
$ (8,723) $ (12,792)
---------- ----------
---------- ----------
See accompanying notes to unaudited Consolidated Financial Statements.
6
<PAGE>
REGIS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. BASIS OF PRESENTATION OF INTERIM CONSOLIDATED FINANCIAL STATEMENTS:
The unaudited consolidated statements of operations for the three and six
months ended December 31, 1997 and 1996, reflect, in the opinion of
management, all adjustments (which, with the exception of the matters
discussed in Note 4 herein, include only normal recurring adjustments)
necessary to fairly present the results of operations for the interim
periods. The results of operations for any interim period are not
necessarily indicative of results for the full year.
The year-end balance sheet data was derived from audited financial
statements, but does not include all disclosures required by generally
accepted accounting principles. The unaudited interim consolidated
financial statements should be read in conjunction with Regis Corporation's
(the Company) consolidated financial statements which are incorporated by
reference in the Company's Annual Report on Form 10-K for the year ended
June 30, 1997. Coopers & Lybrand L.L.P., the Company's independent
accountants, have performed limited reviews of the financial data included
herein. Their report on such reviews accompanies this filing.
COST OF PRODUCT SALES. On an interim basis, product costs are determined
by applying an estimated gross profit margin.
2. NONRECURRING GAINS:
For the six month periods ended December 31, 1997 and 1996, the Company
received $156,000 and $440,000, respectively, of principal payments from
Premier Salons. The Company had previously written off the related
receivable and, accordingly, is recording all subsequent principal payments
as nonrecurring gains.
3. FINANCING ARRANGEMENTS:
During the second quarter, the Company entered into an additional credit
facility which allows, at the discretion of the lender, for borrowings up
to $35,000,000. Interest rates and maturity schedules are negotiated
between the Company and the lender and may vary by note issuances under the
facility. In December 1997, the Company borrowed $7,000,000 under this
facility in the form of a senior term note bearing interest at 7.72
percent, payable semi-annually. Principal payments in the amount of
$1,400,000 are due and payable on December 31 in the years 2000 through
2004. The proceeds were used to acquire a controlling interest in
additional home office facilities. Additionally, during the second
quarter, the Company borrowed $4,700,000 under an existing credit facility
to fund construction of a new distribution center.
7
<PAGE>
4. NONRECURRING CHARGES:
In the first quarter of fiscal 1998, the Company recorded a special charge
of $1,979,000 associated with the divestiture of the business and assets of
Anasazi Exclusive Salon Products, LLC, (Anasazi) a professional salon
products manufacturing firm the Company acquired in fiscal 1997. Anasazi
was sold to Curtis Acquisition LLC, which is controlled by two members of
the Company's Board of Directors, one of whom is the Chairman.
In the second quarter of fiscal 1997, the Company recorded $18,731,000 of
merger and restructuring costs associated with the acquisition of
Supercuts.
5. NET INCOME (LOSS) PER SHARE:
During the second quarter the Company adopted Statement of Financial
Accounting Standards No. 128, Earnings per Share (EPS).
Basic EPS is calculated as net income divided by weighted average common
shares outstanding. The Company's only dilutive securities are issuable
under the Company's Stock Option Plan, as amended. Diluted EPS is
calculated as net income divided by weighted average common shares
outstanding, increased to include assumed conversion of dilutive
securities. Dilutive securities are excluded from the calculation of
weighted average common and common equivalent shares outstanding in all
loss periods, as their inclusion would be anti-dilutive.
The following provides information related to the calculation of the
Company's basic and diluted EPS:
<TABLE>
<CAPTION>
FOR THE PERIODS ENDED DECEMBER 31,
----------------------------------
THREE MONTHS SIX MONTHS
------------------------- -------------------------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Weighted average common shares outstanding 23,344,913 22,600,334 23,339,060 22,584,434
Common equivalent shares assuming conversion of
dilutive securities 592,004 -- 616,652 --
---------- ---------- ---------- ----------
Weighted average common and common equivalent
shares outstanding 23,936,917 22,600,334 23,955,712 22,584,434
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
</TABLE>
8
<PAGE>
REVIEW REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Directors of Regis Corporation:
We have reviewed the accompanying consolidated balance sheet of Regis
Corporation as of December 31, 1997, and the related consolidated statements of
operations and cash flows for the three and six months ended December 31, 1997
and 1996. These financial statements are the responsibility of the Company's
management.
We conducted our reviews in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures to
financial data and making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an audit conducted
in accordance with generally accepted auditing standards, the objective of which
is the expression of an opinion regarding the financial statements taken as a
whole. Accordingly, we do not express such an opinion.
Based on our reviews, we are not aware of any material modifications that
should be made to the consolidated financial statements referred to above for
them to be in conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted
auditing standards, the consolidated balance sheet as of June 30, 1997, and the
related consolidated statements of operations, changes in shareholders' equity
and cash flows for the year then ended (not fully presented herein); and in our
report dated August 22, 1997, we expressed an unqualified opinion on those
consolidated financial statements. In our opinion, the information set forth in
the accompanying consolidated balance sheet as of June 30, 1997, is fairly
stated, in all material respects, in relation to the consolidated balance sheet
from which it has been derived.
/s/ Coopers & Lybrand L.L.P.
COOPERS & LYBRAND L.L.P.
Minneapolis, Minnesota
January 22, 1998
9
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
SUMMARY
Regis Corporation, based in Minneapolis, is the world's largest owner, operator
and franchisor of hair and retail product salons with 3,355 salons (800
franchised) in 50 states, Puerto Rico, Canada and seven other international
countries at December 31, 1997. Regis operates and franchises salons in six
divisions: Regis Hairstylists, Supercuts, MasterCuts, Trade Secret, Wal-Mart and
International, and has 26,000 employees worldwide.
Second quarter revenues, including franchise income of $6,632,000, grew to a
record $198,952,000, a 12.7 percent increase over fiscal 1997 second quarter
total revenues of $176,458,000. Excluding nonrecurring items in the second
quarter of the prior fiscal year, fiscal 1998 second quarter operating income
grew 47.0 percent to $15,821,000, and net income grew to a record $7,957,000 or
$.33 per share, an earnings per share increase of 57.1 percent.
Revenues for the six months ended December 31, 1997, including franchise income
of $13,371,000, grew to a record $387,633,000, a 11.7 percent increase over
total revenues of $347,063,000 in the comparable fiscal 1997 period. Excluding
nonrecurring items in both periods, six month fiscal 1998 operating income grew
29.4 percent to $29,915,000 and net income grew to $14,865,000 or $.62 per
share, an earnings per share increase of 34.8 percent.
Fiscal 1998 and 1997 results reflect certain previously reported nonrecurring
items comprised primarily of merger and restructuring costs associated with the
acquisition of Supercuts and disposition of Anasazi. As a result, the Company
reported second quarter fiscal 1998 net income of $7,957,000, or $.33 per share,
compared to a net loss of $8,880,000, or $.39 per share, in the second quarter
the previous year. For the first six months of fiscal 1998, the Company
reported net income of $13,753,000, or .57 per share, compared to a net loss of
$4,339,000, or $.19 per share in the first half of fiscal 1997.
10
<PAGE>
RESULTS OF OPERATIONS
The following table sets forth for the periods indicated certain information
derived from the Company's Consolidated Statement of Operations expressed as a
percentage of total revenues, except as noted.
FOR THE PERIODS ENDED DECEMBER 31,
----------------------------------
THREE MONTHS SIX MONTHS
------------ ----------
1997 1996 1997 1996
---- ---- ---- ----
Company-owned service revenues (1) 69.7% 71.2% 70.6% 72.7%
Company-owned product revenues (1) 30.3 28.8 29.4 27.3
Franchise income 3.3 3.8 3.4 3.8
Company-owned operations:
Profit margins on service (2) 42.8 41.5 42.8 41.9
Profit margins on product (3) 45.4 45.4 45.1 45.1
Direct salon (1) 9.3 10.0 9.4 9.9
Rent (1) 13.7 13.8 13.8 14.0
Depreciation (1) 3.2 3.3 3.2 3.3
Direct salon contribution (1) 17.5 15.5 17.0 15.6
Selling, general and administrative 11.0 11.2 10.8 10.8
Depreciation and amortization 1.1 1.0 1.1 1.1
Nonrecurring charges 0.0 10.6 0.5 5.4
Operating income (loss) 8.0 (4.5) 7.2 1.3
Income (loss) before income taxes 6.8 (5.8) 6.1 0.0
Net income (loss) 4.0 (5.0) 3.5 (1.3)
Operating income, excluding
nonrecurring items 8.0 6.1 7.7 6.7
Net income, excluding
nonrecurring items 4.0 2.7 3.8 3.1
(1) Computed as a percent of company-owned revenues
(2) Computed as a percent of service revenues
(3) Computed as a percent of product revenues
11
<PAGE>
THREE MONTHS ENDED DECEMBER 31, 1997, COMPARED TO THREE MONTHS ENDED DECEMBER
31, 1996:
REVENUES
REVENUES for the second quarter of fiscal 1998 grew to a record $198,952,000, an
increase of $22,494,000 or 12.7 percent, over the same period in fiscal 1997.
System-wide sales, inclusive of non-consolidated sales generated from franchise
salons, increased 11.5 percent in the second quarter of fiscal 1998 to
$262,947,000 from $235,778,000 in the same period in fiscal 1997. These
increases in company-owned and system-wide sales are the result of the total
number of salons added to the system through acquisitions and net salon
openings, as well as same-store sales increases from existing salons.
For the second quarters of fiscal 1998 and 1997, respectively, revenues by
division are as follows:
1998 1997
---- ----
Regis Hairstylists $ 74,352 $ 69,153
Supercuts 24,771 22,679
MasterCuts 27,252 23,800
Trade Secret 30,322 23,638
Wal-Mart 9,148 7,547
International 26,475 23,000
Franchise Income 6,632 6,641
--------- ---------
$ 198,952 $ 176,458
--------- ---------
--------- ---------
Same-store sales for domestic company-owned salons increased 6.2 percent in the
second quarter of fiscal 1998, compared to 2.2 percent in the same period in
fiscal 1997. System-wide same-store sales for the second quarter of fiscal 1998
increased 5.4 percent, compared to 2.2 percent in the same period a year ago.
Same-store sales increases achieved are primarily due to an increase in the
number of customers served. A total of 17,601,900 customers system-wide were
served during the second quarter of fiscal 1998. The Company utilizes an
audiovisual-based training system in its company-owned salons. Management
believes this training system provides its employees with improved customer
service and technical skills, and positively contributes to the increase in
customers served.
SERVICE REVENUES in the second quarter of fiscal 1998 were $134,032,000, an
increase of $13,077,000 or 10.8 percent, over the same period in fiscal 1997.
This increase is a result of strong service same-store sales increase of 5.8
percent, salon acquisitions the Company has made during the past twelve months
and accelerated new salon construction.
12
<PAGE>
PRODUCT REVENUES in the second quarter of fiscal 1998 grew to $58,288,000, an
increase of $9,426,000 or 19.3 percent, over the same period in fiscal 1997.
This increase continues a trend of escalating product revenues due to strong
product same-store sales growth of 7.4 percent, a reflection of the continuous
focus on product awareness, training and acceptance of national label
merchandise and the addition of 8 new Trade Secret salons. Product revenues as
a percent of total company-owned revenues increased to 30.3 percent of revenues
compared to 28.8 percent of revenues in the same period in fiscal 1997.
FRANCHISE INCOME, including royalties, initial franchise fees and product sales
made by the Company to franchisees, were $6,632,000 in the second quarter of
fiscal 1998.
COST OF REVENUES
The aggregate cost of service and product revenues in the second quarter of
fiscal 1998 were $108,485,000, compared to $97,512,000, in the same period in
fiscal 1997. The resulting combined gross margin percentage for the second
quarter of fiscal 1998 improved 100 basis points to 43.6 percent of
company-owned revenues compared to 42.6 percent of company-owned revenues in the
same period in fiscal 1997. As discussed below, this improvement was primarily
due to strong same-store sales and the increased sales leverage in the Company's
fixed cost payroll divisions.
SERVICE MARGINS improved to 42.8 percent in the second quarter of fiscal 1998,
compared to 41.5 percent in the same period in fiscal 1997. This 130 basis
point improvement is primarily due to continued sales leverage of fixed cost
payrolls in the Supercuts division, and strong service same-store sales
increases of 5.8 percent.
PRODUCT MARGINS were 45.4 percent in the second quarter of fiscal 1998,
identical to that in the same period a year ago. Although the percentage
remained the same, the second quarter margins in the current year benefitted
from lower product costs in the Supercuts division, offset by increased
discounting costs primarily in the Regis Hairstylists division as the result of
the Company's 75th anniversary sale that took place in October 1997.
DIRECT SALON
This expense category includes direct costs associated with salon operations
such as advertising, promotion, insurance, telephone and utilities. Direct salon
expense of $17,862,000 improved as a percent of company-owned revenues to 9.3
percent in the second quarter of fiscal 1998 from 10.0 percent in the same
period in fiscal 1997. This improvement resulted from an increased ability to
leverage these costs against increased revenues, which were a result of
stronger same-store sales and a maturing salon base, as well as the closures of
under-performing stores, primarily in the Supercuts division.
13
<PAGE>
RENT
Rent expense in the second quarter of fiscal 1998 was $26,273,000 or 13.7
percent of company-owned revenues, compared to $23,510,000, or 13.8 percent of
company-owned revenues, in the same period in fiscal 1997. The slight
percentage improvement is primarily due to leveraging this fixed cost against
increasing revenues.
DEPRECIATION - SALON LEVEL
Depreciation expense at the salon level remained fairly consistent at 3.2
percent of company-owned revenues, improving 10 basis points over the second
quarter in fiscal 1997, due to leveraging this fixed cost against increasing
revenues.
DIRECT SALON CONTRIBUTION
For the reasons described above, direct salon contribution, representing
company-owned salon revenues less associated operating expenses, improved in the
second quarter of fiscal 1998 to $33,601,000, or 17.5 percent of company-owned
revenues, compared to $26,245,000 or 15.5 percent of company-owned revenues in
the same period of fiscal 1997.
SELLING, GENERAL AND ADMINISTRATIVE
Selling, general and administrative (SG&A) expenses were $21,812,000, or 11.0
percent of total revenues in the second quarter of fiscal 1998, compared to
$19,786,000, or 11.2 percent of total revenues in the same period in fiscal
1997. Expenses in this category include field supervision (payroll, related
taxes and travel) and home office administration costs (such as warehousing,
salaries, occupancy costs and professional fees). This 20 basis point
improvement is a result of leveraging fixed costs against increased sales
volumes during the quarter. The dollar increase is primarily driven by the
Supercuts acquisition which resulted in higher warehouse expenses due to volume
increases and additional corporate professional fees, offset by cost reductions
associated with the amalgamation of the Supercuts back office functions.
All direct and indirect expenses associated with franchise operations, other
than the cost of products sold to franchisees, are included in SG&A expense.
The cost of products sold and associated franchise activities remained
relatively consistent in the second quarters of fiscal 1998 and 1997.
DEPRECIATION AND AMORTIZATION - CORPORATE
Depreciation and amortization remained fairly consistent at 1.1 percent of total
revenues in the second quarter of fiscal 1998.
14
<PAGE>
OPERATING INCOME
Exclusive of nonrecurring items from the prior year, operating income in the
second quarter of fiscal 1998 improved to $15,821,000, or 8.0 percent of total
revenues, an increase of $5,056,000, or 47.0 percent over the prior year
operating income of $10,765,000, or 6.1 percent of total revenues. This
improvement is attributable primarily to improved gross margins and the
leveraging of direct salon and SG&A expenses.
INTEREST
Interest expense in the second quarter of fiscal 1998 was $2,470,000, or 1.2
percent of total revenues, compared to $2,524,000 or 1.4 percent of total
revenues in the same period in fiscal 1997. Interest expense has remained
relatively consistent between the two periods because, although debt levels have
increased, average interest rates were lower during the period.
INCOME TAXES
The Company's effective income tax rate for fiscal 1998 is estimated to be
approximately 41.0 percent, compared to 66.6 percent in fiscal 1997. The
Company's effective tax rate for fiscal 1997 was negatively affected by certain
nondeductible merger and transaction costs (nonrecurring charges) associated
with the Supercuts merger. Additionally, as part of the tax provision for the
period ended December 31, 1996, the Company recorded a $1,500,000 charge
associated with the resolution of Supercuts income tax matters related to years
prior to 1996, resulting from the completion of an Internal Revenue Service
examination. Exclusive of the effect of nonrecurring charges and the
$1,500,000 resolution charge, the Company's effective tax rate for fiscal 1997
was 43.1 percent.
NET INCOME (LOSS)
Net income in the second quarter of fiscal 1998 was $7,957,000 or $.33 per
share, compared to a net loss of $8,880,000 or $.39 per share in the same period
in fiscal 1997. Exclusive of nonrecurring items in the prior year, net income
in the second quarter of fiscal 1998 increased to $7,957,000 or $.33 per share,
compared to net income in the same period in fiscal 1997 of $4,790,000 or $.21
per share, an earnings per share increase of 57.1 percent.
15
<PAGE>
SIX MONTHS ENDED DECEMBER 31, 1997, COMPARED TO SIX MONTHS ENDED DECEMBER 31,
1996:
REVENUES
REVENUES for the first six months of fiscal 1998 were a record $387,633,000, an
increase of $40,570,000 or 11.7 percent, over the same period in fiscal 1997.
System-wide sales, inclusive of non-consolidated sales generated from franchise
salons, increased 11.0 percent in the first six months of fiscal 1998 to
$516,269,000 from $464,968,000 in the same period in fiscal 1997. These
increases in company-owned and system-wide sales are the result of the total
number of salons added to the system through acquisitions and net salon
openings, as well as same-store sales increases from existing salons.
For the first six months of fiscal 1998 and 1997, respectively, revenues by
division are as follows:
1998 1997
---- ----
Regis Hairstylists $145,782 $136,325
Supercuts 49,582 47,703
MasterCuts 53,190 46,583
Trade Secret 57,408 42,818
Wal-Mart 17,659 14,974
International 50,641 45,335
Franchise Income 13,371 13,325
-------- --------
$387,633 $347,063
-------- --------
-------- --------
Same-store sales for domestic company-owned salons increased 6.0 percent in the
first six months of fiscal 1998, compared to 2.7 percent in the same period in
fiscal 1997. System-wide same-store sales for the first six months of fiscal
1998 increased 5.4 percent, compared to 2.1 percent in the same period in fiscal
1997. Same-store sales increases achieved are primarily due to an increase in
the number of customers served. A total of 35,570,000 customers system-wide
were served during the first half of fiscal 1998. The Company utilizes an
audiovisual-based training system in its company-owned salons. Management
believes this training system provides its employees with improved customer
service and technical skills, and positively contributes to the increase in
customers served.
SERVICE REVENUES in the first six months of fiscal 1998 were $264,110,000, an
increase of $21,615,000 or 8.9 percent, over the same period in fiscal 1997.
This increase is a result of strong service same-store sales growth of 5.6
percent, salon acquisitions the Company has made during the past twelve months
and accelerated new salon construction.
16
<PAGE>
PRODUCT REVENUES in the first six months of fiscal 1998 were $110,152,000, an
increase of $18,909,000 or 20.7 percent, over the same period in fiscal 1997.
This increase continues a trend of escalating product revenues due to strong
product same-store sales growth of 7.1 percent, a reflection of the continuous
focus on product awareness, training and acceptance of national label
merchandise, and the addition of 29 new Trade Secret salons. Product revenues
as a percent of total company-owned revenues increased to 29.4 percent of
revenues compared to 27.3 percent of revenues in the same period in fiscal 1997.
FRANCHISE INCOME, including royalties, initial franchise fees and product sales
made by the Company to franchisees, increased slightly to $13,371,000 in the
first six months of fiscal 1998.
COST OF REVENUES
The aggregate cost of service and product revenues in the first six months of
fiscal 1998 were $211,599,000, compared to $190,916,000 in the same period in
fiscal 1997. The resulting combined gross margin percentage for the first six
months of fiscal 1998 improved 70 basis points to 43.5 percent of company-owned
revenues compared to 42.8 percent of company-owned revenues in the same period
in fiscal 1997. As discussed below, this improvement was primarily due to
strong same-store sales and the increased sales leverage in the Company's fixed
cost payroll divisions.
SERVICE MARGINS were 42.8 percent in the first six months of fiscal 1998,
compared to 41.9 percent in the same period in fiscal 1997. This 80 basis point
improvement is primarily due to continued sales leverage of fixed cost payrolls
in the Supercuts division, and strong service same-store sales growth of 5.6
percent.
PRODUCT MARGINS were 45.1 percent in the first six months of fiscal 1998,
identical to that in the same period a year ago. Although the percentage
remained the same, the current year margins benefitted from lower product costs
in the Supercuts division, offset by increased discounting costs primarily in
the Regis Hairstylists division as the result of the Company's 75th anniversary
sale that took place in October 1997.
DIRECT SALON
This expense category includes direct costs associated with salon operations
such as advertising, promotion, insurance, telephone and utilities. Direct salon
expense of $35,137,000 improved as a percent of company-owned revenues to 9.4
percent in the first six months of fiscal 1998 from 9.9 percent in the same
period in fiscal 1997. This improvement resulted from an increased ability to
leverage these costs against increased revenues, which were a result of stronger
same-store sales and a maturing salon base, as well as the closure of
under-performing stores, primarily in the Supercuts division.
17
<PAGE>
RENT
Rent expense in the first six months of fiscal 1998 was $51,743,000 or 13.8
percent of company-owned revenues, compared to $46,579,000 or 14.0 percent of
company-owned revenues in the same period in fiscal 1997. The percentage
improvement is primarily due to leveraging this fixed cost against increasing
revenues.
DEPRECIATION - SALON LEVEL
Depreciation expense at the salon level remained fairly consistent at 3.2
percent of company-owned revenues, improving 10 basis points over the first six
months in fiscal 1997, due to leveraging this fixed cost against increasing
revenues.
DIRECT SALON CONTRIBUTION
For the reasons described above, direct salon contribution, representing
company-owned salon revenues less associated operating expenses, improved in the
first six months of fiscal 1998 to $63,647,000, or 17.0 percent of company-owned
revenues, compared to $52,154,000 or 15.6 percent of company-owned revenues in
the same period of fiscal 1997.
SELLING, GENERAL AND ADMINISTRATIVE
Selling, general and administrative (SG&A) expenses were $42,045,000, or 10.8
percent of total revenues in the first six months of fiscal 1998, compared to
$37,573,000, or 10.8 percent of total revenues in the same period in fiscal
1997. Expenses in this category include field supervision (payroll, related
taxes and travel) and home office administration costs (such as warehousing,
salaries, occupancy costs and professional fees). Although the percentage of
SG&A to total revenues remained the same, the dollar increase is primarily
driven by the Supercuts acquisition which resulted in higher warehouse expenses
due to volume increases and additional corporate professional fees, offset by
cost reductions associated with the amalgamation of the Supercuts back office
functions.
All direct and indirect expenses associated with franchise operations, other
than the cost of products sold to franchisees, are included in SG&A expense.
The cost of products sold and associated franchise activities remained
relatively consistent in both periods of fiscal 1998 and 1997.
DEPRECIATION AND AMORTIZATION - CORPORATE
Depreciation and amortization remained consistent at 1.1 percent of total
revenues in both periods.
18
<PAGE>
NONRECURRING CHARGES
See Note 4 to the unaudited Consolidated Financial Statements.
OPERATING INCOME
Exclusive of nonrecurring items, operating income in the first six months of
fiscal 1998 improved to $29,915,000, or 7.7 percent of total revenues, an
increase of $6,790,000, or 29.4 percent over the prior year period operating
income of $23,125,000, or 6.7 percent of total revenues. This improvement is
attributable primarily to improved gross margins and the leveraging of direct
salon expenses.
INTEREST
Interest expense in the first six months of fiscal 1998 was $4,887,000, or 1.3
percent of total revenues, compared to $4,974,000 or 1.4 percent of total
revenues in the same period in fiscal 1997. Interest expense has remained
relatively consistent between the two periods because, although debt levels have
increased, average interest rates were lower during the period.
INCOME TAXES
The Company's effective income tax rate for fiscal 1998 is estimated to be
approximately 41.0 percent, compared to 66.6 percent in fiscal 1997. The
Company's effective tax rate for fiscal 1997 was negatively affected by certain
nondeductible merger and transaction costs (nonrecurring charges) associated
with the Supercuts merger. Additionally, as part of the tax provision for the
period ended December 31, 1996, the Company recorded a $1,500,000 charge
associated with the resolution of Supercuts income tax matters related to years
prior to 1996, resulting from the completion of an Internal Revenue Service
examination. Exclusive of the effect of nonrecurring charges and the $1,500,000
resolution charge, the Company's effective tax rate for fiscal 1997 was 43.1
percent.
NET INCOME (LOSS)
Net income in the first six months of fiscal 1998 was $13,753,000 or $ .57 per
share, compared to a net loss of $4,339,000 or $.19 per share in the same period
in fiscal 1997. Exclusive of nonrecurring items in both periods, net income in
the first six months of fiscal 1998 increased to $14,865,000 or $.62 per share,
compared to net income in the same period in fiscal 1997 of $10,701,000 or $.46
per share, an earnings per share increase of 34.8 percent.
19
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
Customers generally pay for salon services and merchandise in cash at the time
of sale, which reduces the Company's working capital requirements. Net cash
provided by operating activities in the first six months of fiscal 1998 was
$30,948,000 compared to $13,157,000 during the same period in fiscal 1997. The
increase between the two periods is due to improved operating performance in the
current year and the merger and transaction costs associated with the Supercuts
merger in the prior year period.
During the first six months of fiscal 1998, the Company had worldwide capital
expenditures of $33,221,000, of which $1,193,000 related to acquisitions,
$4,299,000 of capital lease obligations that were entered into during the
current year, $5,142,000 for the Company's new distribution center and
$6,950,000 for the purchase of additional home office facilities. The Company
constructed 18 new Regis Hairstylists salons, 26 new MasterCuts salons, 24 new
Trade Secret salons, 23 new Wal-Mart salons and 8 new International salons, and
completed 35 major remodeling projects. All salon capital expenditures during
the first six months of fiscal 1998 were funded primarily by cash flow from the
Company's operations and borrowings under its revolving credit facilities.
The Company anticipates its worldwide salon development program for fiscal
1998 will include the construction of approximately 200 new company-owned
salons, and 60 major remodeling and conversion projects. It is expected the
Company's total capital expenditures in fiscal 1998 will be approximately
$63,000,000, excluding acquisitions, with approximately $41,000,000 related
to new salon construction and renovations. The remaining $22,000,000 is
related to the construction of the Company's new distribution center and the
purchase of additional home office facilities. Expenditures will be funded in
part through borrowings under existing credit facilities and capital lease
arrangements.
FINANCING
See Note 3 to the unaudited Consolidated Financial Statements.
Management believes that cash generated from operations and amounts available
under its revolving credit facilities will be sufficient to fund its anticipated
capital expenditures and required debt repayments for the foreseeable future.
DIVIDENDS
During the first six months of fiscal 1998, the Company paid quarterly dividends
of $933,595 or $.02 per share. In February 1998, the Board of Directors of the
Company approved the payment of a $.02 per share dividend payable to
shareholders of record of February 16, 1998.
20
<PAGE>
YEAR 2000
The Company has already begun the necessary software conversion and programming
modifications necessary to comply with the Year 2000 computer software issues
for significant portions of its software and computer systems. Based on the
Company's most recent assessment, the associated costs to be incurred are
estimated to be approximately $5,000,000. Such costs are estimated to be
incurred and charged to earnings over the next twenty-four months.
21
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
Exhibit 10 (ff) Modifications of Private Shelf Agreement in 10(dd) dated
October 1, 1997.
(gg) Private Shelf Agreement dated as of December 19, 1997 between
the registrant, Life Insurance Company of Georgia and ING
Affiliates.
(hh) Series R-1 Senior Note drawn from Private Shelf dated as of
December 19, 1997, between the registrant and ING Affiliate.
(ii) Series R-2 Senior Note drawn from Private Shelf dated as of
December 19, 1997 between the registrant and ING Affiliates.
(jj) Modifications to Revolving Credit agreement in 10 (cc) dated
December 30, 1997.
Exhibit 15 Letter Re: Unaudited Interim Financial Information.
Exhibit 27 Financial Data Schedule
(b) Reports on Form 8-K:
There were no reports on Form 8-K filed during the six months ended
December 31, 1997.
22
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
REGIS CORPORATION
Date: February 9, 1998 By: /s/ Randy L. Pearce
------------------------------------
Randy L. Pearce
Senior Vice President, Finance
Chief Financial Officer
Signing on behalf of the
registrant and as principal
accounting officer
23
<PAGE>
[LOGO]
[LETTERHEAD]
January 22, 1998
Regis Corporation
7201 Metro Boulevard
Minneapolis, Minnesota 55439
Attention: Kyle Didier, Manager, Finance
RE: AMENDMENT TO PRIVATE SHELF AGREEMENT DATED AS OF JULY 25, 1995 (AS
AMENDED AS OF JULY 11, 1997, AND AS OTHERWISE AMENDED FROM TIME TO
TIME, THE "AGREEMENT"), BY AND BETWEEN REGIS CORPORATION (THE
"COMPANY") AND THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
("PRUDENTIAL")
----------------------------------------------------------------------
Ladies and Gentlemen:
Reference is made to the above-captioned Agreement, pursuant to which
the Company issued and sold and Prudential purchased the Company's:
(i) 6.94% $10,000,000 Series A Senior Notes due July 1, 2005;
(ii) 7.99% $5,000,000 Series B Senior Notes due July 1, 2003;
(iii)7.80% $22,000,000 Series C Senior Notes due July 1, 2006;
(iv) 7.16% $5,000,000 Series D Senior Notes due January 2, 2002;
(v) 8.18% $8,000,000 Series E Senior Notes due July 2, 2006; and
(vi) 7.48% $2,000,000 Series F Senior Notes due July 2, 2006.
Capitalized terms used and not otherwise defined herein shall have the
meanings assigned to such terms in the Agreement.
Pursuant to the request of the Company and in accordance with the
provisions of paragraph 11C of the Agreement, the parties hereto agree as
follows:
SECTION 1. AMENDMENT. From and after the date this letter becomes
effective in accordance with its terms, the Agreement is amended as follows:
1.1 Paragraph 5K of the Agreement is deleted hereby.
<PAGE>
Regis Corporation
January 22, 1998
Page 2
1.2 Paragraph 6C(2)(iii) of the Agreement is amended hereby by deleting
it in its entirety and substituting it with the following:
"(iii) Current Debt, PROVIDED that any holder of such Current
Debt (other than a holder of Permitted Seller Current Debt) is
party to an Offset Sharing Agreement, and".
1.3 Paragraph 6C(3)(vii)(a) of the Agreement is amended hereby by deleting
the following parenthetical phrase "(excluding up to a $4,000,000 equity
contribution to a single United Kingdom based corporation if made after June
23, 1995 and prior to October 1, 1995)".
1.4 Paragraphs 7A(iii), 7A(xiii), 8F, 8J, 8L, and 8M of the Agreement
are amended hereby by inserting the term "Restricted" prior to the term
"Subsidiary" each time such term appears therein.
1.5 Paragraph 10B of the Agreement is amended hereby by deleting
therefrom the definition of "Consolidated Net Income", "Consolidated Net
Worth", "Tangible Net Worth" and "Total Debt" and substituting therefor the
following:
"'CONSOLIDATED NET INCOME' shall mean, as to any period, the net
income of the Company and Restricted Subsidiaries on a consolidated
basis."
"'CONSOLIDATED NET WORTH' shall mean, as of any time of
determination thereof, (i) the shareholders' equity (or deficit) of the
Company and its Restricted Subsidiaries, as the same would be shown on a
consolidated balance sheet of the Company and its Restricted
Subsidiaries, MINUS (ii) the aggregate amount of Investments in
Unrestricted Subsidiaries which are deemed not to be Investments for
purposes of paragraph 6C(3) as a result of clause (vii)(b) thereof."
"'TANGIBLE NET WORTH' shall mean, as of any time of
determination thereof, the net worth of the Company and its Restricted
Subsidiaries determined on a consolidated basis in accordance with
generally accepted accounting principles, plus, to the extent not
included in the assets of the Company and its Restricted Subsidiaries
used in determining such net worth, the amount of the cash surrender
value of life insurance policies maintained by the Company on the lives
of executive officers, plus any amount of Funded Debt of the Company
that is subordinated to the Notes and to all of the Company's
obligations under this Agreement in a manner and form satisfactory to
Prudential in its sole discretion as to the right to and time of payment
of such Funded Debt, and
<PAGE>
Regis Corporation
January 22, 1998
Page 3
as to any rights and remedies of Prudential and other holders of any
Notes with respect to such Funded Debt, minus the sum of (i) the amount
of any General Intangibles, (ii) amounts due from Affiliates and (iii)
the amount of investments in Unrestricted Subsidiaries."
"'TOTAL DEBT' shall mean, as of any time of determination
thereof, the aggregate amount of (i) all Funded Debt of the Company and
Restricted Subsidiaries PLUS (ii) the average outstanding daily balance
of all Current Debt of the Company and Restricted Subsidiaries during
the twelve calendar month period most recently ended as of any time of
determination, MINUS (iii) Debt of Restricted Subsidiaries owed to the
Company or a Wholly-Owned Subsidiary."
1.6 Paragraph 10B of the Agreement is amended further hereby by adding
thereto the following definitions, which shall be inserted in proper
alphabetical order:
"'PERMITTED SELLER CURRENT DEBT' shall mean Seller Current Debt
that (i) does not exceed $5,000,000 in aggregate outstanding principal
amount, either individually or collectively with all other Seller
Current Debt incurred in connection with the same purchase of an
operating business, and (ii) does not collectively with all other
outstanding Seller Current Debt exceed $10,000,000 in aggregate
outstanding principal amount."
"'SELLER CURRENT DEBT' shall mean Current Debt of the Company or
a Restricted Subsidiary that is (i) incurred in connection with the
purchase through asset purchase, stock purchase, merger, or
consolidation, of any operating business, (ii) is payable to the
seller(s) of such business or to the shareholders or other equity
holders of the seller(s) of such business, and (iii) represents deferred
purchase price for the purchased business."
1.7 Paragraph 10B of the Agreement is amended further hereby by deleting
the definition of "Subordinated Debt".
SECTION 2. REPRESENTATION AND WARRANTY. The Company hereby represents
and warrants that no Default or Event of Default exists under the Agreement
as of the date hereof.
<PAGE>
Regis Corporation
January 22, 1998
Page 4
SECTION 3. CONDITIONS PRECEDENT. This letter shall become effective as
of October 1, 1997 upon the return by the Company to Prudential of a
counterpart hereof duly executed by the Company and Prudential. Such
counterpart should be returned to: Prudential Capital Group, Two Prudential
Plaza, Suite 5600, Chicago, Illinois 60601-6716, Attention: Marianne
Grabowski.
SECTION 4. REFERENCE TO AND EFFECT ON AGREEMENT. Upon the effectiveness
of this letter, each reference to the Agreement in any other document,
instrument or agreement shall mean and be a reference to the Agreement as
modified by this letter. Except as specifically set forth in Section 1
hereof, the Agreement shall remain in full force and effect and is hereby
ratified and confirmed in all respects.
SECTION 5. GOVERNING LAW. THIS LETTER SHALL BE CONSTRUED AND ENFORCED IN
ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF ILLINOIS, WITHOUT REGARD TO
PRINCIPLES OF CONFLICT OF LAWS OF SUCH STATE.
SECTION 6. COUNTERPARTS; SECTION TITLES. This letter may be executed in
any number of counterparts, each of which when so executed and delivered
shall be deemed to be an original and all of which taken together shall
constitute but one and the same instrument. The section titles contained in
this letter are and shall be without substance, meaning or content of any
kind whatsoever and are not a part of the agreement between the parties
hereto.
Very truly yours,
THE PRUDENTIAL INSURANCE COMPANY
OF AMERICA
By: /s/ Illegible
---------------------------------
Vice President
Agreed and accepted:
REGIS CORPORATION
By: /s/ Randy L. Pearce
---------------------------------
RANDY L. PEARCE
Title: SENIOR VICE PRESIDENT-FINANCE
CHIEF FINANCIAL OFFICER
---------------------------------
<PAGE>
- ---------------------------------------------------------------------
- ---------------------------------------------------------------------
REGIS CORPORATION
$35,000,000
PRIVATE SHELF AGREEMENT
Dated as of December 19, 1997
- ---------------------------------------------------------------------
- ---------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
(Not Part of Agreement)
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C> <C>
1. AUTHORIZATION OF ISSUE OF NOTES.......................................... 1
2. PURCHASE AND SALE OF NOTES............................................... 2
2A. Facility............................................................ 2
2B. Issuance Period..................................................... 2
2C. Request for Purchase................................................ 2
2D. Rate Quotes......................................................... 3
2E. Acceptance.......................................................... 3
2F. Market Disruption................................................... 3
2G. Note Closings....................................................... 4
2H. Fees................................................................ 5
2H(i). Facility Fee................................................. 5
2H(ii). Issuance Fee................................................ 5
2H(iii). Delayed Delivery Fee....................................... 5
2H(iv). Cancellation Fee............................................ 6
3. CONDITIONS OF CLOSING.................................................... 6
3A. Certain Documents................................................... 6
3B. Opinion of Purchaser's Special Counsel.............................. 7
3C. Representations and Warranties; No Default.......................... 7
3D. Purchase Permitted by Applicable Laws............................... 8
3E. Payment of Fees..................................................... 8
3F. Offset Sharing Agreement............................................ 8
3G. Change in Company's Position........................................ 8
3H. Other Loan Agreements............................................... 8
4. PREPAYMENTS.............................................................. 8
4A. Required Prepayments of Notes....................................... 8
4B(1). Optional Prepayment With Yield-Maintenance Amount............ 8
4B(2). Prepayment with Yield-Maintenance Amount Pursuant to
Offset Sharing Agreement.......................................... 9
4C. Notice of Optional Prepayment....................................... 9
4D. Application of Prepayments.......................................... 9
4E. Retirement of Notes................................................. 9
-i-
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C> <C>
5. AFFIRMATIVE COVENANTS................................................... 10
5A. Financial Statements: Notice of Defaults........................... 10
5B. Information Required by Rule 144A.................................. 14
5C. Inspection of Property............................................. 14
5D. Covenant to Secure Notes Equally................................... 14
5E. Keeping of Books and Bank Accounts................................. 14
5F. Incorporation of Other Debt Covenants.............................. 14
5G. Corporate Existence................................................ 15
5H. Payment of Taxes and Claims........................................ 15
5I. Compliance with Laws, Etc.......................................... 15
5J. Maintenance of Properties; Insurance............................... 16
5K. Offset Sharing Agreement Amendment................................. 16
6. NEGATIVE COVENANTS...................................................... 16
6A. Interest Coverage Ratio............................................ 16
6B. Consolidated Net Worth............................................. 16
6C. Lien, Debt and Other Restrictions.................................. 16
6C(1). Liens....................................................... 16
6C(2). Debt........................................................ 17
6C(3). Investments................................................. 17
6C(4). Sale of Stock and Debt of Subsidiaries...................... 18
6C(5). Merger and Consolidation.................................... 19
6C(6). Transfer of Assets.......................................... 19
6C(7). Sale or Discount of Receivables............................. 20
6C(8). Transactions with Affiliates................................ 20
6C(9). Restricted Subsidiary Dividend Restrictions................. 20
6C(10). Tax Consolidation.......................................... 20
6D. Transactions by Restricted Subsidiaries............................ 21
7. EVENTS OF DEFAULT....................................................... 21
7A. Acceleration....................................................... 21
7B. Rescission of Acceleration......................................... 24
7C. Notice of Acceleration or Rescission............................... 24
7D. Other Remedies..................................................... 24
8. REPRESENTATIONS, COVENANTS AND WARRANTIES............................... 25
8A. Organization....................................................... 25
8B. Financial Statements............................................... 25
8C. Actions Pending; Observance of Agreements, Statutes and Orders..... 26
8D. Outstanding Debt................................................... 26
8E. Title to Properties................................................ 26
8F. Taxes.............................................................. 27
-ii-
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C> <C>
8G. Conflicting Agreements and Other Matters........................... 27
8H. Offering of Notes.................................................. 28
8I. Use of Proceeds.................................................... 28
8J. ERISA.............................................................. 28
8K. Governmental Consent............................................... 29
8L. Environmental Compliance........................................... 29
8M. Disclosure......................................................... 29
8N. Restricted Subsidiary Dividend Restrictions........................ 29
8O. Rule 144A.......................................................... 30
8P. Foreign Assets Control Regulations, etc............................ 30
8Q. Licenses Permits, etc.............................................. 30
9. REPRESENTATIONS OF THE PURCHASERS....................................... 30
9A. Nature of Purchase................................................. 30
9B. Source of Funds.................................................... 30
10. DEFINITIONS; ACCOUNTING MATTERS......................................... 30
10A. Yield-Maintenance Terms............................................ 31
10B. Other Terms........................................................ 32
10C. Accounting Principles, Terms and Determinations.................... 41
11. MISCELLANEOUS........................................................... 42
11A. Note Payments...................................................... 42
11B. Expenses........................................................... 42
11C. Consent to Amendments.............................................. 42
11D. Form, Registration, Transfer and Exchange of Notes; Lost Notes..... 43
11E. Persons Deemed Owners; Participation............................... 44
11F. Survival of Representations and Warranties; Entire Agreement....... 44
11G. Successors and Assigns............................................. 44
11H. Independence of Covenants.......................................... 45
11I. Notices............................................................ 45
11J. Payments Due on Non-Business Days.................................. 45
11K. Severability....................................................... 46
11L. Descriptive Headings............................................... 46
11M. Satisfaction Requirement........................................... 46
11N. Governing Law...................................................... 46
11O. Severalty of Obligations........................................... 46
11P. Counterparts....................................................... 46
11Q. Binding Agreement.................................................. 47
-iii-
</TABLE>
<PAGE>
INFORMATION SCHEDULE
EXHIBIT A -- FORM OF NOTE
EXHIBIT B -- FORM OF REQUEST FOR PURCHASE
EXHIBIT C -- FORM OF CONFIRMATION OF ACCEPTANCE
EXHIBIT D -- FORM OF OPINION OF COMPANY'S COUNSEL
SCHEDULE 8A -- LIST OF RESTRICTED AND UNRESTRICTED SUBSIDIARIES
SCHEDULE 8G -- LIST OF AGREEMENTS RESTRICTING DEBT
-iv-
<PAGE>
REGIS CORPORATION
7201 Metro Boulevard
Minneapolis, Minnesota 55439
As of December 19, 1997
Life Insurance Company of Georgia ("LOG")
Each ING Affiliate (as hereinafter
defined) which becomes bound by certain
provisions of this Agreement as hereinafter
provided (together with LOG,
the "PURCHASERS")
c/o ING Investment Management, Inc.
5780 Powers Ferry Road, N.W.
Suite 300
Atlanta, GA 30327-4349
Ladies and Gentlemen:
The undersigned, Regis Corporation (herein called the "COMPANY"), hereby
agrees with you as follows:
1. AUTHORIZATION OF ISSUE OF NOTES. The Company will authorize the
issue of its senior promissory notes (the "NOTES") in the aggregate principal
amount of $35,000,000, to be dated the date of issue thereof, to mature, in
the case of each Note so issued, no less than five and no more than ten years
after the date of original issuance thereof, to bear interest on the unpaid
balance thereof from the date thereof at the rate per annum, and to have such
other particular terms, as shall be set forth, in the case of each Note so
issued, in the Confirmation of Acceptance with respect to such Note delivered
pursuant to paragraph 2E and to be substantially in the form of EXHIBIT A
attached hereto. The terms "NOTE" and "NOTES" as used herein shall include
each Note delivered pursuant to any provision of this Agreement and each Note
delivered in substitution or exchange for any such Note pursuant to any such
provision. Notes which have (i) the same final maturity, (ii) the same
principal prepayment dates, (iii) the same principal prepayment amounts (as a
percentage of the original principal amount of each Note), (iv) the same
interest rate, (v) the same interest payment periods and (vi) the same date
of issuance (which, in the case of a Note issued in exchange for another
Note, shall be deemed for these purposes the date on which such Note's
ultimate predecessor Note was issued), are herein called a "SERIES" of Notes.
<PAGE>
2. PURCHASE AND SALE OF NOTES.
2A. FACILITY. LOG is willing to consider, in its sole discretion and
within limits which may be authorized for purchase by LOG and ING Affiliates
from time to time, the purchase of Notes pursuant to this Agreement. The
willingness of LOG to consider such purchase of Notes is herein called the
"FACILITY". At any time, the aggregate principal amount of Notes stated in
paragraph 1, MINUS the aggregate principal amount of Notes purchased and sold
pursuant to this Agreement prior to such time, MINUS the aggregate principal
amount of Accepted Notes (as hereinafter defined) which have not yet been
purchased and sold hereunder prior to such time, MINUS the aggregate
principal amount of notes of the Company issued pursuant to the 1991
Agreement which are outstanding and held by LOG and ING Affiliates at such
time, is herein called the "AVAILABLE FACILITY AMOUNT" at such time.
NOTWITHSTANDING THE WILLINGNESS OF LOG TO CONSIDER PURCHASES OF NOTES, THIS
AGREEMENT IS ENTERED INTO ON THE EXPRESS UNDERSTANDING THAT NEITHER LOG NOR
ANY ING AFFILIATE SHALL BE OBLIGATED TO MAKE OR ACCEPT OFFERS TO PURCHASE
NOTES, OR TO QUOTE RATES, SPREADS OR OTHER TERMS WITH RESPECT TO SPECIFIC
PURCHASES OF NOTES, AND THE FACILITY SHALL IN NO WAY BE CONSTRUED AS A
COMMITMENT BY LOG OR ANY ING AFFILIATE.
2B. ISSUANCE PERIOD. Notes may be issued and sold pursuant to this
Agreement commencing December 19, 1997, and continuing until the earlier of
(i) December 18, 2000 and (ii) the thirtieth day after LOG shall have given
to the Company, or the Company shall have given to LOG, a notice stating that
it elects to terminate the issuance and sale of Notes pursuant to this
Agreement (or if such thirtieth day is not a Business Day, the Business Day
next preceding such thirtieth day). The period during which Notes may be
issued and sold pursuant to this Agreement is herein called the "ISSUANCE
PERIOD".
2C. REQUEST FOR PURCHASE. The Company may from time to time during the
Issuance Period make requests for purchases of Notes (each such request being
herein called a "REQUEST FOR PURCHASE"). Each Request for Purchase shall be
made to LOG by telecopier or overnight delivery service, and shall (i)
specify the aggregate principal amount of Notes covered thereby, which shall
not be less than $5,000,000 and not be greater than the Available Facility
Amount at the time such Request for Purchase is made, (ii) specify the
principal amounts, final maturities, principal prepayment dates and amounts,
and interest payment periods of the Notes covered thereby, (iii) specify the
use of proceeds of such Notes, (iv) specify the proposed day for the closing
of the purchase and sale of such Notes, which shall be a Business Day during
the Issuance Period not less than 10 days and not more than 25 days after the
making of such Request for Purchase, (v) specify the number of the account
and the name and address of the depository institution to which the purchase
prices of such Notes are to be transferred on the Closing Day for such
purchase and sale, (vi) certify that the representations and warranties
contained in paragraph 8 are true on and as of the date of such
2
<PAGE>
Request for Purchase and that there exists on the date of such Request for
Purchase no Event of Default or Default, and (vii) be substantially in the
form of EXHIBIT B attached hereto. Each request for Purchase shall be in
writing and shall be deemed made when received by LOG.
2D. RATE QUOTES. Not later than five Business Days after the Company
shall have given LOG a Request for Purchase pursuant to paragraph 2C. LOG
may, but shall be under no obligation to, provide to the Company by telephone
or telecopier, in each case between 9:30 A.M. and 1:30 P.M. New York City
local time (or such later time as LOG may elect) interest rate quotes for the
several principal amounts, maturities, principal prepayment schedules and
interest payment periods of Notes specified in such Request for Purchase.
Each quote shall represent the interest rate per annum payable on the
outstanding principal balance of such Notes at which LOG or an ING Affiliate
would be willing to purchase such Notes at 100% of the principal amount
thereof.
2E. ACCEPTANCE. Within 30 minutes after LOG shall have provided any
interest rate quotes pursuant to paragraph 2D or such shorter period as LOG
may specify to the Company (such period herein called the "ACCEPTANCE
WINDOW"), the Company may, subject to paragraph 2F, elect to accept such
interest rate quotes as to not less than $5,000,000 aggregate principal
amount of the Notes specified in the related Request for Purchase. Such
election shall be made by an Authorized Officer of the Company notifying LOG
by telephone or telecopier within the Acceptance Window that the Company
elects to accept such interest rate quotes, specifying the Notes (each such
Note being herein called an "ACCEPTED NOTE") as to which acceptance (herein
called an "ACCEPTANCE") relates. The day the Company notifies LOG of an
Acceptance with respect to any Accepted Notes is herein called the
"ACCEPTANCE DAY" for such Accepted Notes. Any interest rate quotes as to
which LOG does not receive an Acceptance within the Acceptance Window shall
expire, and no purchase or sale of Notes hereunder shall be made based on
such expired interest rate quotes. Subject to paragraph 2F and the other
terms and conditions hereof, the Company agrees to sell to LOG or an ING
Affiliate, and LOG agrees to purchase, or to cause the purchase by an ING
Affiliate of, the Accepted Notes at 100% of the principal amount of
such Notes. As soon as practicable following the Acceptance Day, the Company,
LOG and each ING Affiliate which is to purchase any such Accepted Notes will
execute a confirmation of such Acceptance substantially in the form of
EXHIBIT C attached hereto (herein called a "CONFIRMATION OF ACCEPTANCE"). If
the Company should fail to execute and return to LOG within three Business
Days following receipt thereof a Confirmation of Acceptance with respect to
any Accepted Notes, LOG may at its election at any time prior to its receipt
thereof cancel the closing with respect to such Accepted Notes and terminate
all obligations to purchase such Accepted Notes by so notifying the Company
in writing.
2F. MARKET DISRUPTION. Notwithstanding the provisions of paragraph 2E,
if LOG shall have provided interest rate quotes pursuant to paragraph 2D and
thereafter prior to the
3
<PAGE>
time an Acceptance with respect to such quotes shall have been notified to
LOG in accordance with paragraph 2E, the domestic market for U.S. Treasury
securities or derivatives shall have closed or there shall have occurred a
general suspension, material limitation, or significant disruption of trading
in securities generally on the New York Stock Exchange or in the domestic
market for U.S. Treasury securities or derivatives, then such interest rate
quotes shall expire, and no purchase or sale of Notes hereunder shall be made
based on such expired interest rate quotes. If the Company thereafter
notifies LOG of the Acceptance of any such interest rate quotes, such
Acceptance shall be ineffective for all purposes of this Agreement, and LOG
shall promptly notify the Company that the provisions of this paragraph 2F
are applicable with respect to such Acceptance.
2G. NOTE CLOSINGS. Not later than 11:30 A.M. (New York City local
time) on the Closing Day for any Accepted Notes, the Company will deliver to
each Purchaser listed in the Confirmation of Acceptance relating thereto at
the offices of ING Investment Management, Inc., at 5780 Powers Ferry Road,
Suite 300, Atlanta, Georgia 30327-4751, the Accepted Notes to be purchased by
such Purchaser in the form of one or more Notes in authorized denominations
as such Purchaser may request for each Series of Accepted Notes to be
purchased on the Closing Day, dated the Closing Day and registered in such
Purchaser's name (or in the name of its nominee), against payment of the
purchase price thereof by transfer of immediately available funds for credit
to the Company's account specified in the Request for Purchase of such Notes.
If the Company fails to tender to any Purchaser the Accepted Notes to be
purchased by such Purchaser on the scheduled Closing Day for such Accepted
Notes as provided above in this paragraph 2G, or any of the conditions
specified in paragraph 3 shall not have been fulfilled by the time required
on such scheduled Closing Day, the Company shall, prior to 1:00 P.M., New
York City local time, on such scheduled Closing Day notify LOG (which
notification shall be deemed received by each Purchaser) in writing whether
(i) such closing is to be rescheduled (such rescheduled date to be a Business
Day during the Issuance Period not less than one Business Day and not more
than 10 Business Days after such scheduled Closing Day (the "RESCHEDULED
CLOSING DAY") and certify to LOG (which certification shall be for the
benefit of each Purchaser) that the Company reasonably believes that it will
be able to comply with the conditions set forth in paragraph 3 on such
Rescheduled Closing Day and that the Company will pay the Delayed Delivery
Fee in accordance with paragraph 2H(iii) or (ii) such closing is to be
canceled and all obligations of each Purchaser to purchase the Accepted Notes
are terminated. In the event that the Company shall fail to give such notice
referred to in the preceding sentence, LOG (on behalf of each Purchaser) may
at its election, at any time after 1:00 P.M., New York City local time, on
such scheduled Closing Day, notify the Company in writing that such closing
is to be canceled and all obligations of each Purchaser to purchase the
Accepted Notes are terminated. Notwithstanding anything to the contrary
appearing in this Agreement, the Company may elect to reschedule a closing
with respect to any given Accepted Notes on not more than one occasion,
unless LOG shall have otherwise consented in writing.
4
<PAGE>
2H. FEES.
2H(i). FACILITY FEE. At the time of the execution and delivery of
this Agreement by the Company and LOG, the Company will pay to LOG in
immediately available funds a fee (the "FACILITY FEE") in the amount of
$50,000. Payment shall be made to LOG's agent, ING Investment Management,
Inc., in accordance with the written wire transfer instructions provided by
ING Investment Management, Inc., to the Company on or before the date of this
Agreement. If following payment of the Facility Fee a Refund Event shall
occur, LOG shall refund or cause ING Investment Management, Inc., to refund
to the Company the Refundable Portion of the Facility Fee.
2H(ii). ISSUANCE FEE. The Company will pay to each Purchaser of any
Accepted Notes in immediately available funds a fee (herein called the
"ISSUANCE FEE") on the Closing Day with respect to such Accepted Notes in an
amount equal to 0.15% of the aggregate principal amount of such Accepted
Notes sold on such Closing Day.
2H(iii). DELAYED DELIVERY FEE. If the closing of the purchase and sale
of any Accepted Note is delayed for any reason beyond the original Closing
Day for such Accepted Note, the Company will pay to LOG for the benefit of
the Purchaser of the Accepted Note (a) on the Cancellation Date or actual
closing date of such purchase and sale and (b) if earlier, the next Business
Day following 90 days after the Acceptance Day for such Accepted Note and on
each Business Day following 90 days after the prior payment hereunder, a fee
(herein called the "DELAYED DELIVERY FEE") calculated as follows:
(BEY - MMY) X DTS/360 X PA
where "BEY" means Bond Equivalent Yield, I.E., the bond equivalent yield per
annum of such Accepted Note, "MMY" means Money Market Yield, I.E., the yield
per annum on a commercial paper investment of the highest quality selected by
LOG on the date LOG receives notice of the delay in the closing for such
Accepted Note having a maturity date or dates the same as, or closest to, the
Rescheduled Closing Day or Rescheduled Closing Days (a new alternative
investment being selected by LOG each time such closing is delayed); "DTS"
means Days to Settlement, I.E., the number of actual days elapsed from and
including the Original Closing Day with respect to such Accepted Note (in the
case of the first such payment with respect to such Accepted Note) or from
and including the date of the next preceding payment (in the case of any
subsequent delayed delivery fee payment with respect to such Accepted Note)
to but excluding the date of such payment; and "PA" means Principal Amount,
I.E., the principal amount of the Accepted Note for which such calculation is
being made. In no case shall the Delayed Delivery Fee be less than zero.
Nothing contained herein shall obligate any Purchaser to purchase any
Accepted Note on any day other than the Closing Day for such Accepted Note,
as the same may be rescheduled from time to time in compliance with paragraph
2G.
5
<PAGE>
2H(iv). CANCELLATION FEE. If the Company at any time notifies LOG in
writing that the Company is canceling the closing of the purchase and sale of
any Accepted Note, or if LOG notifies the Company in writing under the
circumstances set forth in the last sentence of paragraph 2E or the
penultimate sentence of paragraph 2G that the closing of the purchase and
sale of such Accepted Note is to be canceled, or if the closing of the
purchase and sale of such Accepted Note is not consummated on or prior to the
last day of the Issuance Period (the date of any notification, or the last
day of the Issuance Period, as the case may be, being herein called the
"CANCELLATION DATE"), the Company will pay to LOG for the benefit of the
Purchaser of the Accepted Note in immediately available funds, in addition to
any Delayed Delivery Fee owing with respect to such Accepted Note, an amount
(the "CANCELLATION FEE") calculated as follows:
PI X PA
where "PI" means Price Increase, I.E., the quotient (expressed in decimals)
obtained by dividing (a) the excess of the ask price (as determined by LOG)
of the Hedge Treasury Note(s) on the Cancellation Date over the bid price (as
determined by LOG) of the Hedge Treasury Notes(s) on the Acceptance Day for
such Accepted Note by (b) such bid price; and "PA" has the meaning ascribed
to it in paragraph 2H(iii). The foregoing bid and ask prices shall be as
reported by Bloomberg Financial Markets Service (or, if such data for any
reason ceases to be available through Bloomberg Financial Markets Service,
any publicly available source of similar market data). Each price shall be
based on a U.S. Treasury security having a par value of $100.00 and shall be
rounded to the second decimal place. In no case shall the Cancellation Fee be
less than zero. Any Cancellation Fee shall be paid on demand made by LOG.
3. CONDITIONS OF CLOSING. The obligation of any Purchaser to purchase
and pay for any Notes is subject to the satisfaction, on or before the
Closing Date for such Notes, of the following conditions:
3.A. CERTAIN DOCUMENTS. Such Purchaser shall have received the
following, each dated the date of the applicable Closing Day:
(i) The Note(s) to be purchased by such Purchaser.
(ii) Certified copies of the resolutions of the Board of Directors
of the Company authorizing the execution and delivery of this Agreement
and the issuance of the Notes, and of all documents evidencing other
necessary corporate action and governmental approvals, if any, with
respect to this Agreement and the Notes.
(iii) A certificate of the Secretary or an Assistant Secretary and
one other officer of the Company certifying the names and true
signatures of the officers of the
6
<PAGE>
Company authorized to sign this Agreement and the Notes and the other
documents to be delivered hereunder.
(iv) Certified copies of the Certificate of Incorporation and
By-laws of the Company.
(v) A favorable opinion of Phillips & Gross, P.A., special
counsel to the Company (or such other counsel designated by the Company
and acceptable to the Purchaser(s)) satisfactory to such Purchaser and
substantially in the form of EXHIBIT D attached hereto and as to such
other matters as such Purchaser may reasonably request. The Company
directs such counsel to deliver such opinion, agrees that the issuance
and sale of any Notes will constitute a reconfirmation of such
direction, and understands and agrees that each Purchaser receiving such
an opinion will and is hereby authorized to rely on such opinion.
(vi) A good standing certificate for the Company from the Secretary
of State of Minnesota dated as of a recent date and such other evidence of
the status of the Company as such Purchaser may reasonably request.
(vii) Certified copies of the Requests for Information or Copies
(Form UCC-11) or equivalent reports listing all effective financing
statements which name the Company or any Restricted Subsidiary (under
their present names and previous names) as debtor and which are filed
in the offices of the Secretaries of State of Minnesota and Colorado
together with copies of such financing statements.
(viii) Additional documents or certificates with respect to legal
matters or corporate or other proceedings related to the status of the
Company and its Subsidiaries or the transactions contemplated hereby as
may be reasonably requested by such Purchaser.
3B. OPINION OF PURCHASER'S SPECIAL COUNSEL. Such Purchaser shall have
received from Kilpatrick Stockton LLP, special counsel for LOG, or such other
counsel who is acting as counsel for it in connection with the transaction to
be closed a favorable opinion satisfactory to such Purchaser as to such
matters incident to the matters herein contemplated as it may reasonably
request.
3C. REPRESENTATIONS AND WARRANTIES; NO DEFAULT. The representations and
warranties contained in paragraph 8 shall be true on and as of such Closing
Day; there shall exist on such Closing Day no Event of Default or Default;
and the Company shall have delivered to such Purchaser an Officer's
Certificate, dated such Closing Day, to both such effects.
7
<PAGE>
3D. PURCHASE PERMITTED BY APPLICABLE LAWS. The purchase of and payment
for the Notes to be purchased by such Purchaser on the terms and conditions
herein provided (including the use of the proceeds of such Notes by the
Company) shall not violate any applicable law or governmental regulation
(including, without limitation, Section 5 of the Securities Act or Regulation
G, T or X of the Board of Governors of the Federal Reserve System) and shall
not subject such Purchaser to any tax, penalty, liability or other onerous
condition under or pursuant to any applicable law or governmental regulation,
and such Purchaser shall have received such certificates or other evidence as
it may request to establish compliance with this condition.
3E. PAYMENT OF FEES. The Company shall have paid to LOG and its
Affiliates and all fees due it or them pursuant to or in connection with this
Agreement, including any Issuance Fee due pursuant to paragraph 2H(ii) and
any Delayed Delivery Fee due pursuant to paragraph 2H(iii).
3F. OFFSET SHARING AGREEMENT. If the Closing Day occurs after the
expiration of the period within which the Company is required to cause the
Offset Sharing Agreement to be amended, as provided in paragraph 5K, the
Offset Sharing Agreement shall have been so amended.
3G. CHANGE IN COMPANY'S POSITION. On the date of closing there shall
not have occurred or be threatened (i) a material and adverse change in the
Company's financial position, or (ii) any condition, event or act which would
materially and adversely affect the Company's business or its ability to
repay the Notes.
3H. OTHER LOAN AGREEMENTS. The Company shall have demonstrated its
compliance with the penultimate sentence of paragraph 8G to the satisfaction
of the Purchaser.
4. PREPAYMENTS. The Notes shall be subject to required prepayment as
and to the extent provided in paragraph 4A. The Notes shall also be subject
to prepayment under the circumstances set forth in paragraph 4B. Any
prepayment made by the Company pursuant to paragraph 4B shall not reduce or
otherwise affect its obligation to make any required prepayment as specified
in paragraph 4A. Except as set forth in paragraph 4B(1), the Notes shall not
be subject to prepayment at the option of the Company.
4A. REQUIRED PREPAYMENTS OF NOTES. Each Series of Notes shall be
subject to required prepayments, if any, set forth in the Notes of such
Series.
4B(1). OPTIONAL PREPAYMENT WITH YIELD-MAINTENANCE AMOUNT. The Notes of
each Series shall be subject to prepayment, in whole at any time or from time
to time in part (in integral multiples of $500,000) at the option of the
Company, at 100% of the principal amount so prepaid plus interest thereon to
the prepayment date and the Yield-Maintenance
8
<PAGE>
Amount, if any, with respect to each such Note. Any partial prepayment of a
Series of Notes pursuant to this paragraph 4B(1) shall be applied in
satisfaction of required payments of principal in inverse order of their
scheduled due dates.
4B(2). PREPAYMENT WITH YIELD-MAINTENANCE AMOUNT PURSUANT TO OFFSET
SHARING AGREEMENT. If amounts are to be applied to the principal of the Notes
pursuant to the terms of an Offset Sharing Agreement, interest owing thereon
to the prepayment date and the Yield-Maintenance Amount, if any, with respect
to each Note shall be due and payable on such date. Any partial prepayment
of the Notes pursuant to this paragraph 4B(2) shall be applied in
satisfaction of required payments of principal in inverse order of their
scheduled due dates.
4C. NOTICE OF OPTIONAL PREPAYMENT. The Company shall give the
holder of each Note of a Series to be prepaid pursuant to paragraph 4B(1)
irrevocable written notice of such prepayment not less than 10 Business Days
prior to the prepayment date, specifying such prepayment date, the aggregate
principal amount of the Notes of such Series to be prepaid on such day, the
principal amount of the Notes of such Series held by such holder to be
prepaid on that date and that such prepayment is to be made pursuant to
paragraph 4B(1). Notice of prepayment having been given as aforesaid, the
principal amount of the Notes specified in such notice, together with
interest thereon to the prepayment date and together with the
Yield-Maintenance Amount, if any, herein provided, shall become due and
payable on such prepayment date. The Company shall, on or before the day on
which it gives written notice of any prepayment pursuant to paragraph 4B(1),
give telephonic notice of the principal amount of the Notes to be prepaid and
the prepayment day to each Significant Holder which shall have designated a
recipient for such notices in the Purchaser Schedule attached to the
applicable Confirmation of Acceptance or by notice in writing to the Company.
4D. APPLICATION OF PREPAYMENTS. In the case of each prepayment of
less than the entire unpaid principal amount of all outstanding Notes of any
Series, as the case may be, pursuant to paragraphs 4A, 4B(1) or 4B(2), the
amount to be prepaid shall be applied pro rata to all outstanding Notes or
all outstanding Notes of such Series, as the case may be (including, for the
purpose of this paragraph 4D only, all Notes prepaid or otherwise retired or
purchased or otherwise acquired by the Company or any of its Subsidiaries or
Affiliates other than by prepayment pursuant to paragraph 4A or 4B),
according to the respective unpaid principal amounts thereof.
4E. RETIREMENT OF NOTES. The Company shall not, and shall not permit
any of its Subsidiaries or Affiliates to, prepay or otherwise retire in whole
or in part prior to their stated final maturity (other than by prepayment
pursuant to paragraphs 4A or 4B or upon acceleration of such final maturity
pursuant to paragraph 7A), or purchase or otherwise acquire, directly or
indirectly, Notes of any Series held by any holder unless their Company or
such Subsidiary or Affiliate shall have offered to prepay or otherwise retire
or purchase or
9
<PAGE>
otherwise acquire, as the case may be, the same proportion of the aggregate
principal amount of Notes of such Series held by each other holder of Notes
of such Series at the time outstanding upon the same terms and conditions.
Any Notes so prepaid or otherwise retired or purchased or otherwise acquired
by the Company or any of its Subsidiaries or Affiliates shall not be deemed
to be outstanding for any purpose under this Agreement, EXCEPT as provided in
paragraph 4D.
5. AFFIRMATIVE COVENANTS. During the Issuance Period and so long
thereafter as any Note is outstanding and unpaid, the Company covenants as
follows:
5A. FINANCIAL STATEMENTS; NOTICE OF DEFAULTS. The Company covenants
that it will deliver to LOG and each Significant Holder in triplicate:
(i) as soon as practicable and in any event within 45 days after
the end of each quarterly period (other than the last quarterly period) in
each fiscal year, a consolidated balance sheet of the Company and its
Subsidiaries and of the Company and its Restricted Subsidiaries as at
the end of such quarterly period and the related consolidated statements
of income and cash flows of the Company and its Subsidiaries and of the
Company and its Restricted Subsidiaries for such period setting forth,
in each case in comparative form, figures for the corresponding period in
the preceding fiscal year, all in reasonable detail and certified by the
chief financial officer or chief accounting officer of the Company as
fairly presenting the consolidated financial position of the Company and
its Subsidiaries and of the Company and its Restricted Subsidiaries as
at the dates indicated and the consolidated results of their respective
operations and cash flows, in each case for the periods indicated, in
conformity with generally accepted accounting principles applied on a
basis consistent with prior periods (except as disclosed in such
certificate), subject to changes resulting from year-end adjustments;
(ii) as soon as practicable and in any event within 90 days after
the end of each fiscal year, a consolidated and consolidating balance
sheet of the Company and its Subsidiaries as at the end of such year and
the related consolidated and consolidating statements of income and cash
flows of the Company and its Subsidiaries for such year, all in
reasonable detail and satisfactory in scope to the Required Holder(s),
and (a) in the case of such consolidated financial statements, setting
forth in each case in comparative form corresponding consolidated
figures for the preceding fiscal year, and accompanied by a report
thereon of independent public accountants of recognized national
standing selected by the Company, which report shall state that,
subject only to standard qualifications and limitations generally
contained in an unqualified audit report, such consolidated financial
statements present fairly the consolidated financial position of the
Company and its Subsidiaries as at the dates indicated and the
consolidated results of their operations and cash flows
10
<PAGE>
for the periods indicated in conformity with generally accepted accounting
principles applied on a basis consistent with prior years (except as
otherwise specified in such report) and that the audit by such
accountants in connection with such consolidated financial statements
has been made in accordance with generally accepted auditing standards,
and (b) in the case of such consolidating financial statements, (w)
setting forth on supplemental schedules, in one column, the total
amounts for the Company and its Restricted Subsidiaries, and, in a
second column, the total amounts for the Company's other Subsidiaries, and
showing all eliminations and adjustments made in aggregating the amounts
of such columns to arrive at the Company's consolidated financial
statements, (x) setting forth in comparative form the corresponding
consolidated figures for the Company and its Restricted Subsidiaries for
the preceding fiscal year, (y) certified by the chief financial officer
or chief accounting officer of the Company as fairly presenting the
respective financial positions of the separate entities reported on as
at the dates indicated and the results of their respective operations
and cash flows for the period indicated, in conformity with generally
accepted accounting principles applied on a basis consistent with prior
periods (except as otherwise specified in such certificate), and (z)
accompanied by a report thereon of the independent public accountants
reporting on the consolidated financial statements of the Company and
its Subsidiaries for such fiscal year, which report shall state that,
subject to the qualifications and limitations contained in their report
on the consolidated financial statements of the Company and its
Subsidiaries, and to the further qualification that the principles of
consolidation followed in the preparation of such consolidated figures
for the Company and its Restricted Subsidiaries conform to the
provisions of this Agreement rather than to generally accepted
accounting principles, such consolidated figures for the Company and its
Restricted Subsidiaries present fairly the consolidated financial
position of the Company and its Restricted Subsidiaries as at the dates
indicated and the consolidated results of their operations and cash
flows for the periods indicated in conformity with generally accepted
accounting principles applied on a basis consistent with prior periods
(except as otherwise specified in such report);
(iii) as soon as practicable and in any event within (a) 45 days
after the end of each quarterly period (other than the last quarterly
period) in each fiscal year and (b) 120 days after the end of each
fiscal year, balance sheets (which in the case of the fiscal year end
shall be audited) of each Unrestricted Subsidiary as at the end of such
period and the related statements of income and cash flows of each such
Unrestricted Subsidiary for such period (which in the case of annual
statements shall be audited);
(iv) together with each delivery of financial statements
pursuant to clauses (i) and (ii) of this paragraph 5A, an Officer's
Certificate (a) stating that the signer has reviewed the terms of this
Agreement and the Notes and has made, or caused to be made under his or
her supervision, a review in reasonable detail of the transactions
11
<PAGE>
and condition of the Company and its Restricted Subsidiaries during the
fiscal period covered by such financial statements and that such review
has not disclosed the existence during or at the end of such fiscal
period, and that the signer does not have knowledge of the existence as
at the date of the Officer's Certificate, of any condition or event
which constitutes a Default or Event of Default or, if any such
condition or event existed or exists, specifying the nature and period
of existence thereof and what action the Company has taken or is taking
or proposes to take with respect thereto, and (b) demonstrating (with
computations in reasonable detail) compliance by the Company with the
provisions of paragraphs 6A, 6B, 6C(1), 6C(2), 6C(3), 6C(4), 6C(6) and
6C(8) of this Agreement (herein called the "COMPUTATION PARAGRAPHS");
(v) together with each delivery of financial statements of the
Company and its Subsidiaries pursuant to clause (ii) of this paragraph
5A, a certificate by the Company's independent public accountants
stating (a) that their audit examination has included a review of the
terms of this Agreement and of the Notes as they relate to accounting
matters and that such review is sufficient to enable them to make the
statement referred to in subclause (c) of this clause (v), (b) whether
in the course of their audit examination there has been disclosed the
existence during the fiscal year covered by such financial statements
(and whether they have knowledge of the existence as of the date of such
accountants' certificate) of any condition or event which constitutes a
Default or Event of Default and if during their audit examination there
has been disclosed (or if they have knowledge of) such a condition or
event, specifying the nature and period of existence thereof (it being
understood, however, that such accountants shall not be liable to any
Person by reason of their failure to obtain knowledge of any Default or
Event of Default which would not be disclosed in the course of an audit
conducted in accordance with generally accepted auditing standards), and
(c) that based on their annual audit examination, including a review of
the Computation Paragraphs, nothing came to their attention which causes
them to believe that the information relating to the Computation
Paragraphs contained in the Officer's Certificate delivered therewith
pursuant to clause (iv) of this paragraph 5A is not correct or that the
matters set forth in such Officer's Certificate are not stated in
accordance with the terms of this Agreement;
(vi) promptly upon their becoming available, copies of all
financial statements, reports, notices and proxy statements sent or
made available generally by the Company and its Restricted Subsidiaries
to its security holders (other than the Company in the case of
Restricted Subsidiaries), of all regular and periodic reports and all
registration statements and prospectuses, if any, filed by the Company or
any of its Restricted Subsidiaries with any securities exchange or with
the Securities and Exchange Commission or with NASDAQ, and of all press
releases and other written statements made available generally by the
Company or any of its Restricted
12
<PAGE>
Subsidiaries to the public concerning material developments in the
business of the Company and its Restricted Subsidiaries:
(vii) promptly upon receipt thereof by the Company, copies of
all reports submitted to the Company by independent public accountants
in connection with each annual, interim or special audit of the books of
the Company or any of its Restricted Subsidiaries made by such
accountants;
(viii) promptly upon any Responsible Officer obtaining knowledge
(a) that a condition or event exists that constitutes a Default or Event
of Default, (b) that the holder of any Note has given any notice or
taken any other action with respect to a claimed Default or Event of
Default under this Agreement, (c) of any condition or event which could
reasonably be expected to have a material adverse effect on the business,
condition (financial or other), assets, properties, operations or
prospects of the Company or the Company and its Restricted Subsidiaries
taken as a whole (other than matters of a general economic or political
nature which do not affect the Company or its Restricted Subsidiaries
uniquely), (d) that any Person has given any notice to the Company or
any Restricted Subsidiary or taken any other action with respect to a
claimed default or event or condition of the type referred to in clause
(iii) of paragraph 7A, (e) of the institution of any litigation
involving claims against the Company or any Restricted Subsidiary in
excess of the coverage provided under the Company's or such Restricted
Subsidiary's insurance policies (treating any portion of such coverage
which is subject to self-insurance or deductibles as a part of such
excess) if the amount of the excess of such claims individually exceeds
$500,000, or, when aggregated with the excess over insurance coverage of
all other outstanding claims, exceeds $1,000,000, (f) of the initiation
by the Securities and Exchange Commission of any proceeding against the
Company or any Restricted Subsidiary or of any investigation of the
Company or any Restricted Subsidiary or (g) of the initiation by any
other governmental agency of any proceeding against the Company or any
Restricted Subsidiary or of any investigation of the Company or any
Restricted Subsidiary involving allegations (or which could reasonably
be expected to result in allegations) of material illegal activities or
misconduct on the part of the Company or any Restricted Subsidiary, an
Officer's Certificate specifying the nature and period of existence of
any such condition or event, or specifying the notice given or action
taken by such holder or Person and the nature of such claimed Default,
Event of Default, event or condition, or specifying the nature of such
litigation, proceeding or investigation, and what action the Company has
taken, is taking or proposes to take with respect thereto; and
(ix) with reasonable promptness, such other information and data
with respect to the Company or any of its Subsidiaries as from time to
time may be reasonably requested by such Significant Holder.
13
<PAGE>
5B. INFORMATION REQUIRED BY RULE 144A. The Company covenants that it
will, upon the request of the holder of any Note, provide such holder, and
any qualified institutional buyer designated by such holder, such financial
and other information as such holder may reasonably determine to be necessary
in order to permit compliance with the information requirements of Rule 144A
under the Securities Act in connection with the resale of Notes, except at
such times as the Company is subject to and in compliance with the reporting
requirements of section 13 or 15(d) of the Exchange Act. For the purpose of
this paragraph 5B, the term "QUALIFIED INSTITUTIONAL BUYER" shall have the
meaning specified in Rule 144A under the Securities Act.
5C. INSPECTION OF PROPERTY. The Company covenants that it will
permit any Person designated by any Significant Holder in writing, at such
Significant Holder's expense (unless a Default or Event of Default shall have
occurred and be continuing, in which case at the Company's expense), to visit
and inspect any of the properties of the Company and its Restricted
Subsidiaries, to examine the corporate books and financial records of the
Company and its Restricted Subsidiaries and make copies thereof or extracts
therefrom and to discuss the affairs, finances and accounts of any of such
corporations with the principal officers of the Company and its independent
public account, all at such reasonable times and as often as such Significant
Holder may reasonably request.
5D. COVENANT TO SECURE NOTES EQUALLY. The Company covenants that, if
it or any Restricted Subsidiary shall create or assume any Lien upon any of
its property or assets, whether now owned or hereafter acquired, other than
Liens permitted by the provisions of paragraph 6C(1) (unless prior written
consent to the creation or assumption thereof shall have been obtained
pursuant to paragraph 11C), it will make or cause to be made effective
provision whereby the Notes will be secured by such Lien equally and ratably
with any and all other obligations thereby secured so long as any such other
obligations shall be so secured.
5E. KEEPING OF BOOKS AND BANK ACCOUNTS. The Company covenants that it
will, and will cause each of its Restricted Subsidiaries to (i) keep separate
and proper books of record and account in which full and correct entries
shall be made of all transactions, including any transactions between the
Company or any Restricted Subsidiary and any Affiliate, all in accordance
with generally accepted accounting principles, and (ii) maintain bank accounts
which are separate and segregated from the bank accounts of any Unrestricted
Subsidiary or Affiliate.
5F. INCORPORATION OF OTHER DEBT COVENANTS. The Company covenants that
if it is or shall become subject to any operational or financial covenant in
any document evidencing or pertaining to Debt of the Company which is more
favorable to a lender or other beneficiary than those set forth in paragraph
6 hereof, then (i) this Agreement shall be deemed to be automatically amended
to include such more favorable covenant, (ii) the
14
<PAGE>
Company shall promptly give each holder of Notes notice thereof and (iii) if
requested by LOG or the Required Holder(s) of the Notes, the Company shall
promptly execute and deliver a written amendment to this Agreement
specifically incorporating such covenant herein. Once any such covenant has
been included in this Agreement (whether or not pursuant to a written
amendment), it may only be modified or eliminated by an amendment hereto
entered into as contemplated by paragraph 11C hereof.
5G. CORPORATE EXISTENCE. The Company covenants that it will at all
times preserve and keep in full force and effect its corporate existence, and
rights and franchises material to its business, and those of each of its
Restricted Subsidiaries, except as otherwise specifically permitted by
paragraphs 6C(4) and 6C(5), and will qualify, and cause each of its
Restricted Subsidiaries to qualify, to do business in any jurisdiction where
the failure to do so would have a material adverse effect on the business,
condition (financial and other), assets, properties, prospects or operations
of the Company or the Company and its Restricted Subsidiaries taken as a
whole, PROVIDED that the corporate existence of any Restricted Subsidiary may
be terminated if, in the good faith judgment of the Board of Directors of the
Company, such termination is in the best interests of the Company.
5H. PAYMENT OF TAXES AND CLAIMS. The Company covenants that it will,
and will cause each of its Subsidiaries to, pay all income taxes before the
same shall become delinquent, except where such income taxes are being
contested in good faith by appropriate proceedings promptly instituted and
diligently conducted, if adequate reserves therefor have been established on
the books of the Company or its Subsidiaries in accordance with generally
accepted accounting principles. The Company covenants that it will, and will
cause each of its Subsidiaries to, pay all other taxes, assessments and other
governmental charges imposed upon it or any of its properties or assets or in
respect of any of its franchises, business, income or profits before any
penalty accrues thereon, and all claims (including, without limitation,
claims for labor, services, materials and supplies) for sums which have
become due and payable and which by law have or may become a Lien upon any of
its properties or assets, PROVIDED that no such tax, assessment, charge or
claim need be paid if it is being contested in good faith by appropriate
proceedings promptly instituted and diligently conducted and if such accrual
or other appropriate provision, if any, shall be required by generally
accepted accounting principles, shall have been made therefor.
5I. COMPLIANCE WITH LAWS, ETC. The Company covenants that it will, and
will cause each of it Restricted Subsidiaries to, comply with the
requirements of all applicable laws, rules, regulations and orders of any
governmental authority, the noncompliance with which would materially
adversely affect the business, condition (financial or other), assets
properties, operations or prospects of the Company or the Company and its
Restricted Subsidiaries taken as a whole.
15
<PAGE>
5J. MAINTENANCE OF PROPERTIES; INSURANCE. The Company covenants that
it will, and will cause each of its Restricted Subsidiaries to, maintain or
cause to be maintained in good repair, working order and condition all
properties used or useful in the business of the Company and its Restricted
Subsidiaries and from time to time make or cause to be made all appropriate
repairs, renewals and replacements thereof. The Company will maintain or
cause to be maintained, with financially sound and reputable insurers, (i)
insurance with respect to its properties and business and the properties and
business of its Restricted Subsidiaries against loss or damage of the kinds
customarily insured against by corporations of established reputation engaged
in the same or similar business and similarly situated, of such types and in
such amounts as are customarily carried under similar circumstances by such
other corporations, and (ii) life insurance, with the Company as the owner
and named beneficiary, on the life of Myron Kunin in the amount (net of any
premium loans thereon and interest due in connection therewith) of not less
than $2,700,000, and on the life of Paul Finkelstein in the amount (net of
any premium loans thereon and interest due in connection therewith) of not
less than $2,400,000, each of which life insurance policies shall be free of
premium loans (except as specifically provided herein) and other Liens on or
offsets against proceeds payable to the Company.
5K. OFFSET SHARING AGREEMENT AMENDMENT. The Company covenants that
within 60 days from the date of this Agreement it shall cause the Offset
Sharing Agreement to be amended so as to apply to the Notes pursuant to a
document in form and content satisfactory to LOG and to any other holder of
any Notes at the time of such amendment.
6. NEGATIVE COVENANTS. During the Issuance Period and so long
thereafter as any Note or other amount due hereunder is outstanding and
unpaid, the Company covenants as follows:
6A. INTEREST COVERAGE RATIO. The Company will not permit the Interest
Coverage Ratio to be less than 2.0 to 1.0 at the end of any fiscal quarter.
6B. CONSOLIDATED NET WORTH. The Company will not permit: (i)
Consolidated Net Worth at any time to be less than $60,000,000 plus, to the
extent positive, 50% of Consolidated Net Income for the period (taken as one
accounting period) commencing July 1, 1995, and ending on the last day of the
fiscal quarter most recently ended as of any date of determination; or (ii)
Tangible Net Worth at the end of any fiscal quarter to be less than
$10,000,000.
6C. LIEN, DEBT AND OTHER RESTRICTIONS. The Company will not and will
not permit any Restricted Subsidiary to:
6C(1). LIENS. Create, assume or suffer to exist any Lien upon any of its
properties or assets, whether now owned or hereafter acquired (whether or not
provision is made for the
16
<PAGE>
equal and ratable securing of the Notes in accordance with the provisions of
paragraph 5D) EXCEPT:
(i) Liens for taxes, assessments or governmental charges not yet
due or which are being actively contested in good faith by appropriate
proceedings,
(ii) Liens incidental to the conduct of its business or the
ownership of its property and assets which do not secure Debt and which
do not in the aggregate materially detract from the value of its
property or assets or materially impair the use thereof in the operation
of its business,
(iii) Liens on property or assets of a Restricted Subsidiary to
secure obligations of such Restricted Subsidiary to the Company or a
Wholly-Owned Restricted Subsidiary,
(iv) Liens which are the subject of an Offset Sharing Agreement,
and
(v) other Liens securing Debt permitted by paragraph 6C(2),
PROVIDED that Priority Debt shall at no time exceed 15% of Consolidated
Net Worth;
6C(2). DEBT. Create, incur, assume or suffer to exist any Debt, EXCEPT:
(i) Funded Debt evidenced by the Notes,
(ii) Funded Debt which is outstanding under the 1991 Agreement,
(iii) Current Debt, PROVIDED that any holder of such Current Debt
(other than a holder of Permitted Seller Current Debt) is party to an
Offset Sharing Agreement, and
(iv) other Funded Debt,
provided that at no time shall (a) the ratio of Total Debt to the sum of
Total Debt and Consolidated Net Worth exceed .50 to 1.00 or (b) Priority Debt
exceed 15% of Consolidated Net Worth;
6C(3). INVESTMENTS. Make or permit to remain outstanding any loan or
advance to, or extend credit to, or own, purchase or acquire any stock,
obligations or securities of, or any other interest in, or make any capital
contribution to, any Person (all of the foregoing being referred to herein as
"INVESTMENTS"), EXCEPT that the Company or any Restricted Subsidiary may:
17
<PAGE>
(i) make or permit to remain outstanding Investments to or in any
Restricted Subsidiary or any corporation which immediately following
such Investment will be a Restricted Subsidiary,
(ii) own, purchase or acquire marketable direct obligations issued
or unconditionally guaranteed by the United States of America or any
agency thereof and maturing one year from the date of acquisition
thereof,
(iii) make demand deposits in banks in the ordinary course of
business, and make deposits or own certificates of deposit of United
States dollars maturing within one year from the date of acquisition
thereof issued by commercial banks chartered under the laws of the
United States of America or any state thereof or the District of
Columbia, each having at all times combined capital, surplus and
undivided profits of not less than $100,000,000 (determined in
accordance with generally accepted accounting principles),
(iv) own, purchase or acquire commercial paper maturing no more
than 270 days from the date of acquisition thereof and rated A-1 by
Standard & Poor's Corporation or P-1 by Moody's Investors Service, Inc.,
(v) make and own Investments in mutual funds which invest at least
95% of their assets in instruments described in clauses (ii), (iii) and
(iv) of this paragraph 6C(3),
(vi) endorse negotiable instruments for collection in the ordinary
course of business,
(vii) make or permit to remain outstanding Investments to or in any
Unrestricted Subsidiary, PROVIDED that (a) the aggregate amount (at
original cost) of all Investments in Unrestricted Subsidiaries shall at
no time exceed 10% of Consolidated Net Worth and (b) any Investment made
in an Unrestricted Subsidiary subsequent to June 30, 1995, shall only be
deemed an Investment for purposes of this paragraph 6C(3) to the extent
it involves a cash or other asset contribution or advance (net of any
return thereof), and
(viii) make or permit to remain outstanding other Investments
(exclusive of Investments in Unrestricted Subsidiaries), PROVIDED that
the aggregate amount thereof shall at no time exceed 5% of Consolidated
Net Worth.
6C(4). SALE OF STOCK AND DEBT OF SUBSIDIARIES. Sell or otherwise
dispose of, or part with control of, any shares of stock or Debt of any
Restricted Subsidiary, except to the Company or a Wholly-Owned Restricted
Subsidiary, and except that all shares of stock and Debt of any Restricted
Subsidiary at the time owned by or owed to the Company and all
18
<PAGE>
Restricted Subsidiaries may be sold as an entirety for a cash consideration
which represents the fair value (as determined in good faith by the Board of
Directors of the Company) at the time of sale of the shares of stock and Debt
so sold; PROVIDED that (i) such sale or other disposition, if treated as a
Transfer of assets of such Restricted Subsidiary, would be permitted by
paragraph 6C(6) and (ii) at the time of such sale, such Restricted Subsidiary
shall not own, directly or indirectly, any shares of stock or Debt of any
other Restricted Subsidiary (unless all of the shares of Stock and Debt of
such other Restricted Subsidiary owned, directly or indirectly, by the
Company and all Restricted Subsidiaries are simultaneously being sold as
permitted by this paragraph 6C(4));
6C(5). MERGER AND CONSOLIDATION. Merge or consolidate with or into any
other Person, EXCEPT that:
(i) any Restricted Subsidiary may merge or consolidate with or
into the Company, PROVIDED that the Company is the continuing or surviving
corporation,
(ii) any Restricted Subsidiary may merge or consolidate with or
into another Restricted Subsidiary, PROVIDED that a Wholly-Owned Restricted
Subsidiary shall be the continuing or surviving corporation; and
(iii) the Company may merge or consolidate with any other
corporation, PROVIDED that (a) either (x) the Company shall be the
continuing or surviving corporation, or (y) the successor or acquiring
corporation shall be a corporation organized under the laws of any state of
the United States of America and shall expressly assume in writing all of
the obligations of the Company under this Agreement and on the Notes,
including all covenants herein and therein contained, and such successor
or acquiring corporation shall succeed to and be substituted for the
Company with the same effect as if it had been named herein as a party
hereto and (b) immediately after giving effect to such transaction, no
Default or Event of Default would exist hereunder (including a Default
or Event of Default under clause (iii) of paragraph 6C(2));
6C(6). TRANSFER OF ASSETS. Transfer any of its assets EXCEPT that:
(i) any Restricted Subsidiary may Transfer assets to the Company
or a Wholly-Owned Restricted Subsidiary,
(ii) the Company or any Restricted Subsidiary may sell inventory in
the ordinary course of business, and
(iii) the Company or any Restricted Subsidiary may otherwise
Transfer assets, PROVIDED that after giving effect to any Transfer (a) the
Aggregate Percentage of Earnings Capacity Transferred pursuant to this
clause (iii) during the period of
19
<PAGE>
eight consecutive fiscal quarters ending on or most recently ended shall
not exceed 10% and (b) the Aggregate Percentage of Total Assets
Transferred pursuant to this clause (iii) during the period of eight
consecutive fiscal quarters ending on or most recently ended shall not
exceed 10%;
6C(7). SALE OR DISCOUNT OF RECEIVABLES. Sell with recourse, or discount
or otherwise sell for less than the face value thereof, any of its notes or
accounts receivable;
6C(8). TRANSACTIONS WITH AFFILIATES. Directly or indirectly, engage in
any transaction (including, without limitation, the purchase, sale or
exchange of assets or the rendering of any service) with any Affiliate,
unless (i) such transaction is in the ordinary course of and pursuant to the
reasonable requirements of the Company's or such Restricted Subsidiary's
business and upon fair and reasonable terms that are comparable to those
which might be obtained in an arm's-length transaction between unaffiliated
parties, and (ii) in the case of any such transaction in which the aggregate
value of the assets or services involved, or of the payments made, exceeds
$1,000,000, such transaction is authorized by a majority of the independent
members of the Board of Directors of the Company;
6C(9). RESTRICTED SUBSIDIARY DIVIDEND RESTRICTIONS. Enter into, or
otherwise be subject to, any contract or agreement (including its certificate
or articles of incorporation), which limits the amount of, or otherwise
imposes restrictions on the payment of, dividends by any Restricted
Subsidiary; or
6C(10). TAX CONSOLIDATION. Consent to or permit the filing of or be a
party to any consolidated income tax return with any Person, other than a
consolidated tax return of the Company and its Restricted Subsidiaries,
except that the Company may file a consolidated income tax return as the
common parent of an affiliated group that includes the Company, its
Restricted Subsidiaries and its Unrestricted Subsidiaries, provided that (i)
the Company and its Restricted Subsidiaries shall not at any time
collectively or individually pay or agree to pay any amount of the taxes
payable in respect of any such return in excess of the amount which the
Company would have been required to pay if it had filed a consolidated income
tax return for the Company and its Restricted Subsidiaries only (the
"RESTRICTED GROUP AMOUNT"), nor shall the Company and its Restricted
Subsidiaries become obligated to pay any such excess (net of any taxes
payable or reimbursable by a financially responsible Unrestricted
Subsidiary), and (ii) the Company shall have obtained and there shall at all
times remain in effect the written agreement of the Unrestricted Subsidiaries
to reimburse to the Company sums equal to any amount of the taxes payable in
respect of any such return paid by the Company and its Restricted
Subsidiaries collectively or individually in excess of the Restricted Group
Amount, subject to appropriate adjustment in the event that such taxes are
increased or reduced by reason of any audit by a taxing authority or any
successful claim for a refund.
20
<PAGE>
6D. TRANSACTIONS BY RESTRICTED SUBSIDIARIES. The Company covenants that
it will not permit any Restricted Subsidiary (either directly, or indirectly
by the issuance of rights or options for, or securities convertible into,
such shares) to issue, sell or otherwise dispose of (i) any shares of any
class of its stock (other than Common Stock) except to the Company or another
Restricted Subsidiary or (ii) any shares of its Common Stock except (a) to
the Company or another Restricted Subsidiary and (b) concurrently with
dispositions under (a) above, to any minority shareholders of such Restricted
Subsidiary to the extent necessary to maintain such minority shareholders'
percentage ownership of outstanding shares of Common Stock of such Restricted
Subsidiary.
7. EVENTS OF DEFAULT.
7A. ACCELERATION. If any of the following events shall occur and be
continuing for any reason whatsoever (and whether such occurrence shall be
voluntary or involuntary or come about or be effected by operation of law or
otherwise):
(i) the Company defaults in the payment of any principal of, or
Yield-Maintenance Amount payable with respect to, any Note when the same
shall become due, either by the terms thereof or otherwise as herein
provided; or
(ii) the Company defaults in the payment of any interest on any
Note for more than 5 days after the date due; or
(iii) the Company or any Restricted Subsidiary defaults (whether as
primary obligor or as guarantor or other surety) in any payment of
principal of or interest on any other obligation for money borrowed (or
any Capitalized Lease Obligation, any obligation under a conditional
sale or other title retention agreement, any obligation issued or
assumed as full or partial payment for property whether or not secured
by a purchase money mortgage or any obligation under notes payable or
drafts accepted representing extensions of credit) beyond any period of
grace provided with respect thereto, or the Company or any Restricted
Subsidiary fails to perform or observe any other agreement, term or
condition contained in any agreement under which any such obligation is
created (or if any other event thereunder or under any such agreement
shall occur and be continuing) and the effect of such failure or other
event is to cause, or to permit the holder or holders of such obligation
(or a trustee on behalf of such holder or holders) to cause, such
obligation to become due (or to be repurchased by the Company or any
Restricted Subsidiary) prior to any stated maturity, PROVIDED that the
aggregate amount of all obligations as to which such a payment default
shall occur and be continuing or such a failure or other event causing
or permitting acceleration (or resale to the Company or any Restricted
Subsidiary) shall occur and be continuing exceeds $500,000; or
21
<PAGE>
(iv) any representation or warranty made by the Company herein or
by the Company or any of its officers in any writing furnished in
connection with or pursuant to this Agreement shall be false in any
material respect on the day as of which made or repeated; or
(v) the Company fails to perform or observe any covenant or
agreement contained in paragraph 6 or incorporated by reference into
this Agreement pursuant to paragraph 5F; or
(vi) the Company fails to perform or observe any other
agreement, term or condition contained herein and such failure
shall not be remedied within 30 days after any Responsible Officer
obtains actual knowledge thereof; or
(vii) the Company or any Restricted Subsidiary makes an assignment
for the benefit of creditors or is generally not paying its debts as
such debts become due; or
(viii) any decree or order for relief in respect of the Company or
any Restricted Subsidiary is entered under any bankruptcy, reorganization,
compromise, arrangement, insolvency, readjustment of debt, dissolution
or liquidation or similar law, whether now or hereafter in effect
(herein called the "BANKRUPTCY LAW"), of any Jurisdiction; or
(ix) the Company or any Restricted Subsidiary petitions or
applies to any tribunal for, or consents to, the appointment of, or
taking possession by, a trustee, receiver, custodian, liquidator or
similar official of the Company or any Restricted Subsidiary, or of any
substantial part of the assets of the Company or any Restricted
Subsidiary, or commences a voluntary case under the Bankruptcy Law of
the United States or any proceedings (other than proceedings for the
voluntary liquidation and dissolution of a Restricted Subsidiary)
relating to the Company or any Restricted Subsidiary under the
Bankruptcy Law of any other jurisdiction; or
(x) any such petition or application is filed, or any such
proceedings are commenced, against the Company or any Restricted
Subsidiary and the Company or such Restricted Subsidiary by any act
indicates its approval thereof, consent thereto or acquiescence therein,
or an order, judgment or decree is entered appointing any such trustee,
receiver, custodian, liquidator or similar official, or approving the
petition in any such proceedings, and such order, judgment or decree
remains unstayed and in effect for more than 30 days; or
(xi) any order, judgment or decree is entered in any proceedings
against the Company decreeing the dissolution of the Company and such
order, judgment or decree remains unstayed and in effect for more than
60 days; or
22
<PAGE>
(xii) any order, judgment or decree is entered in any proceedings
against the Company or any Restricted Subsidiary decreeing a split-up of
the Company or such Restricted Subsidiary which requires the divestiture
of assets representing a substantial part, or the divestiture of the
stock of a Restricted Subsidiary whose assets represents a substantial
part, of the consolidated assets of the Company and its Restricted
Subsidiaries (determined in accordance with generally accepted
accounting principles) or which requires the divestiture of assets, or
stock of a Restricted Subsidiary, which shall have contributed a
substantial part of Consolidated Net Income for any of the three fiscal
years then most recently ended, and such order, judgment or decree
remains unstayed and in effect for more than 60 days; or
(xiii) one or more final judgments in an aggregate amount in excess
of $500,000 is rendered against the Company or any Restricted Subsidiary
and, within 60 days after entry thereof, any such judgment is not
discharged or execution thereof stayed pending appeal, or within 60 days
after the expiration of any such stay, such judgment is not discharged;
or
(xiv) (a) any Plan shall fail to satisfy the minimum funding
standards of ERISA or the Code for any plan year or part thereof or a
waiver of such standards or extension of any amortization period is
sought or granted under section 412 of the Code, (b) a notice of intent
to terminate any Plan shall have been or is reasonably expected to be
filed with the PBGC or the PBGC shall have instituted proceedings under
ERISA section 4042 to terminate or appoint a Trustee to administer any
Plan or the PBGC shall have notified the Company or any ERISA Affiliate
that a Plan may become a subject of such proceedings, (c) the aggregate
"amount of unfunded benefit liabilities" (within the meaning of section
4001(a)(18) of ERISA) under all Plans, determined in accordance with
Title IV of ERISA, shall exceed $500,000, (d) the Company or any ERISA
Affiliate shall have incurred or is reasonably expected to incur any
liability pursuant to Title I or IV of ERISA or the penalty or excise
tax provisions of the Code relating to employee benefit plans, (c) the
Company or any ERISA Affiliate withdraws from any Multiemployer Plan, or
(f) the Company or any Restricted Subsidiary establishes or amends any
employee welfare benefit plan that provides post-employment welfare
benefits in a manner that would increase the liability of the Company or
any Restricted Subsidiary thereunder; and any such event or events
described in clauses (a) through (f) above, either individually or
together with any other such event or events, could reasonably be
expected to have a material adverse effect on the business or condition
(financial or otherwise) of the Company and the Restricted Subsidiaries,
taken as a whole;
then (a) if such event is an Event of Default specified in clause (i) or
(ii) of this paragraph 7A, any holder of any Note may at its option during
the continuance of such Event of Default, by notice in writing to the
Company, declare all of the Notes held by such holder to
23
<PAGE>
be, and all of the Notes held by such holder shall thereupon be and become,
immediately due and payable at par together with interest accrued thereon,
without presentment, demand, protest or notice of any kind, all of which are
hereby waived by the Company, (b) if such event is an Event of Default
specified in clause (viii), (ix) or (x) of this paragraph 7A with respect to
the Company, all of the Notes at the time outstanding shall automatically
become immediately due and payable together with interest accrued thereon and
together with the Yield-Maintenance Amount, if any, with respect to each Note,
without presentment, demand, protest or notice of any kind, all of which are
hereby waived by the Company, and (c) with respect to any event constituting
an Event of Default, the Required Holder(s) of the Notes of any Series may at
its or their option during the continuance of such Event of Default, by
notice in writing to the Company, declare all of the Notes of such Series to
be, and all of the Notes of such Series shall thereupon be and become,
immediately due and payable together with interest accrued thereon and
together with the Yield-Maintenance Amount, if any, with respect to each Note
of such Series, without presentment, demand, protest or notice of any kind,
all of which are hereby waived by the Company.
7B. RESCISSION OF ACCELERATION. At any time after any or all of the
Notes of any Series shall have been declared immediately due and payable
pursuant to paragraph 7A, the Required Holder(s) of the Notes of such Series
may, by notice in writing to the Company, rescind and annul such declaration
and its consequences if (i) the Company shall have paid all overdue interest
on the Notes of such Series, the principal of and Yield-Maintenance Amount,
if any, payable with respect to any Notes of such Series which have become
due otherwise than by reason of such declaration, and interest on such
overdue interest and overdue principal and Yield-Maintenance Amount at the
rate specified in the Notes of such Series, (ii) the Company shall not have
paid any amounts which have become due solely by reason of such declaration,
(iii) all Events of Default and Defaults, other than non-payment of amounts
which have become due solely by reason of such declaration, shall have been
cured or waived pursuant to paragraph 11C, and (iv) no judgment or decree
shall have been entered for the payment of any amounts due pursuant to the
Notes of such Series or this Agreement. No such rescission or annulment shall
extend to or affect any subsequent Event of Default or Default or impair any
right arising therefrom.
7C. NOTICE OF ACCELERATION OR RESCISSION. Whenever any Note shall be
declared immediately due and payable pursuant to paragraph 7A or any such
declaration shall be rescinded and annulled pursuant to paragraph 7B, the
Company shall forthwith give written notice thereof to the holder of each
Note of each Series at the time outstanding.
7D. OTHER REMEDIES. If any Event of Default or Default shall occur
and be continuing, the holder of any Note may proceed to protect and enforce
its rights under this Agreement and such Note by exercising such remedies as
are available to such holder in respect thereof under applicable law, either
by suit in equity or by action at law, or both, whether for specific
performance of any covenant or other agreement contained in this
24
<PAGE>
Agreement or in aid of the exercise of any power granted in this Agreement.
No remedy conferred in this Agreement upon the holder of any Note is intended
to be exclusive of any other remedy, and each and every such remedy shall be
cumulative and shall be in addition to every other remedy conferred herein or
now or hereafter existing at law or in Equity or by statute or otherwise.
8. REPRESENTATIONS, COVENANTS AND WARRANTIES. The Company
represents, covenants and warrants as follows:
8A. ORGANIZATION. The Company is a corporation duly organized and
existing in good standing under the laws of the State of Minnesota, each
Subsidiary is duly organized and existing in good standing under the laws of
the jurisdiction in which it is incorporated, and the Company has and each
Restricted Subsidiary has the corporate power to own its respective property
and to carry on its respective business as now being conducted. This
Agreement and the Notes have been duly authorized by all necessary corporate
action on the part of the Company and, when executed and delivered by the
Company, will constitute legal, valid and binding obligations of the Company
enforceable against the Company in accordance with its terms, except as such
enforceability may be limited by (i) applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting the enforcement of
creditors' rights generally and (ii) general principles of equity (regardless
of whether such enforceability is considered in a proceeding in equity or at
law). SCHEDULE 8A attached hereto lists all Restricted Subsidiaries and all
Unrestricted Subsidiaries. All of the outstanding stock (and all outstanding
warrants, options and similar rights to acquire stock) of each Restricted
Subsidiary is owned by the Company or a Restricted Subsidiary, except as
otherwise disclosed in SCHEDULE 8A, and has been validly issued and is fully
paid and nonassessable and free and clear of any Lien.
8B. FINANCIAL STATEMENTS. The Company has furnished each Purchaser of
any Accepted Notes with the following financial statements, identified by a
principal financial officer of the Company: (i) consolidating and
consolidated balance sheets of the Company and its Subsidiaries as at June 30
in each of the three fiscal years of the Company most recently completed
prior to the date as of which this representation is made or repeated to such
Purchaser (other than fiscal years completed within 90 days prior to such date
for which audited financial statements have not been released) and
consolidating and consolidated statements of income and cash flows and a
consolidated statement of shareholders' equity of the Company and its
Subsidiaries for each such year, all reported on by Coopers & Lybrand L.L.P
and (ii) a consolidated balance sheet of the Company and its Subsidiaries and
of the Company and its Restricted Subsidiaries as at the end of the quarterly
period (if any) most recently completed prior to such date and after the end
of such fiscal year (other than quarterly periods completed within 45 days
prior to such date for which financial statements have not been released) and
the comparable quarterly period in the preceding fiscal year and consolidated
statements of income and cash flows of the Company and Subsidiaries and of
25
<PAGE>
the Company and its Restricted Subsidiaries for the periods from the
beginning of the fiscal years in which such quarterly periods are included to
the end of such quarterly periods, prepared by the Company. Such financial
statements (including any related schedules and/or notes) are true and
correct in all material respects (subject, as to interim statements, to
changes resulting from audits and year-end adjustments), have been prepared
in accordance with generally accepted accounting principles consistently
followed throughout the periods involved and show all liabilities, direct and
contingent, of the Company and its Subsidiaries of the Company and its
Restricted Subsidiaries (as the case may be) required to be shown in
accordance with such principles. The balance sheets fairly present the
condition of the Company and its Subsidiaries or the Company and its
Restricted Subsidiaries (as the case may be) as at the dates thereof, and the
statements of income, stockholders' equity and cash flows fairly present the
results of the operations of the Company and its Subsidiaries of the Company
and its Restricted Subsidiaries (as the case may be) and their cash flows for
the periods indicated. There has been no material adverse change in the
business, property or assets, condition (financial or otherwise), operations
or prospects of the Company and its Subsidiaries or the Company and its
Restricted Subsidiaries, in each case taken as a whole, since the end of the
most recent fiscal year for which such audited financial statements have been
furnished.
8C. ACTIONS PENDING; OBSERVANCE OF AGREEMENTS, STATUTES AND ORDERS.
There is no action, suit, investigation or proceeding pending or, to the
knowledge of the Company, threatened against the Company or any of its
Restricted Subsidiaries, or any properties or rights of the Company or any of
its Restricted Subsidiaries, by or before any court, arbitrator or
administrative or governmental body which might result in any material
adverse change in the business, property or assets, condition (financial or
otherwise) or operations of the Company and its Restricted Subsidiaries taken
as a whole. Neither the Company nor any Restricted Subsidiary is in default
under any term of any agreement or instrument to which it is a party or by
which it is bound, or any order, judgment, decree or ruling of any court,
arbitrator or administrative or governmental body or is in violation of any
applicable law, ordinance, rule or regulation (including without limitation
environmental laws) of any governmental authority, which default or
violation, individually or in the aggregate, could reasonably be expected to
have material adverse effect on the business, condition (financial or
otherwise), assets, properties, operations or prospects of the Company and
its Restricted Subsidiaries taken as a whole.
8D. OUTSTANDING DEBT. Neither the Company nor any of its Restricted
Subsidiaries has outstanding any Debt except as permitted by paragraph 6C(2).
There exists no default under the provisions of any instrument evidencing
such Debt or of any agreement relating thereto.
8E. TITLE TO PROPERTIES. The Company has and each of its Restricted
Subsidiaries has good and indefeasible title to its respective real
properties (other than properties which it
26
<PAGE>
leases) and good title to all of its other respective properties and assets,
including the properties and assets reflected in the most recent audited
balance sheet referred to in paragraph 8B (other than properties and assets
disposed of in the ordinary course of business), subject to no Lien of any
kind except Liens permitted by paragraph 6C(1). All leases necessary in any
material respect for the conduct of the respective businesses of the Company
and its Restricted Subsidiaries are valid and subsisting and are in full
force and effect.
8F. TAXES. The Company has and each of its Restricted Subsidiaries
has filed all federal, state and other income tax returns which are required
to be filed, and each has paid all taxes as shown on such returns and on all
assessments received by it to the extent that such taxes have become due,
except such taxes as are being contested in good faith by appropriate
proceedings for which adequate reserves have been established in accordance
with generally accepted accounting principles. The Company knows of no basis
for any other tax or assessment that could reasonably be expected to have a
material adverse effect on the business, condition (financial or otherwise),
assets, properties, operations or prospects of the Company and its Restricted
Subsidiaries taken as a whole. The charges, accruals, and reserves on the
books of the Company and its Restricted Subsidiaries in respect of federal,
state or other taxes for all fiscal periods are adequate.
8G. CONFLICTING AGREEMENTS AND OTHER MATTERS. Neither the Company nor
any of its Restricted Subsidiaries is a party to any contract or agreement or
subject to any charter or other corporate restriction which materially and
adversely affects its business, property or assets, condition (financial or
otherwise) or operations. Neither the execution nor delivery of this
Agreement or the Notes, nor the offering, issuance and sale of the Notes, nor
fulfillment of nor compliance with the terms and provisions hereof and of the
Notes will conflict with, or result in a breach of the terms, conditions or
provisions of, or constitute a default under, or result in any violation of,
or result in the creation of any Lien upon any of the properties or assets of
the Company or any of its Restricted Subsidies pursuant to, the charter or
by-laws of the Company or any of its Restricted Subsidiaries, any award of
any arbitrator or any agreement (including any agreement with stockholders),
instrument, order, judgement, decree, statute, law, rule or regulation to
which the Company or any of its Restricted Subsidiaries is subject. Neither
the Company nor any of its Restricted Subsidiaries is a party to, or
otherwise subject to any provision contained in any instrument evidencing
Debt of the Company or such Restricted Subsidiary, any agreement relating
thereto or any other contract or agreement (including its charter) which
limits the amount of, or otherwise imposes restrictions on the incurring of,
Debt of the Company of the type to be evidenced by the Notes except as set
forth in the agreements listed in SCHEDULE 8G attached hereto, true, correct
and complete copies of which (including all amendments thereto) have been
provided to each Purchaser of any Accepted Note. The Company is not party to
any agreement evidencing or pertaining to Debt of the Company which includes
any operational or financial covenant which is more favorable to a lender or
other beneficiary than those set forth in
27
<PAGE>
paragraph 6 hereof. For purposes of the preceding sentence, no effect shall
be given to paragraph 5F hereof.
8H. OFFERING OF NOTES. Neither the Company nor any agent acting on
its behalf has, directly or indirectly, offered the Notes or any similar
security of the Company for sale to, or solicited any offers to buy the Notes
or any similar security of the Company from, or otherwise approached or
negotiated with respect thereto with, any Person other than institutional
investors, and neither the Company nor any agent acting on its behalf has
taken or will take any action which would subject the issuance or sale of the
Notes to the provisions of Section 5 of the Securities Act or to the
provisions of any securities or Blue Sky law of any applicable jurisdiction.
8I. USE OF PROCEEDS. None of the proceeds of the sale of any Notes
will be used, directly or indirectly, for the purpose, whether immediate,
incidental or ultimate, of purchasing or carrying any "margin stock" as
defined in Regulation G (12 CFR Part 207) of the Board of Governors of the
Federal Reserve System (herein called "MARGIN STOCK") or for the purpose of
maintaining, reducing or retiring any indebtedness which was originally
incurred to purchase or carry any stock that is currently a margin stock or
for any other purpose which might constitute the purchase of such Notes a
"purpose credit" within the meaning of such Regulation G, unless the Company
shall have delivered to the Purchaser which is purchasing such Notes, on the
Closing Day for such Notes, an opinion of counsel satisfactory to such
Purchaser stating that the purchase of such Notes does not constitute a
violation of such Regulation G. Neither the Company nor any agent acting on
its behalf has taken or will take any action which might cause this Agreement
or the Notes to violate Regulation G, Regulation T or any other regulation of
the Board of Governors of the Federal Reserve System to to violate the
Exchange Act, in each case as in effect now or as the same may hereafter be
in effect. Margin stock does not constitute more than 10% of the value of the
consolidated assets of the Company and its Subsidiaries and the Company does
not have any present intention that margin stock will constitute more than
10% of the value of such assets.
8J. ERISA. No accumulated funding deficiency (as defined in section
302 of ERISA and section 412 of the Code), whether or not waived, exists with
respect to any Plan (other than a Multiemployer Plan). No liability to the
Pension Benefit Guaranty Corporation has been or is expected by the Company
or any ERISA Affiliate to be incurred with respect to any Plan (other than a
Multiemployer Plan) by the Company, any Restricted Subsidiary or any ERISA
Affiliate which is or would be materially adverse to the business, property
or assets, condition (financial or otherwise) or operations of the Company
and its Restricted Subsidiaries taken as a whole. Neither the Company, any
Restricted Subsidiary nor any ERISA Affiliate has incurred or presently
expects to incur any withdrawal liability under Title IV of ERISA with
respect to any Multiemployer Plan which is or would be materially adverse to
the business, property or assets, condition (financial or otherwise) or
operations of
28
<PAGE>
the Company and its Restricted Subsidiaries taken as a whole. The execution
and delivery of this Agreement and the issuance and sale of the Notes will be
exempt from or will not involve any transaction which is subject to the
prohibitions of section 406 of ERISA and will not involve any transaction in
connection with which a penalty could be imposed under section 502(i) of
ERISA or a tax could be imposed pursuant to section 4975 of the Code. The
representation by the Company in the next preceding sentence is made in
reliance upon and subject to the accuracy of the representation of each
Purchaser in paragraph 9B as to the source of funds to be used by it to
purchase any Notes.
8K. GOVERNMENTAL CONSENT. Neither the nature of the Company or of any
Restricted Subsidiary, nor any of their respective businesses or properties,
nor any relationship between the Company or any Restricted Subsidiary and any
other Person, nor any circumstance in connection with the offering, issuance,
sale or delivery of the Notes is such as to require any authorization,
consent, approval, exemption or any action by or notice to or filing with any
court or administrative or governmental body (other than routine filings
after the Closing Day for any Notes with the Securities and Exchange
Commission and/or state Blue Sky authorities) in connection with the
execution and delivery of this Agreement, the offering, issuance, sale or
delivery of the Notes or fulfillment of or compliance with the terms and
provisions hereof or of the Notes.
8L. ENVIRONMENTAL COMPLIANCE. The Company and its Restricted
Subsidiaries and all of their respective properties and facilities have
complied at all times and in all respects with all foreign, federal, state,
local and regional statutes, laws, ordinances and judicial or administrative
orders, judgments, rulings and regulations relating to protection of the
environment EXCEPT, in any such case, where failure to comply would not
result in a material adverse effect on the business, condition (financial or
otherwise) or operations of the Company and its Restricted Subsidiaries taken
as a whole.
8M. DISCLOSURE. Neither this Agreement nor any other document,
certificate or statement furnished to any Purchaser by or on behalf of the
Company in connection herewith contains any untrue statement of a material
fact or omits to state a material fact necessary in order to make the
statements contained herein and therein not misleading. There is no fact
peculiar to the Company or any of its Restricted Subsidiaries which
materially adversely affects or in the future may (so far as the Company can
now foresee) materially adversely affect the business, property or assets,
condition (financial or otherwise) or operations of the Company or any of its
Restricted Subsidiaries and which has not been set forth in this Agreement.
8N. RESTRICTED SUBSIDIARY DIVIDEND RESTRICTIONS. No Restricted
Subsidiary is a party to, or otherwise subject to, any contract or agreement
(including its certificate or articles of incorporation) which limits the
amount of, or otherwise imposes restrictions on the payment of, dividends.
29
<PAGE>
8O. RULE 144A. The Notes are not of the same class as securities of
the Company, if any, listed on a national securities exchange registered
under Section 6 of the Exchange Act or quoted in a U.S. automated
inter-dealer quotation system.
8P. FOREIGN ASSETS CONTROL REGULATIONS, ETC. Neither the issue and
sale of the Notes by the Company hereunder nor its use of the proceeds
thereof will violate the Trading with the Enemy Act, as amended, or any of
the foreign assets control regulations of the United States Treasury
Department (31 CFR, Subtitle B, Chapter V, as amended) or any enabling
legislation or executive order relating thereto.
8Q. LICENSES, PERMITS, ETC. The Company and its Restricted
Subsidiaries and its Subsidiaries own or possess all licenses, permits,
franchises, authorizations, patents, copyrights, service marks, trademarks
and trade names, or rights thereto, that individually or in the aggregate are
material to the business, property, assets, condition (financial or
otherwise) or operations of the Company and its Restricted Subsidiaries taken
as a whole, without known conflict with the rights of others. To the best
knowledge of the Company, no product or service of the Company or any
Restricted Subsidiary infringes in any material respect any license, permit,
franchise, authorization, patent, copyright, service mark, trademark, trade
name or other right owned by any other Person. To the best knowledge of the
Company, there is no material violation by any Person of any right of the
Company or any of its Restricted Subsidiaries with respect to any patent,
copyright, service mark, trademark, trade name or other right owned or used
by the Company or any of its Restricted Subsidiaries.
9. REPRESENTATIONS OF THE PURCHASERS.
Each Purchaser represents as follows:
9A. NATURE OF PURCHASE. Such Purchaser is not acquiring the Notes
purchased by it hereunder with a view to or for sale in connection with any
distribution thereof within the meaning of the Securities Acts, provided that
the disposition of such Purchaser's property shall at all times be and remain
within its control.
9B. SOURCE OF FUNDS. No part of the funds used by such Purchaser to
pay the purchase price of the Notes purchased by such Purchaser hereunder
constitutes assets allocated to any separate account maintained by such
Purchaser in which any employee benefit plan, other than employee benefit
plans identified on a list which has been furnished by such Purchaser to the
Company, participates to the extent of 10% or more. For the purpose of this
paragraph 9B, the terms "SEPARATE ACCOUNT" and "EMPLOYEE BENEFIT PLAN" shall
have the respective meanings specified in section 3 of ERISA.
10. DEFINITIONS; ACCOUNTING MATTERS. For the purpose of this
Agreement, the terms defined in paragraphs 10A and 10B (or within the text of
any other
30
<PAGE>
paragraph) shall have the respective meanings specified therein and all
accounting matters shall be subject to determination as provided in paragraph
10C.
10A. YIELD-MAINTENANCE TERMS.
"CALLED PRINCIPAL" shall mean, with respect to any Note, the principal
of such Note that is to be prepaid pursuant to paragraph 4B or that becomes
or is declared to be immediately due and payable pursuant to paragraph 7A, as
the context requires.
"DISCOUNTED VALUE" shall mean, with respect to the Called Principal of
any Note, the amount obtained by discounting all Remaining Scheduled Payments
with respect to such Called Principal from their respective scheduled due
dates to the Settlement Date with respect to such Called Principal, in
accordance with accepted financial practice and at a discount factor (as
converted to reflect the periodic basis on which interest on such Note is
payable, if payable other than on a semi-annual basis) equal to the
Reinvestment Yield with respect to such Called Principal.
"REINVESTMENT YIELD" shall mean, with respect to the Called Principal of
any Note, the yield to maturity implied by (i) the yields reported, as of
10:00 A.M. (New York City local time) on the Business Day next preceding the
Settlement Date with respect to such Called Principal, by the Bloomberg
Financial Markets Service (or any successor service) for actively traded U.S.
Treasury securities having a maturity equal to the Remaining Average Life of
such Called Principal as of such Settlement Date, or if such yields shall not
be reported as of such time or the yields reported as of such time shall not
be ascertainable, (ii) the Treasury Constant Maturity Series yields reported,
for the latest day for which such yields shall have been so reported as of
the Business Day next preceding the Settlement Date with respect to such
Called Principal, in Federal Reserve Statistical Release H.15 (519) (or any
comparable successor publication) for actively traded U.S. Treasury
securities having a constant maturity equal to the Remaining Average Life of
such Called Principal as of such Settlement Date. Such implied yield shall be
determined, if necessary, by (a) converting U.S. Treasury bill quotations to
bond-equivalent yields in accordance with accepted financial practice and (b)
interpolating linearly between yields reported for various maturities.
"REMAINING AVERAGE LIFE" shall mean, with respect to the Called
Principal of any Note, the number of years (calculated to the nearest
one-twelfth year) obtained by dividing (i) such Called Principal into (ii)
the sum of the products obtained by multiplying (a) each Remaining Scheduled
Payment of such Called Principal (but not of interest thereon) by (b) the
number of years (calculated to the nearest one-twelfth year) which will
elapse between the Settlement Date with respect to such Called Principal and
the scheduled due date of such Remaining Scheduled Payment.
"REMAINING SCHEDULED PAYMENTS" shall mean, with respect to the Called
Principal of any Note, all payments of such Called Principal and interest
thereon that would be due on
31
<PAGE>
or after the Settlement Date with respect to such Called Principal if no
payment of such Called Principal were made prior to its scheduled due date.
"SETTLEMENT DATE" shall mean, with respect to the Called Principal of
any Note, the date on which such Called Principal is to be prepaid pursuant
to paragraph 4B or becomes or is declared to be immediately due and payable
pursuant to paragraph 7A, as the context requires.
"YIELD-MAINTENANCE AMOUNT" shall mean, with respect to any Note, an
amount equal to the excess, if any, of the Discounted Value of the Called
Principal of such Note over the sum of (i) such Called Principal plus (ii)
interest accrued thereon as of (including interest due on) the Settlement
Date with respect to such Called Principal. The Yield-Maintenance Amount
shall in no event be less than zero, or more than the maximum amount
allowable under Official Code of Georgia Annotated Section 7-4-18 as in
effect on the date hereof.
10B. OTHER TERMS.
"ACCEPTANCE" shall have the meaning specified in paragraph 2E.
"ACCEPTANCE DAY" shall have the meaning specified in paragraph 2E.
"ACCEPTANCE WINDOW" shall have the meaning specified in paragraph 2E.
"ACCEPTED NOTE" shall have the meaning specified in paragraph 2E.
"AFFILIATE" shall mean (i) any Responsible Officer or member of the
Board of Directors of the Company, (ii) any holder of at least 10% of the
total combined voting power of all classes of Voting Stock (or the
equivalent) of the Company or of any corporatoin or other entity which
directly or indirectly controls the Company, (iii) the spouse, any sibling
(by blood or adoption) or any descendant (by blood or adoption) of any
individual referred to in clause (i) or (ii) above, or any spouse of any such
sibling or descendant or any descendant of any such sibling, (iv) any trust
in which any Person referred to in clause (i), (ii) or (iii) above has a
substantial beneficial interest, (v) any corporation or other entity (a) of
which the Company or any Person referred to in clause (i), (ii), (iii) or
(iv) above holds at least 10% of the total combined economic interest of all
classes of Common Stock (or the equivalent) or at least 10% of the total
combined voting power of all classes of Voting Stock (or the equivalent) or
(b) directly or indirectly controlled by any Person referred to in clause
(i), (ii), (iii) or (iv) above, and (vi) any Person directly or indirectly
controlling, controlled by, or under direct or indirect common control with,
the Company, PROVIDED that a Restricted Subsidiary shall not be an Affiliate.
A Person shall be deemed to control a corporation or other entity if such
Person possesses, directly or indirectly, the power to direct or cause the
direction of the management and policies of such corporation or other entity,
whether through the ownership of voting securities, by contract or otherwise.
32
<PAGE>
"AGGREGATE PERCENTAGE OF EARNINGS CAPACITY TRANSFERRED" shall mean, with
respect to any eight consecutive fiscal quarter period, the sum of the
Percentages of Earnings Capacity Transferred for each asset of the Company
and its Restricted Subsidiaries that is Transferred during such period.
"AGGREGATE PERCENTAGE OF TOTAL ASSETS TRANSFERRED" shall mean, with
respect to any eight consecutive fiscal quarter period, the sum of the
Percentages of Total Assets Transferred for each asset of the Company and its
Restricted Subsidiaries that is Transferred during such period.
"AUTHORIZED OFFICER" shall mean (i) in the case of the Company, its
chief executive officer, its chief financial officer, any vice president of
the Company designated as an "Authorized Officer" of the Company in the
Information Schedule attached hereto or any vice president of the Company
designated as an "Authorized Officer" of the Company for the purpose of this
Agreement in an Officer's Certificate executed by the Company's chief
executive officer or chief financial officer and delivered to LOG, and (ii)
in the case of LOG, any officer of LOG designated as its "Authorized Officer"
in the Information Schedule or any officer of LOG designated as its
"Authorized Officer. for the purpose of this Agreement in a certificate
executed by one of its Authorized Officers. Any action taken under this
Agreement on behalf of the Company by any individual who on or after the date
of this Agreement shall have been an Authorized Officer of the Company and
whom LOG in good faith believes to be an Authorized Officer of the Company at
the time of such action shall be binding on the Company even though such
individual shall have ceased to be an Authorized Officer of the Company, and
any action taken under this Agreement on behalf of LOG by any individual who
on or after the date of this Agreement shall have been an Authorized Officer
of LOG and whom the Company in good faith believes to be an Authorized
Officer of LOG at the time of such action shall be binding on LOG even though
such individual shall have ceased to be an Authorized Officer of LOG.
"AVAILABLE FACILITY AMOUNT" shall have the meaning specified in
paragraph 2A.
"AVERAGE CONSOLIDATED NET INCOME" shall mean, as of any time of
determination thereof, the average Consolidated Net Income of the Company and
Restricted Subsidiaries for the three complete fiscal years of the Company
then most recently ended.
"BANKRUPTCY LAW" shall have the meaning specified in clause (viii) of
paragraph 7A.
"BUSINESS DAY" shall mean any day other than (i) a Saturday or a Sunday,
(ii) a day on which commercial banks in Atlanta, Georgia are required or
authorized to be closed and (iii) for purposes of paragraph 2C hereof only, a
day on which Life Insurance Company of Georgia is not open for business.
33
<PAGE>
"CANCELLATION DATE" shall have the meaning specified in paragraph 2H(iv).
"CANCELLATION FEE" shall have the meaning specified in paragraph 2H(iv).
"CAPITALIZED LEASE OBLIGATION" shall mean any rental obligation which,
under generally accepted accounting principles, is or will be required to be
capitalized on the books of the Company or any Restricted Subsidiary, taken
at the amount thereof accounted for as indebtedness (net of interest
expenses) in accordance with such principles.
"CLOSING DAY" shall mean, with respect to any Accepted Note, the
Business Day specified for the closing of the purchase and sale of such
Accepted Note in the Request for Purchase of such Accepted Note, PROVIDED
that (i) if the Company and the Purchaser which is obligated to purchase such
Accepted Note agree on an earlier Business Day for such closing, the
"CLOSING DAY" for such Accepted Note shall be such earlier Business Day, and
(ii) if the closing of the purchase and sale of such Accepted Note is
rescheduled pursuant to paragraph 2G, the Closing Day for such Accepted Note,
for all purposes of this Agreement except references to "Original Closing
Day" in paragraph 2H(iii), shall mean the Rescheduled Closing Day with
respect to such Accepted Note.
"CODE" shall mean the Internal Revenue Code of 1986, as amended.
"COMMON STOCK" shall mean, as applied to any corporation, shares of such
corporation which shall not be entitled to preference or priority over any
other shares of such corporation in respect of either the payment of
dividends or the distribution of assets upon liquidation.
"COMPUTATION PARAGRAPHS" shall have the meaning specified in paragraph
5A(iv).
"CONFIRMATION OF ACCEPTANCE" shall have the meaning specified in
paragraph 2E.
"CONSOLIDATED INTEREST EXPENSE" shall mean, as to any period,
consolidated interest expense of the Company and Restricted Subsidiaries for
such period, calculated to (i) include imputed interest on Capitalized Lease
Obligations and (ii) exclude amortization of debt discount to the extent not
actually paid in cash.
"CONSOLIDATED NET INCOME" shall mean, as to any period, the net income
of the Company and Restricted Subsidiaries on a consolidated basis.
"CONSOLIDATED NET WORTH" shall mean, as of any time of determination
thereof, (i) the shareholders' equity (or deficit) of the Company and its
Restricted Subsidiaries, as the same would be shown on a consolidated balance
sheet of the Company and its Restricted Subsidiaries, MINUS (ii) the
aggregate amount of Investments in Unrestricted Subsidiaries which are deemed
not to be Investments for purposes of paragraph 6C(3) as a result of clause
(vii)(b) thereof.
34
<PAGE>
"CURRENT DEBT" shall mean, with respect to any Person, all Indebtedness
of such Person for borrowed money which by its terms or by the terms of any
instrument or agreement relating thereto matures on demand or within one year
from the date of the creation thereof, PROVIDED that Indebtedness outstanding
under a revolving credit or similar agreement which obligates the lender or
lenders to extend credit over a period of more than one year shall constitute
Current Debt and not Funded Debt.
"DEBT" shall mean Current Debt and Funded Debt.
"DELAYED DELIVERY FEE" shall have the meaning specified in paragraph
2H(iii).
"EBIT" shall mean, as to any period, Consolidated Net Income for such
period plus (i) Consolidated Interest Expense for such period, PLUS or MINUS
(as appropriate) (ii) any provision for income taxes for such period.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended.
"ERISA AFFILIATE" shall mean any corporation which is a member of the
same controlled group of corporations as the Company within the meaning of
section 414(b) of the Code, or any trade or business which is under common
control with the Company within the meaning of section 414(c) of the Code.
"EVENT OF DEFAULT" shall mean any of the events specified in paragraph
7A, provided that there has been satisfied any requirement in connection with
such event for the giving of notice, or the lapse of time, or the happening
of any further condition, event or act, and "DEFAULT" shall mean any of such
events, whether or not any such requirement has been satisfied.
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as
amended.
"FACILITY" shall have the meaning specified in paragraph 2A.
"FACILITY FEE" shall have the meaning specified in paragraph 2H(i).
"FUNDED DEBT" shall mean with respect to any Person, all Indebtedness of
such Person which by it terms or by the terms of any instrument or agreement
relating thereto matures, or which is otherwise payable or unpaid, more than
one year from, or is directly or indirectly renewable or extendible at the
option of the debtor to a date more than one year from, the date of the
creation thereof, PROVIDED that Indebtedness outstanding under a revolving
credit or similar agreement which obligates the lender or lenders to extend
credit over a period of more than one year shall constitute Current Debt and
not Funded Debt.
35
<PAGE>
"GENERAL INTANGIBLES" shall mean all choses in action, causes of action
and all other intangible property of the Company and its Restricted
Subsidiaries of every kind and nature now owned or hereafter acquired,
including, without limitation, corporate and other business records, deposit
accounts, inventions, designs, patents, patent and trademark registrations
and applications, trademarks, trade names, trade secrets, goodwill,
copyrights, registrations, licenses, franchises, deferred tax benefits, tax
refund claims, prepaid expenses, computer programs not included in Capital,
Property and Equipment on the annual audited consolidated financial
statements of the Company and its Restricted Subsidiaries, covenants not to
compete, customer lists and mailing lists, contract rights, indemnification
rights, and any letters of credit, guarantee claims, security interests or
other security held by or granted to the Company or its Restricted
Subsidiaries.
"GUARANTEE" shall mean, with respect to any Person, any direct or
indirect liability, contingent or otherwise, of such Person with respect to
any indebtedness, lease, dividend or other obligation of another, including,
without limitation, any such obligation directly or indirectly guaranteed,
endorsed (otherwise than for collection or deposit in the ordinary course of
business) or discounted or sold with recourse by such Person, or in respect
of which such Person is otherwise directly or indirectly liable, including,
without limitation, any such obligation in effect guaranteed by such Person
through any agreement (contingent or otherwise) to purchase, repurchase or
otherwise acquire such obligation or any security therefor, or to provide
funds for the payment or discharge of such obligation (whether in the form of
loans, advances, stock purchases, capital contributions or otherwise), or to
maintain the solvency or any balance sheet or other financial condition of
the obligor of such obligation, or to make payment for any products,
materials or supplies or for any transportation or service, regardless of the
non-delivery or non-furnishing thereof, in any such case if the purpose or
intent of such agreement is to provide assurance that such obligation will be
paid or discharged, or that any agreements relating thereto will be complied
with, or that the holders of such obligation will be protected against loss
in respect thereof. The amount of any Guarantee shall be equal to the
outstanding principal amount of the obligation guaranteed or such lesser
amount to which the maximum exposure of the guarantor shall have been
specifically limited.
"HEDGE TREASURY NOTE(S)" shall mean, with respect to any Accepted Note,
the United States Treasury Note or Notes whose duration (as determined by LOG
in accordance with its standard practice) most closely matches the duration
(as so determined) of such Accepted Note.
"INCLUDING" shall mean, unless the context clearly requires otherwise,
"including without limitation".
"INDEBTEDNESS" shall mean, with respect to any Person, without
duplication, (i) all items (excluding items of (a) contingency reserves, (b)
reserves for deferred income taxes,
36
<PAGE>
(c) deferred compensation to the extent that such deferred compensation items
are fully funded by life insurance policies, (d) deferred rent, (e)
post-retirement benefit liabilities determined in accordance with Financial
Accounting Standards Board Statement No. 106 and (f) current liabilities for
trade payables, tax and payroll obligations) which in accordance with
generally accepted accounting principles would be included in determining
total liabilities as shown on the liability side of a balance sheet of such
Person as of the date on which Indebtedness is to be determined, (ii) all
indebtedness secured by any Lien on any property or asset owned or held by
such Person subject thereto, whether or not the indebtedness secured thereby
shall have benn assumed, and (iii) all indebtedness and other obligations of
others with respect to which such Person has become liable by way of
Guarantee.
"ING AFFILIATE" shall mean any corporation or other entity all of the
Voting Stock (or equivalent voting securities or interests) of which is owned
by the ultimate parent corporation of LOG, either directly or through ING
Affiliates.
"INTEREST COVERAGE RATIO" shall mean, as to any period, the ratio of (i)
EBIT for such period to (ii) Consolidated Interest Expense for such period.
"INVESTMENT" shall have the meaning specified in paragraph 6C(3).
"ISSUANCE FEE" shall have the meaning specified in paragraph 2H(ii).
"ISSUANCE PERIOD" shall have the meaning specified in paragraph 2B.
"LIEN" shall mean any mortgage, pledge, security interest, encumbrance,
lien (statutory or otherwise) or charge of any kind (including any agreement
to give any of the foregoing, any conditional sale or other title retention
agreement, any lease in the nature thereof, and the filing of or agreement to
give any financing statement under the Uniform Commercial Code of any
jurisdiction) or any other type of preferential arrangement for the purpose,
or having the effect, of protecting a creditor against loss or securing the
payment or performance of an obligation.
"LOG" shall mean Life Insurance Company of Georgia.
"MULTIEMPLOYER PLAN" shall mean any Plan which is a "multiemployer plan"
(as such term is defined in section 4001(a)(3) of ERISA).
"1991 AGREEMENT" shall mean the note agreement dated as of June 21, 1991
pursuant to which the Company issued its 11.52% promissory notes due June 30,
1998 in the original principal amount of $55,000,000.
"NOTES" shall have the meaning specified in paragraph 1.
37
<PAGE>
"OFFICER'S CERTIFICATE" shall mean a certificate signed in the name of
the Company by an Authorized Officer of the Company.
"OFFSET SHARING AGREEMENT" shall mean the offset agreement dated as of
June 21, 1994, among LOG, Prudential Life Insurance Company of America,
LaSalle National Bank, and the other lenders and institutional investors
named as parties thereto (as such agreement has been and may be amended from
time to time) as well as any similar agreement which hereafter may be entered
into by LOG, other holders of the Notes and other lenders to the Company.
"PBGC" shall mean the Pension Benefit Guaranty Corporation, or any
successor or replacement entity thereto under ERISA.
"PERCENTAGE(S) OF EARNINGS CAPACITY TRANSFERRED" shall mean, with
respect to each asset Transferred pursuant to clause (iii) of paragraph
6C(6), the ratio (expressed as a percentage) of (i) Consolidated Net Income
produced by, or attributable to, such asset during the four fiscal quarter
period most recently ended prior to the effective date of such Transfer to
(ii) Average Consolidated Net Income.
"PERCENTAGE(S) OF TOTAL ASSETS TRANSFERRED" shall mean, with respect to
each asset Transferred pursuant to clause (iii) of paragraph 6C(6), the ratio
(expressed as a percentage) of (i) the greater of such asset's fair market
value or net book value on the date of Transfer to (ii) the book value of the
consolidated assets of the Company and Restricted Subsidiaries as of the last
day of the fiscal quarter immediately preceding the day of Transfer.
"PERMITTED SELLER CURRENT DEBT" shall mean Seller Current Debt that (i)
does not exceed $5,000,000 in aggregate outstanding principal amount, either
individually or collectively with all other Seller Current Debt incurred in
connection with the same purchase of an operating business, and (ii) does not
collectively with all other outstanding Seller Current Debt exceed
$10,000,000 in aggregate outstanding principal amount.
"PERSON" shall mean and include an individual, a partnership, a joint
venture, a corporation, a trust, an unincorporated organization and a
government or any department or agency thereof.
"PLAN" shall mean any employee pension benefit plan (as such term is
defined in section 3 of ERISA) which is or has been established or
maintained, or to which contributions are or have been made, by the Company
or any ERISA Affiliate.
"PRIORITY DEBT" shall mean, as of any time of determination thereof, (i)
Debt of any Restricted Subsidiary, other than Debt owed to the Company or a
Wholly-Owned Restricted Subsidiary and (ii) Debt of the Company secured by
any Lien.
38
<PAGE>
"PURCHASERS" shall mean with respect to any Accepted Notes, LOG and/or
the ING Affiliate(s), which are purchasing such Accepted Notes.
"REFUND EVENT" shall mean (i) a termination of the Facility resulting
from LOG's provision of a notice of termination as contemplated by clause
(ii) of paragraph 2B or (ii) a termination of the Facility resulting from the
Company's provision of a notice of termination as contemplated by clause (ii)
of paragraph 2B, if such notice is provided by the Company within five
Business Days following LOG's failure to provide an interest rate quote (as
contemplated by paragraph 2D), unless (a) the applicable Request for Purchase
failed to conform in all respects with the requirements of paragraph 2C, (b)
a Default or Event of Default existed at the time the applicable Request for
Purchase was received or would have existed upon the issuance of the Notes
described in the applicable Request for Purchase, (c) a market disrupting
event described in paragraph 2F existed at any time during the five Business
Day period following receipt of the applicable Request for Purchase, or (d)
upon the issuance of the Notes described in the applicable Request for
Purchase the Company's credit quality, as determined by LOG would have been
below investment grade.
"REFUNDABLE PORTION" shall mean, with respect to the Facility Fee,
that portion thereof determined by multiplying the amount of such fee by a
fraction, the denominator of which shall be 1,095 and the numerator of which
shall be the difference between 1,095 and the number of days elapsed between
the date of the Agreement and the date of the Refund Event.
"REQUEST FOR PURCHASE" shall have the meaning specified in paragraph 2C.
"REQUIRED HOLDER(S)" shall mean the holder or holders of at least 51%
of the aggregate principal amount of the Notes or of a Series of Notes, as
the context may require, from time to time outstanding.
"RESCHEDULED CLOSING DAY" shall have the meaning specified in
paragraph 2G.
"RESPONSIBLE OFFICER" shall mean the chief executive officer, chief
operating officer, chief financial officer or chief accounting officer of the
Company, general counsel of the Company or any other officer of the Company
involved principally in its financial administration or its controllership
function.
"RESTRICTED GROUP AMOUNT" shall have the meaning specified in
paragraph 6C(10).
"RESTRICTED SUBSIDIARY" shall mean any Subsidiary organized under the
laws of any state of the United States of America, Puerto Rico, Canada or any
province of Canada, which conducts substantially all of its business in the
United States of America, Puerto Rico or Canada, and at least 80% of the
total combined voting power of all classes of Voting Stock of which shall,
at the time as of which any determination is being made, be owned by the
39
<PAGE>
Company either directly or through Restricted Subsidiaries, PROVIDED that no
such Subsidiary shall be a Restricted Subsidiary unless (i) it is listed as a
Restricted Subsidiary in Schedule 8A attached hereto or (ii) (a) the Board of
Directors of the Company hereafter designates such Subsidiary a Restricted
Subsidiary, (b) notice of such designation is given by the Company to the
holders of the Notes with the next succeeding delivery of financial
statements pursuant to paragraph 5A, and (c) on the date of and immediately
after giving effect to such designation, no Event of Default shall have
occurred and be continuing.
"SECURITIES ACT" shall mean the Securities Act of 1933, as amended.
"SELLER CURRENT DEBT" shall mean Current Debt of the Company or a
Restricted Subsidiary that is (i) incurred in connection with the purchase,
through asset purchase, stock purchase, merger, or consolidation, of any
operating business, (ii) is payable to the seller(s) of such business or to
the shareholders or other equity holders of the seller(s) of such business,
and (iii) represents deferred purchase price for the purchased business.
"SERIES" shall have the meaning specified in paragraph 1.
"SIGNIFICANT HOLDER" shall mean (i) LOG, so long as LOG or any ING
Affiliate shall hold (or be committed under this Agreement to purchase) any
Note, or (ii) any other holder of at least 5% of the aggregate principal
amount of the Notes of any Series from time to time outstanding.
"SUBSIDIARY" shall mean any corporation, association or other business
entity which is required to be consolidated in the financial statements of
the Company.
"TANGIBLE NET WORTH" shall mean, as of any time of determination
thereof, the net worth of the Company and its Restricted Subsidiaries
determined on a consolidated basis in accordance with generally accepted
accounting principles, PLUS, to the extent not included in the assets of the
Company and its Restricted Subsidiaries used in determining such net worth,
the amount of the cash surrender value of life insurance policies maintained
by the Company on the lives of executive officers, PLUS any amount of Funded
Debt of the Company that is subordinated to the Notes and to all of the
Company's obligations under this Agreement in a manner and form satisfactory
to LOG and the Required Holders in their sole discretion as to the right to
and time of payment of such Funded Debt, and as to any rights and remedies of
LOG and the holders of any Notes with respect to such Funded Debt, MINUS the
sum of (i) the amount of any General Intangibles, (ii) amounts due from
Affiliates and (iii) the amount of Investments in Unrestricted Subsidiaries.
"TOTAL DEBT" shall mean, as of any time of determination thereof, the
aggregate amount of (i) all Funded Debt of the Company and Restricted
Subsidiaries, PLUS (ii) the average outstanding daily balance of all Current
Debt of the Company and Restricted Subsidiaries during the twelve calendar
month period most recently ended as of any time of
40
<PAGE>
determination, MINUS (iii) Debt of Restricted Subsidiaries owed to the
Company or a Wholly-Owned Restricted Subsidiary.
"TRANSFER" shall mean, with respect to any item, the sale, exchange,
conveyance, lease, transfer or other disposition of such item.
"TRANSFEREE" shall mean any direct or indirect transferee of all or
any part of any Note purchased by any Purchaser under this Agreement.
"UNRESTRICTED SUBSIDIARY" shall mean any Subsidiary other than a
Restricted Subsidiary. No Subsidiary which is or becomes a Restricted
Subsidiary shall at any time thereafter become or be an Unrestricted
Subsidiary. Notwithstanding the foregoing, solely for the purposes of clause
(iii) of paragraph 5A, Regis Mexico, S.A. shall not be deemed an Unrestricted
Subsidiary unless and until either it contributes greater than 5% of the
consolidated revenues of the Company and Subsidiaries for any fiscal year of
the Company or its assets constitute greater than 5% of the consolidated
assets of the Company and Subsidiaries as at the end of any fiscal year of
the Company.
"VOTING STOCK" shall mean, with respect to any corporation, any shares
of stock of such corporation whose holders are entitled under ordinary
circumstances to vote for the election of directors of such corporation
(irrespective of whether at the time stock of any other class or classes
shall have or might have voting power by reason of the happening of any
contingency).
"WHOLLY-OWNED RESTRICTED SUBSIDIARY" shall mean a Restricted
Subsidiary all the outstanding shares (other than directors' qualifying
shares, if required by law) of every class of stock of which are at the time
owned by the Company or by one or more Wholly-Owned Restricted Subsidiaries.
10C. ACCOUNTING PRINCIPLES, TERMS AND DETERMINATIONS. All references in
this Agreement to "generally accepted accounting principles" shall be
deemed to refer to generally accepted accounting principles in effect in the
United States at the time of application thereof. Unless otherwise specified
herein, all accounting terms used herein shall be interpreted, all
determinations with respect to accounting matters hereunder shall be made, and
all unaudited financial statements and certificates and reports as to
financial matters required to be furnished hereunder shall be prepared, in
accordance with generally accepted accounting principles applied on a basis
consistent with the most recent audited financial statements delivered
pursuant to clause (ii) of paragraph 5A or, if no such statements have been
so delivered, the most recent audited financial statements referred to in
clause (i) of paragraph 8B.
41
<PAGE>
11. MISCELLANEOUS.
11A. NOTE PAYMENTS. The Company agrees that, so long as any Purchaser
shall hold any Note, it will make payments of principal of, interest on, and
any Yield-Maintenance Amount payable with respect to, such Note, which comply
with the terms of this Agreement, by wire transfer of immediately available
funds for credit (not later than 12:00 noon, New York City local time, on the
date due) to the account or accounts of such Purchaser specified in the
Purchaser Schedule specified in the Confirmation of Acceptance with respect
to such Note or such other account or accounts in the United States as such
Purchaser may from time to time designate in writing, notwithstanding any
contrary provision herein or in any Note with respect to the place of
payment. Each Purchaser agrees that, before disposing of any Note, it will
make a notation thereon (or on a schedule attached thereto) of all principal
payments previously made thereon and of the date to which interest thereon
has been paid. The Company agrees to afford the benefits of this paragraph
11A to any Transferee which shall have made the same agreement as the
Purchasers have made in this paragraph 11A.
11B. EXPENSES. The Company agrees, whether or not any of the
transactions contemplated hereby shall be consummated, to pay, and save LOG,
each Purchaser and any Transferee harmless against liability for the payment
of, all out-of-pocket expenses arising in connection with such transactions,
including (i) all document production and duplication charges and the fees
and expenses of any special counsel engaged by the Purchasers or any
Transferee in connection with this Agreement, the transactions contemplated
hereby (including in connection with the Offset Sharing Agreement amendment
contemplated by paragraph 5K) and any subsequent proposed modification of, or
proposed consent under, this Agreement, whether or not such proposed
modification shall be effected or proposed consent granted, and (ii) the
costs and expenses, including attorneys' fees, incurred by any Purchaser or
any Transferee in enforcing (or determining whether or how to enforce) any
rights under this Agreement or the Notes or in responding to any subpoena or
other legal process or informal investigative demand issued in connection
with this Agreement or the transactions contemplated hereby or by reason of
any Purchaser's or any Transferee's having acquired any Note, including
without limitation costs and expenses incurred in any bankruptcy case.
Payment of a Delayed Delivery Fee or Cancellation Fee with respect to any
Accepted Note shall not be deemed payment or satisfaction of any fees of
special counsel or other out-of-pocket fees or expenses incurred by any
Purchaser in connection with the anticipated purchase. The obligations of the
Company under this paragraph 11B shall survive the transfer of any Note or
portion thereof or interest therein by any Purchaser or any Transferee and
the payment of any Note.
11C. CONSENT TO AMENDMENTS. This Agreement may be amended, and the
Company may take any action herein prohibited, or omit to perform any act
herein required to be performed by it, if the Company shall obtain the
written consent to such amendment, action or omission to act, of the Required
Holder(s) of the Notes of each Series except that,
42
<PAGE>
(i) with the written consent of the holders of all Notes of a particular
Series, and if an Event of Default shall have occurred and be continuing, of
the holders of all Notes of all Series, at the time outstanding (and not
without such written consents), the Notes of such Series may be amended or
the provisions therof waived to change the maturity therof, to change or
affect the principal thereof, or to change or affect the rate or time of
payment of interest on or any Yield-Maintenance Amount payable with respect
to the Notes of such Series, (ii) without the written consent of the holder
or holders of all Notes at the time outstanding, no amendment to or waiver of
the provisions of this Agreement shall change or affect the provisions of
paragraph 7A or this paragraph 11C insofar as such provisions relate to
proportions of the principal amount of the Notes of any Series, or the rights
of any individual holder of Notes, required with respect to any declaration
of Notes to be due and payable or with respect to any consent, amendment,
waiver or declaration, (iii) with the written consent of LOG (and not without
the written consent of LOG) the provisions of paragraph 2 may be amended or
waived (except insofar as any such amendment or waiver would affect any
rights or obligations with respect to the purchase and sale of Notes which
shall have become Accepted Notes prior to such amendment or waiver), and (iv)
with the written consent of all of the Purchasers which shall have become
obligated to purchase Accepted Notes of any Series (and not without the
written consent of all such Purchasers), any of the provisions of paragraphs
2 and 3 may be amended or waived insofar as such amendment or waiver would
affect only rights or obligations with respect to the purchase and sale of
the Accepted Notes of such Series or the terms and provisions of such
Accepted Notes. Each holder of any Note at the time or thereafter outstanding
shall be bound by any consent authorized by this paragraph 11C, whether or
not such Note shall have been marked to indicate such consent, but any Notes
issued therafter may bear a notation referring to any such consent. No
course of dealing between the Company and the holder of any Note nor any
delay in exercising any rights hereunder or under any Note shall operate as a
waiver of any rights of any holder of such Note. As used herein and in the
Notes, the term "THIS AGREEMENT" and references thereto shall mean this
Agreement as it may from time to time be amended or supplemented.
11D. FORM, REGISTRATION, TRANSFER AND EXCHANGE OF NOTES; LOST NOTES.
The Notes are issuable as registered notes without coupons in denominations
of at least $1,000,000, except as may be necessary to reflect any principal
amount not evenly divisible by $1,000,000. The Company shall keep at its
principal office a register in which the Company shall provide for the
registration of Notes and of transfers of Notes. Upon surrender for
registration of transfer of any Note at the principal office of the Company,
the Company shall, at its expense, execute and deliver one or more new Notes
of like tenor and of a like aggregate principal amount, registered in the
name of such transferee or transferees. At the option of the holder of any
Note, such Note may be exchanged for other Notes of like tenor and of any
authorized denominations, of a like aggregate principal amount, upon
surrender of the Note to be exchanged at the principal office of the Company.
Whenever any Notes are so surrendered for exchange, the Company shall, at its
expense, execute and deliver the Notes which the holder making the exchange
is entitled to receive. Each installment of
43
<PAGE>
principal payable on each installment date upon each new Note issued upon any
such transfer or exchange shall be in the same proportion to the unpaid
principal amount of such new Note as the installment of principal payable on
such date on the Note surrendered for registration of transfer or exchange
bore to the unpaid principal amount of such Note. No reference need be made
in any such new Note to any installment or installments of principal
previously due and paid upon the Note surrendered for registration of
transfer or exchange. Every Note surrendered for registration of transfer or
exchange shall be duly endorsed, or be accompanied by a written instrument of
transfer duly executed, by the holder of such Note or such holder's attorney
duly authorized in writing. Any Note or Notes issued in exchange for any Note
or upon transfer thereof shall carry the rights to unpaid interest and
interest to accrue which were carried by the Note so exchanged or
transferred, so that neither gain nor loss of interest shall result from any
such transfer or exchange. Upon receipt of written notice from the holder of
any Note of the loss, theft, destruction or mutilation of such Note and, in
the case of any such loss, theft or destruction, upon receipt of such
holder's unsecured indemnity agreement, or in the case of any such mutilation
upon surrender and cancellation of such Note, the Company will make and
deliver a new Note, of like tenor, in lieu of the lost, stolen, destroyed or
mutilated Note.
11E. PERSONS DEEMED OWNERS; PARTICIPATION. Prior to due presentment for
registration of transfer, the Company may treat the Person in whose name any
Note is registered as the owner and holder of such Note for the purpose of
receiving payment of principal of and interest on, and any Yield-Maintenance
Amount payable with respect to, such Note and for all other purposes
whatsoever, whether or not such Note shall be overdue, and the Company shall
not be affected by notice to the contrary. Subject to the preceding sentence,
the holder of any Note may from time to time grant participations in all or
any part of such Note to any Person on such terms and conditions as may be
determined by such holder in its sole and absolute discretion.
11F. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ENTIRE AGREEMENT. All
representations and warranties contained herein or made in writing by or on
behalf of the Company in connection herewith shall survive the execution and
delivery of this Agreement and the Notes, the transfer by any Purchaser of
any Note or portion thereof or interest therein and the payment of any Note,
and may be relied upon by any Transferee, regardless of any investigation
made at any time by or on behalf of any Purchaser or any Transferee. Subject
to the preceding sentence, this Agreement and the Notes embody the entire
agreement and understanding between the parties hereto with respect to the
subject matter hereof and supersede all prior agreements and understandings
relating to such subject matter.
11G. SUCCESSORS AND ASSIGNS. All covenants and other agreements in
this Agreement contained by or on behalf of any of the parties hereto shall
bind and inure to the benefit of the respective successors and assigns of the
parties hereto (including, without limitation, any Transferee) whether so
expressed or not.
44
<PAGE>
11H. INDEPENDENCE OF COVENANTS. All covenants hereunder shall be given
independent effect so that if a particular action or condition is prohibited
by any one of such covenants, the fact that it would be permitted by an
exception to, or otherwise be in compliance within the limitations of,
another covenant shall not (i) avoid the occurrence of an Event of Default or
Default if such action is taken or such condition exists or (ii) in any way
prejudice an attempt by a holder or the holders of the Notes to prohibit
(through equitable action or otherwise) the taking of any action by the
Company or a Restricted Subsidiary which would result in an Event of Default
or Default.
11I. NOTICES. All written communications provided for hereunder (other
than communications provided for under paragraph 2) shall be sent by first
class mail or nationwide overnight delivery service (with charges prepaid)
and (i) if to any Purchaser, addressed as specified for such communications
in the Purchaser Schedule attached to the applicable Confirmation of
Acceptance or at such other address as any such Purchaser shall have
specified to the Company in writing, (ii) if to any other holder of any Note,
addressed to it at such address as it shall have specified in writing to the
Company or, if any such holder shall not have so specified an address, then
addressed to such holder in care of the last holder of such Note which shall
have so specified an address to the Company and (iii) if to the Company,
addressed to it at 7201 Metro Boulevard, Minneapolis, Minnesota 55439,
Attention: Chief Financial Officer, PROVIDED, HOWEVER, that any such
communication to the Company may also, at the option of the Person sending
such communication, be delivered by any other means either to the Company at
its address specified above or to any Authorized Officer of the Company. Any
communication pursuant to paragraph 2 shall be made by the method specified
for such communication in paragraph 2, and shall be effective to create any
rights or obligations under this Agreement only if, in the case of a
telephone communication, an Authorized Officer of the party conveying the
information and of the party receiving the information are parties to the
telephone call, and in the case of a telecopier communication, the
communication is signed by an Authorized Officer of the party conveying the
information, addressed to the attention of an Authorized Officer of the party
receiving the information, and in fact received at the telecopier terminal
the number of which is listed for the party receiving the communication in
the Information Schedule or at such other telecopier terminal as the party
receiving the information shall have specified in writing to the party
sending such information.
11J. PAYMENTS DUE ON NON-BUSINESS DAYS. Anything in this Agreement or
the Notes to the contrary notwithstanding, any payment of principal of or
interest on, or Yield-Maintenance Amount payable with respect to, any Note
that is due on a date other than a Business Day shall be made on the next
succeeding Business Day. If the date for any payment is extended to the next
succeeding Business Day by reason of the preceding sentence, the period of
such extension shall be included in the computation of the interest payable
on such Business Day.
45
<PAGE>
11K. 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.
11L. DESCRIPTIVE HEADINGS. The descriptive headings of the several
paragraphs of this Agreement are inserted for convenience only and do not
constitute a part of this Agreement.
11M. SATISFACTION REQUIREMENT. If any agreement, certificate or other
writing, or any action taken or to be taken, is by the terms of this
Agreement required to be satisfactory to any Purchaser, to any holder of
Notes or to the Required Holder(s), the determination of such satisfaction
shall be made by such Purchaser, such holder or the Required Holder(s), as
the case may be, in the sole and exclusive judgment (exercised in good faith)
of the Person or Persons making such determination.
11N. GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED AND ENFORCED IN
ACCORDANCE WITH, AND THE RIGHTS OF THE PARTIES SHALL BE GOVERNED BY, THE
INTERNAL LAW OF THE STATE OF GEORGIA.
11O. SEVERALTY OF OBLIGATIONS. The sales of Notes to the Purchasers are
to be several sales, and the obligations of LOG and the Purchasers under this
Agreement are several obligations. No failure by LOG or any Purchaser to
perform its obligations under this Agreement shall relieve any other
Purchaser or the Company of any of its obligations hereunder, and neither LOG
nor any Purchaser shall be responsible for the obligations of, or any action
taken or omitted by, and other such Person hereunder. LOG may, in its
discretion, authorize ING Investment Management, Inc., or any other LOG
Affiliate to exercise any of LOG's rights hereunder or to perform any of its
undertakings hereunder.
11P. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
46
<PAGE>
11Q. BINDING AGREEMENT. When this Agreement is executed and delivered
by the Company and LOG, it shall become a binding agreement between the
Company and LOG. This Agreement shall also inure to the benefit of each
Purchaser which shall have executed and delivered a Confirmation of
Acceptance, and each such Purchaser shall be bound by this Agreement to the
extent provided in such Confirmation of Acceptance.
Very truly yours,
REGIS CORPORATION
By: /s/ Bert M. Gross
-----------------------------
Name: Bert M. Gross
Title: Assistant Secretary
(Signatures continued on following page.)
47
<PAGE>
The foregoing Agreement is
hereby accepted as of the
date first above written.
LIFE INSURANCE COMPANY OF GEORGIA
By: ING INVESTMENT MANAGEMENT, INC., its agent
By:
-----------------------------------------------
Name: Fred C. Smith
Title: Senior Vice President and Managing Director
48
<PAGE>
INFORMATION SCHEDULE
AUTHORIZED OFFICERS FOR LOG
<TABLE>
<S> <C>
Randal W. Ralph Scott Frost
Vice President Investment Manager
ING Investment Management, Inc. ING Investment Management, Inc.
5780 Powers Ferry Road 5780 Powers Ferry Road
Suite 300 Suite 300
Atlanta, Georgia 30327-4349 Atlanta, Georgia 30327-4349
Telephone: (770) 690-4754 Telephone: (770) 690-4747
Facsimile: (770) 690-4899 Facsimile: (770) 690-4899
AUTHORIZED OFFICERS FOR COMPANY
Paul Finkelstein Randy Pearce
Chief Operating Officer & President Vice President, Finance
Regis Corporation Regis Corporation
7201 Metro Boulevard 7201 Metro Boulevard
Minneapolis, Minnesota 55439 Minneapolis, Minnesota 55439
Telephone: (612) 947-7911 Telephone: (612) 947-7603
Facsimile: (612) 947-7900 Facsimile: (612) 947-7600
Frank Evangelist
Senior Vice President, Finance
Regis Corporation
Minneapolis, Minnesota 55439
Telephone: (612) 947-7699
Facsimile: (612) 947-7600
</TABLE>
<PAGE>
EXHIBIT A
[FORM OF NOTE]
REGIS CORPORATION
SENIOR SERIES _____ NOTE
No. __________
ORIGINAL PRINCIPAL AMOUNT:
ORIGINAL ISSUE DATE:
INTEREST RATE:
INTEREST PAYMENT DATES:
FINAL MATURITY DATE:
PRINCIPAL PREPAYMENT DATES AND AMOUNTS:
FOR VALUE RECEIVED, the undersigned, Regis Corporation (herein called
the "Company"), a corporation organized and existing under the laws of the
State of Minnesota, hereby promises to pay to _______________________, or
registered assigns, the principal sum of ______________________ DOLLARS [on
the Final Maturity Date specified above] [, payable on the Principal
Prepayment Dates and in the amounts specified above, and on the Final
Maturity Date specified above in an amount equal to the unpaid balance of the
principal hereof,] with interest (computed on the basis of a
360-day year--30-day month) (a) on the unpaid balance thereof at the
Interest Rate per annum specified above, payable on each Interest Payment
Date specified above and on the Final Maturity Date specified above,
commencing with the Interest Payment Date next succeeding the date hereof,
until the principal hereof shall have become due and payable, and (b) to the
extent permitted by applicable laws, on any overdue payment (including any
overdue prepayment) of principal, any overdue payment of Yield-Maintenance
Amount and any overdue payment of interest, payable on each Interest Payment
Date as aforesaid (or, at the option of the registered holder hereof, on
demand), at a rate per annum from time to time equal to the greater of (i) 2%
over the Interest Rate specified above or (ii) 2% over the rate of interest
publicly announced Wachovia Bank of Georgia, N.A., from time to time in
Atlanta, Georgia, as its Prime Rate, such Prime Rate to change for purposes
of this Note when and as changes therein are made by such bank, provided that
in not event shall such rate at any time be greater than the maximum rate
permitted by applicable law.
Payments of principal, Yield-Maintenance Amount, if any, and interest
are to be made at the main office of Wachovia Bank of Georgia, N.A., or at
such other place as the holder hereof shall designate to the Company in
writing, in lawful money of the United States of America.
A-1
<PAGE>
This Note is one of a series of Senior Notes (herein called the "Notes")
issued pursuant to a Private Shelf Agreement, dated as of [___________, 1997]
(herein called the "Agreement"), between the Company, on the one hand, and
Life Insurance Company of Georgia and each ING Affiliate (as defined in the
Agreement) which becomes a party thereto, on the other hand, and is entitled
to the benefits thereof.
This Note is subject to optional prepayment, in whole or from time to
time in part, on the terms and conditions specified in the Agreement.
This Note is a registered Note and, as provided in the Agreement, upon
surrender of this Note for registration of transfer, duly endorsed, or
accompanied by a written instrument of transfer duly executed, by the
registered holder hereof or such holder's attorney duly authorized in
writing, a new Note for the then outstanding principal amount will be issued
to, and registered in the name of, the transferee. Prior to due presentment
for registration of transfer, the Company may treat the person in whose name
this Note is registered as the owner hereof for the purpose of receiving
payment and for all other purposes, and the Company shall not be affected by
any notice to the contrary.
In case an Event of Default shall occur and be continuing, the principal
of this Note may be declared or otherwise become due and payable in the
manner and with the effect provided in the Agreement.
The Company agrees to pay, and save the holder hereof harmless against
any liability for the payment of, all costs and expenses, including
reasonable attorneys' fees, arising in connection with the enforcement by
such holder of any of its rights under this Note.
Capitalized terms used and not otherwise defined herein shall have the
meanings (if any) provided in the Agreement.
This Note is intended to be performed in the State of Georgia and shall
be construed and enforced in accordance with the internal law of such State.
Time is of the essence of this Note.
Except for any notice required by the Agreements, the Company expressly
waives notice (including, without limitation, notice of intention to
accelerate maturity, notice of acceleration of maturity, notice of
nonpayment, and notice of protest), demand, presentment for payment, protest,
bringing of suit, and diligence in taking any action to collect amounts owing
hereunder or in proceeding against any of the rights and properties securing
payment hereof.
REGIS CORPORATION
By:_____________________________
Title:__________________________
A-2
<PAGE>
EXHIBIT B
[FORM OF REQUEST FOR PURCHASE]
REGIS CORPORATION
Reference is made to the Private Shelf Agreement (the "Agreement"),
dated as of [___________________, 1997] between Regis Corporation (the
"Company"), on the one hand, and Life Insurance Company of Georgia ("LOG")
and each ING Affiliate which becomes party thereto, on the other hand.
Capitalized terms used and not otherwise defined herein shall have the
respective meanings specified in the Agreement.
Pursuant to Paragraph 2C of the Agreement, the Company hereby makes the
following Request for Purchase:
1. Aggregate principal amount of
the Notes covered hereby
(the "Notes").................... $__________
2. Individual specifications of the Notes:
<TABLE>
<CAPTION>
PRINCIPAL
FINAL PREPAYMENT INTEREST
PRINCIPAL MATURITY DATES AND PAYMENT
AMOUNT 1 DATE 2 AMOUNTS PERIOD
- --------- -------- ---------- --------
<S> <C> <C> <C>
</TABLE>
3. Use of proceeds of the Notes:
4. Proposed day for the closing of the purchase and sale of the
Notes:
5. The purchase price of the Notes is to be transferred to:
- --------------------------
1 Minimum principal amount of $5,000,000.
2 No less than five and nor more than ten years from the date of original
issuance.
B-1
<PAGE>
<TABLE>
<CAPTION>
NAME, ADDRESS
AND ABA ROUTING NUMBER OF
NUMBER OF BANK ACCOUNT
--------------- ---------
<S> <C>
</TABLE>
6. The Company certifies (a) that the representations and warranties
contained in paragraph 8 of the Agreement are true on and as of the
date of this Request for Purchase except to the extent of changes
caused by the transactions contemplated in the Agreement and (b)
that there exists on the date of this Request for Purchase no Event
of Default or Default.
Dated: REGIS CORPORATION
By:________________________________
Authorized Officer
B-2
<PAGE>
EXHIBIT C
[FORM OF CONFIRMATION OF ACCEPTANCE]
REGIS CORPORATION
Reference is made to the Private Shelf Agreement (the "Agreement"),
dated as of December ____, 1997 between Regis Corporation (the "Company"), on
the one hand, and Life Insurance Company of Georgia ("LOG") and each ING
Affiliate which becomes a party thereto, on the other hand. All terms used
herein that are defined in the Agreement have the respective meanings
specified in the Agreement.
LOG or the ING Affiliate which is named below as a Purchaser of Notes
hereby confirms the representations as to such Notes set forth in paragraph 9
of the Agreement, and agrees to be bound by the provisions of paragraphs 2E
and 2G of the Agreement relating to the purchase and sale of such Notes and
by the provisions of the penultimate sentence of paragraph 11A of the
Agreement.
Pursuant to paragraph 2E of the Agreement, an Acceptance with respect to
the following Accepted Notes is hereby confirmed:
I. Accepted Notes: Aggregate principal amount $________________
(A) (a) Name of Purchaser:
(b) Principal amount:
(c) Final maturity date:
(d) Principal prepayment dates and amounts:
(e) Interest rate:
(f) Interest payment period:
(g) Payment and notice instructions: As set forth on attached
Purchaser Schedule
(B) (a) Name of Purchaser:
(b) Principal amount:
(c) Final maturity date:
(d) Principal prepayment dates and amounts:
(e) Interest rate:
(f) Interest payment period:
(g) Payment and notice instructions: As set forth on attached
Purchaser Schedule
[(C), (D)...............same information as above.]
C-1
<PAGE>
II. Closing Day:
Dated: REGIS CORPORATION
By:________________________________
Title:_____________________________
[LIFE INSURANCE COMPANY OF GEORGIA]
By:________________________________
Title:_____________________________
[ING AFFILIATE]
By:________________________________
Title:_____________________________
C-2
<PAGE>
EXHIBIT D
[FORM OF OPINION OF COMPANY'S COUNSEL]
[Date of Closing]
[Name(s) and address(es) of
purchaser(s)]
Ladies and Gentlemen:
We have acted as counsel for Regis Corporation (the "Company") in
connection with the Private Shelf Agreement, dated as of [____________, 1997]
(the "Agreement") between the Company, on the one hand, and Life Insurance
Company of Georgia and each ING Affiliate which becomes a party thereto, on
the other hand, pursuant to which the Company has issued to you today Senior
Series _____ Notes of the Company in the aggregate principal amount of
$__________ (the "Notes"). Capitalized terms used and not otherwise defined
herein shall have the meanings provided in the Agreement. This letter is
being delivered to you in satisfaction of the condition set forth in
paragraph 3A(v) of the Agreement and with the understanding that you are
purchasing the Notes in reliance on the opinions expressed herein.
In this connection, we have examined such certificates of public
officials, certificates of officers of the Company and copies certified so
our satisfaction of corporate documents and records of the Company and of
other papers, and have made such other investigations, as we have deemed
relevant and necessary as a basis for our opinion hereinafter set forth. We
have relied upon such certificates of public officials and of officers of the
Company with respect to the accuracy of material factual matters contained
therein which were not independently established. With respect to the opinion
expressed in paragraph 3 below, we have also relied upon the representation
made by [each of] you in paragraph 9A of the Agreement.
Based on the foregoing, it is our opinion that:
1. The Company is a corporation duly organized and validly existing
in good standing under the laws of the State of Minnesota. Each Subsidiary
is a corporation duly organized and validly existing in good standing under
the laws of its jurisdiction of
D-1
<PAGE>
incorporation. The Company and its Restricted Subsidiaries have the corporate
power to carry on its their respective businesses as now being conducted.
2. The Agreement and the Notes have been duly authorized by all
requisite corporate action and duly executed and delivered by authorized
officers of the Company, and are valid obligations of the Company, legally
binding upon and enforceable against the Company in accordance with their
respective terms, except as such enforceability may be limited by (a)
bankruptcy, insolvency, reorganization or other similar laws affecting the
enforcement of creditors' rights generally and (b) general principles of
equity (regardless of whether such enforceability is considered in a
proceeding in equity or at law).
3. It is not necessary in connection with the offering, issuance, sale
and delivery of the Notes under the circumstances contemplated by the
Agreement to register the Notes under the Securities Act or to qualify an
indenture in respect of the Notes under the Trust Indenture Act of 1939, as
amended.
4. The extension, arranging and obtaining of the credit represented by
the Notes do not result in any violation of regulation G, T or X of the Board
of Governors of the Federal Reserve System.
5. The execution and delivery of the Agreement and the Notes, the
offering, issuance and sale of the Notes and fulfillment of and compliance
with the respective provisions of the Agreement and the Notes do not
conflict with, or result in a breach of the terms, conditions or provisions
of, or constitute a default under, or result in any violation of, or result
in the creation of any Lien upon any of the properties or assets of the
Company or any of its Restricted Subsidiaries pursuant to, or require any
authorization, consent, approval, exemption or other action by or notice to
or filing with any court, administrative or governmental body or other Person
(other than routine filings after the date hereof with the Securities and
Exchange Commission and/or state Blue Sky authorities) pursuant to, the
charter or by-laws of the Company or any of its Restricted Subsidiaries, any
applicable law (including any securities or Blue Sky law), statute, rule or
regulation or (insofar as is known to us after having made due inquiry with
respect thereto) any agreement (including, without limitation, any agreement
listed in Schedule 8G to the Agreement), instrument, order, judgment or
decree to which the Company or any of its Restricted Subsidiaries is a party
or otherwise subject.
6. The amounts contracted to be received by [each of] you and any
subsequent holder under the Notes (including any subsequent Note issued in
substitution or replacement thereof) and the Agreement, which are or which
may be deemed to be interest or other charges for the use of money,
constitute lawful interest and charges that are not usurious or illegal under
the law of the State of Minnesota.
Very truly yours,
D-2
<PAGE>
SCHEDULE 8A
REGIS CORPORATION
SCHEDULE OF SUBSIDIARIES
- --------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Regis Hairstylists, Ltd. Restricted 100%
Trade Secret, Inc. Restricted 100%
Regis Europe, Ltd. Unrestricted 99%*
Regis Mexico, S.A. Unrestricted 100%
Regis South Africa (Proprietary) Limited Unrestricted 100%
Regis Hairstylists (Proprietary) Limited Unrestricted 100%
Regis Suisse, Ltd. Unrestricted 100%
</TABLE>
- ---------------
* Borrower owns 9,998 shares of the 10,000 shares which are outstanding.
The two shares not controlled by Borrower are owned by two employees
of Regis Europe, Ltd.
<PAGE>
SCHEDULE 8G
LISTING OF AGREEMENTS WHICH RESTRICT
THE ABILITY OF REGIS TO INCUR DEBT
1. 11.52% Senior Note Agreement, dated June 21, 1991 (as amended).
2. Bank Credit Agreement, dated June 21, 1994 (as amended).
3. $50,000,000 Private Shelf Agreement, dated as of July 25, 1995
(as amended).
<PAGE>
EXHIBIT 10(hh)
REGIS CORPORATION
SENIOR SERIES 7.72% NOTE
No. R-1
ORIGINAL PRINCIPAL AMOUNT: $2,000,000
ORIGINAL ISSUE DATE: December 19, 1997
INTEREST RATE: 7.72%
INTEREST PAYMENT DATES: the 19th day of each December and June
FINAL MATURITY DATE: December 31, 2004
PRINCIPAL PREPAYMENT DATES AND AMOUNTS: $400,000 due on December 31 in
each of the following years:
2000, 2001, 2002 and 2003
FOR VALUE RECEIVED, the undersigned, Regis Corporation (herein called
the "Company"), a corporation organized and existing under the laws of the
State of Minnesota, hereby promises to pay to GOLDEN AMERICAN LIFE INSURANCE
COMPANY, or registered assigns, the principal sum of TWO MILLION DOLLARS,
payable on the Principal Prepayment Dates and in the amounts specified above,
and on the Final Maturity Date specified above in an amount equal to the
unpaid balance of the principal hereof, with interest (computed on the basis
of a 360-day year--30-day month) (a) on the unpaid balance thereof at the
Interest Rate per annum specified above, payable on each Interest Payment
Date specified above and on the Final Maturity Date specified above,
commencing with the Interest Payment Date next succeeding the date hereof,
until the principal hereof shall have become due and payable, and (b) to the
extent permitted by applicable laws, on any overdue payment (including any
overdue prepayment) of principal, any overdue payment of Yield-Maintenance
Amount and any overdue payment of interest, payable on each Interest Payment
Date as aforesaid (or, at the option of the registered holder hereof, on
demand), at a rate per annum from time to time equal to the greater of (i) 2%
over the Interest Rate specified above or (ii) 2% over the rate of interest
publicly announced by Wachovia Bank of Georgia, N.A., from time to time in
Atlanta, Georgia, as its Prime Rate, such Prime Rate to change for purposes
of this Note when and as changes therein are made by such bank, provided that
in no event shall such rate at any time be greater than the maximum rate
permitted by applicable law.
Payments of principal, Yield-Maintenance Amount, if any, and interest
are to be made at the main office of Wachovia Bank of Georgia, N.A., or at
such other place as the holder hereof shall designate to the Company in
writing, in lawful money of the United States of America.
This Note is one of a series of Senior Notes (herein called the "Notes")
issued pursuant to a Private Shelf Agreement, dated as of December 19, 1997
(herein called the "Agreement"), between the Company, on the one hand, and
Life Insurance Company of
<PAGE>
Georgia and each ING Affiliate (as defined in the Agreement) which becomes a
party thereto, on the other hand, and is entitled to the benefits thereof.
This Note is subject to optional prepayment, in whole or from time to
time in part, on the terms and conditions specified in the Agreement.
This Note is a registered Note and, as provided in the Agreement, upon
surrender of this Note for registration of transfer, duly endorsed, or
accompanied by a written instrument of transfer duly executed, by the
registered holder hereof or such holder's attorney duly authorized in
writing, a new Note for the then outstanding principal amount will be issued
to, and registered in the name of, the transferee. Prior to due presentment
for registration of transfer, the Company may treat the person in whose name
this Note is registered as the owner hereof for the purpose of receiving
payment and for all other purposes, and the Company shall not be affected by
any notice to the contrary.
In case an Event of Default shall occur and be continuing, the principal
of this Note may be declared or otherwise become due and payable in the
manner and with the effect provided in the Agreement.
The Company agrees to pay, and save the holder hereof harmless against
any liability for the payment of, all costs and expenses, including
reasonable attorneys' fees, arising in connection with the enforcement by
such holder of any of its rights under this Note.
Capitalized terms used and not otherwise defined herein shall have the
meanings (if any) provided in the Agreement.
This Note is intended to be performed in the State of Georgia and shall
be construed and enforced in accordance with the internal law of such State.
Time is of the essence of this Note.
Except for any notice required by the Agreements, the Company expressly
waives notice (including, without limitation, notice of intention to
accelerate maturity, notice of acceleration of maturity, notice of
nonpayment, and notice of protest), demand, presentment for payment, protest,
bringing of suit, and diligence in taking any action to collect amounts owing
hereunder or in proceeding against any of the rights and properties securing
payment hereof.
REGIS CORPORATION
By: /s/ Bert M. Gross
---------------------
Title: Assistant Secretary
-------------------
<PAGE>
EXHIBIT 10(ii)
REGIS CORPORATION
SENIOR SERIES 7.72% NOTE
No. R-2
ORIGINAL PRINCIPAL AMOUNT: $5,000,000
ORIGINAL ISSUE DATE: December 19, 1997
INTEREST RATE: 7.72%
INTEREST PAYMENT DATES: the 19th day of each December and June
FINAL MATURITY DATE: December 31, 2004
PRINCIPAL PREPAYMENT DATES AND AMOUNTS: $1,000,000 due on December 31 in
each of the following years:
2000, 2001, 2002 and 2003
FOR VALUE RECEIVED, the undersigned, Regis Corporation (herein called
the "Company"), a corporation organized and existing under the laws of the
State of Minnesota, hereby promises to pay to SECURITY LIFE OF DENVER
INSURANCE COMPANY, or registered assigns, the principal sum of FIVE MILLION
DOLLARS, payable on the Principal Prepayment Dates and in the amounts
specified above, and on the Final Maturity Date specified above in an amount
equal to the unpaid balance of the principal hereof, with interest (computed
on the basis of a 360-day year--30-day month) (a) on the unpaid balance
thereof at the Interest Rate per annum specified above, payable on each
Interest Payment Date specified above and on the Final Maturity Date
specified above, commencing with the Interest Payment Date next succeeding
the date hereof, until the principal hereof shall have become due and
payable, and (b) to the extent permitted by applicable laws, on any overdue
payment (including any overdue prepayment) of principal, any overdue payment
of Yield-Maintenance Amount and any overdue payment of interest, payable on
each Interest Payment Date as aforesaid (or, at the option of the registered
holder hereof, on demand), at a rate per annum from time to time equal to the
greater of (i) 2% over the Interest Rate specified above or (ii) 2% over the
rate of interest publicly announced by Wachovia Bank of Georgia, N.A., from
time to time in Atlanta, Georgia, as its Prime Rate, such Prime Rate to
change for purposes of this Note when and as changes therein are made by such
bank, provided that in no event shall such rate at any time be greater than
the maximum rate permitted by applicable law.
Payments of principal, Yield-Maintenance Amount, if any, and interest
are to be made at the main office of Wachovia Bank of Georgia, N.A., or at
such other place as the holder hereof shall designate to the Company in
writing, in lawful money of the United States of America.
This Note is one of a series of Senior Notes (herein called the "Notes")
issued pursuant to a Private Shelf Agreement, dated as of December 19, 1997
(herein called the "Agreement"), between the Company, on the one hand, and
Life Insurance Company of
<PAGE>
Georgia and each ING Affiliate (as defined in the Agreement) which becomes a
party thereto, on the other hand, and is entitled to the benefits thereof.
This Note is subject to optional prepayment, in whole or from time to
time in part, on the terms and conditions specified in the Agreement.
This Note is a registered Note and, as provided in the Agreement, upon
surrender of this Note for registration of transfer, duly endorsed, or
accompanied by a written instrument of transfer duly executed, by the
registered holder hereof or such holder's attorney duly authorized in
writing, a new Note for the then outstanding principal amount will be issued
to, and registered in the name of, the transferee. Prior to due presentment
for registration of transfer, the Company may treat the person in whose name
this Note is registered as the owner hereof for the purpose of receiving
payment and for all other purposes, and the Company shall not be affected by
any notice to the contrary.
In case an Event of Default shall occur and be continuing, the principal
of this Note may be declared or otherwise become due and payable in the
manner and with the effect provided in the Agreement.
The Company agrees to pay, and save the holder hereof harmless against
any liability for the payment of, all costs and expenses, including
reasonable attorneys' fees, arising in connection with the enforcement by
such holder of any of its rights under this Note.
Capitalized terms used and not otherwise defined herein shall have the
meanings (if any) provided in the Agreement.
This Note is intended to be performed in the State of Georgia and shall
be construed and enforced in accordance with the internal law of such State.
Time is of the essence of this Note.
Except for any notice required by the Agreements, the Company expressly
waives notice (including, without limitation, notice of intention to
accelerate maturity, notice of acceleration of maturity, notice of
nonpayment, and notice of protest), demand, presentment for payment, protest,
bringing of suit, and diligence in taking any action to collect amounts owing
hereunder or in proceeding against any of the rights and properties securing
payment hereof.
REGIS CORPORATION
By: /s/ Bert M. Gross
---------------------
Title: Assistant Secretary
-------------------
<PAGE>
EXHIBIT 10(jj)
- -----------------------------------------------------------------------------
REGIS CORPORATION
as Borrower
AMENDED AND RESTATED CREDIT AGREEMENT
Dated as of December 30, 1997
LASALLE NATIONAL BANK
as Agent
- ------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
This Table of Contents is not part of the Agreement to which it is attached
but is inserted for convenience only.
1 DEFINITIONS AND TERMS. . . . . . . . . . . . . . . . . . . . . . . . . 1
1A. Certain Definitions . . . . . . . . . . . . . . . . . . . . . 1
1B. Certain Terms . . . . . . . . . . . . . . . . . . . . . . . . 17
2 REVOLVING CREDIT LOANS: COMMITMENTS AND BORROWING PROCEDURES . . . . . 18
2A. Revolving Credit Commitments. . . . . . . . . . . . . . . . . 18
2B. Borrowing Procedures under the Revolving Credit Commitment. . 18
3 REVOLVING CREDIT LOANS: NOTES AND INTEREST . . . . . . . . . . . . . . 18
3A. Revolving Credit Notes. . . . . . . . . . . . . . . . . . . . 18
3B. Recordation . . . . . . . . . . . . . . . . . . . . . . . . . 19
3C. Interest Rates; Default Rate. . . . . . . . . . . . . . . . . 19
3D. Computation of Interest . . . . . . . . . . . . . . . . . . . 20
3E. Conversion and Reborrowing of Loans . . . . . . . . . . . . . 20
3F. Change of Law . . . . . . . . . . . . . . . . . . . . . . . . 20
3G. Unavailability of Deposits or Inability to Ascertain the
LIBOR Rate or Adjusted LIBOR Rate . . . . . . . . . . . . . . 21
3H. Yield Protection, Etc . . . . . . . . . . . . . . . . . . . . 21
3I. Funding Indemnity . . . . . . . . . . . . . . . . . . . . . . 22
3J. Discretion of Lenders as to Manner of Funding . . . . . . . . 23
3K. Interest Laws . . . . . . . . . . . . . . . . . . . . . . . . 23
3L. Letters of Credit . . . . . . . . . . . . . . . . . . . . . . 24
3M. Unused Portion Fee. . . . . . . . . . . . . . . . . . . . . . 31
3N. Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . 31
4 LOANS: GENERAL TERMS AND CONDITIONS TO LENDING . . . . . . . . . . . . 32
4A. General Conditions. . . . . . . . . . . . . . . . . . . . . . 32
4A(1) Payments to Agent . . . . . . . . . . . . . . . . . . 32
4A(2) Automatic Debit . . . . . . . . . . . . . . . . . . . 32
4A(3) Payment to Lenders. . . . . . . . . . . . . . . . . . 32
4A(4) Pro Rata Treatment; Sharing of Payments . . . . . . . 32
4A(5) Non-Receipt of Funds by the Agent . . . . . . . . . . 33
4A(6) Conditions Precedent Events . . . . . . . . . . . . . 34
4A(7) Offset. . . . . . . . . . . . . . . . . . . . . . . . 34
4A(8) Discretionary Disbursements . . . . . . . . . . . . . 34
4A(9) Termination Dates; Continuance of Obligations, Etc. . 34
4A(10) Loan Evidence . . . . . . . . . . . . . . . . . . . . 34
4A(11) Over-Advances . . . . . . . . . . . . . . . . . . . . 35
i
<PAGE>
4A(12) Lending Offices . . . . . . . . . . . . . . . . . . . 35
4A(13) Several Obligations; Remedies Independent . . . . . . 35
4A(14) Prepayment. . . . . . . . . . . . . . . . . . . . . . 35
4B. Conditions to Lending . . . . . . . . . . . . . . . . . . . . 35
4B(2) Accountant's Letter . . . . . . . . . . . . . . . . . 37
5 TERM LOAN A. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
5A. Term Loan A Commitment; Term Loan A Note. . . . . . . . . . . 37
5B. Borrowing Procedure under the Term Loan A Commitment. . . . . 37
5C. Interest Rate; Default Rate . . . . . . . . . . . . . . . . . 37
5D. Installment Payments of Principal . . . . . . . . . . . . . . 38
5E. Prepayments . . . . . . . . . . . . . . . . . . . . . . . . . 38
6 TERM LOAN B. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
6A. Term Loan B Commitments; Term Loan B Notes; Recordation . . . 38
6B. Borrowing Procedures under the Term Loan B Commitment . . . . 39
6C. Interest Rates; Default Rate. . . . . . . . . . . . . . . . . 39
6D. Computation of Interest . . . . . . . . . . . . . . . . . . . 40
6E. Conversion and Reborrowing of Loans . . . . . . . . . . . . . 40
6F. Change of Law . . . . . . . . . . . . . . . . . . . . . . . . 41
6G. Unavailability of Deposits or Inability to Ascertain the
LIBOR Rate or Adjusted LIBOR Rate . . . . . . . . . . . . . . 41
6H. Yield Protection, Etc . . . . . . . . . . . . . . . . . . . . 41
(i) Increased Costs . . . . . . . . . . . . . . . . . . . 41
(ii) Capital Adequacy. . . . . . . . . . . . . . . . . . . 42
6I. Funding Indemnity . . . . . . . . . . . . . . . . . . . . . . 43
6J. Discretion of Lenders as to Manner of Funding . . . . . . . . 43
6K. Interest Laws . . . . . . . . . . . . . . . . . . . . . . . . 43
6L. Unused Term Loan B Commitment Fee . . . . . . . . . . . . . . 44
6M. Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . 44
7 AFFIRMATIVE COVENANTS. . . . . . . . . . . . . . . . . . . . . . . . . 44
7A. Financial Statements. . . . . . . . . . . . . . . . . . . . . 44
7B. Inspection of Property. . . . . . . . . . . . . . . . . . . . 48
7C. Covenant to Secure Notes Equally. . . . . . . . . . . . . . . 48
7D. Keeping of Books and Bank Accounts. . . . . . . . . . . . . . 48
7E. Incorporation of Other Debt Covenants . . . . . . . . . . . . 49
7F. Corporate Existence, etc. . . . . . . . . . . . . . . . . . . 49
7G. Payment of Taxes and Claims . . . . . . . . . . . . . . . . . 49
7H. Compliance with Laws, etc . . . . . . . . . . . . . . . . . . 49
7I. Maintenance of Properties; Insurance. . . . . . . . . . . . . 50
7J. Covenant to Amend . . . . . . . . . . . . . . . . . . . . . . 50
7K. Maintenance of Accounts . . . . . . . . . . . . . . . . . . . 50
ii
<PAGE>
8 NEGATIVE COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . 50
8A. (i) Interest Coverage . . . . . . . . . . . . . . . . . . 51
(ii) Consolidated Net Worth. . . . . . . . . . . . . . . . 51
(iii) Tangible Net Worth. . . . . . . . . . . . . . . . . . 51
8B. Intentionally omitted . . . . . . . . . . . . . . . . . . . . 51
8C(1) Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
8C(2) Debt. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
8C(3) Investments . . . . . . . . . . . . . . . . . . . . . . . . . 52
8C(4) Sale of Stock and Debt of Restricted Subsidiaries . . . . . . 53
8C(5) Merger and Consolidation. . . . . . . . . . . . . . . . . . . 53
8C(6) Transfer of Assets. . . . . . . . . . . . . . . . . . . . . . 54
8C(7) Sale or Discount of Receivables . . . . . . . . . . . . . . . 54
8C(8) Transactions with Affiliates. . . . . . . . . . . . . . . . . 54
8C(9) Restricted Subsidiary Dividend Restrictions . . . . . . . . . 54
8C(10) Tax Consolidation . . . . . . . . . . . . . . . . . . . . . . 54
8D. Transactions by Restricted Subsidiaries . . . . . . . . . . . 54
8E. Compliance with ERISA . . . . . . . . . . . . . . . . . . . . 55
9 REPRESENTATIONS, COVENANTS AND WARRANTIES. . . . . . . . . . . . . . . 56
9A. Organization; Subsidiaries. . . . . . . . . . . . . . . . . . 56
9B. Financial Statements and Condition. . . . . . . . . . . . . . 56
9C. Actions Pending . . . . . . . . . . . . . . . . . . . . . . . 57
9D. Outstanding Debt. . . . . . . . . . . . . . . . . . . . . . . 57
9E. Title to Properties . . . . . . . . . . . . . . . . . . . . . 57
9F. Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
9G. Conflicting Agreements and Other Matters. . . . . . . . . . . 58
9H. Regulation U. . . . . . . . . . . . . . . . . . . . . . . . . 58
9I. ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
9J. Governmental Consent. . . . . . . . . . . . . . . . . . . . . 60
9K. Status Under Certain Federal Statutes . . . . . . . . . . . . 60
9L. Foreign Assets Control Regulations, etc . . . . . . . . . . . 60
9M. Intellectual Property . . . . . . . . . . . . . . . . . . . . 60
9N. Environmental Matters . . . . . . . . . . . . . . . . . . . . 60
9O. Affiliate Transactions and Agreements . . . . . . . . . . . . 61
9P. Accuracy of Information . . . . . . . . . . . . . . . . . . . 61
9Q. Securities Transaction. . . . . . . . . . . . . . . . . . . . 61
9R. Compliance with Laws. . . . . . . . . . . . . . . . . . . . . 61
9S. Labor . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
9T. Solvency. . . . . . . . . . . . . . . . . . . . . . . . . . . 61
9U. Securities Laws Filings . . . . . . . . . . . . . . . . . . . 62
9V. Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . 62
9W. Corporate Names . . . . . . . . . . . . . . . . . . . . . . . 62
iii
<PAGE>
10 DEFAULT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
10A. Events of Default . . . . . . . . . . . . . . . . . . . . . . 62
10B. Acceleration and Termination of Loans . . . . . . . . . . . . 64
10C. Other Remedies. . . . . . . . . . . . . . . . . . . . . . . . 64
11 THE AGENT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
11A. Appointment, Powers and Immunities. . . . . . . . . . . . . . 65
11B. Reliance by Agent . . . . . . . . . . . . . . . . . . . . . . 65
11C. Defaults. . . . . . . . . . . . . . . . . . . . . . . . . . . 65
11D. Rights as a Lender. . . . . . . . . . . . . . . . . . . . . . 66
11E. Indemnification . . . . . . . . . . . . . . . . . . . . . . . 66
11F. Non-Reliance on Agent and other Lenders . . . . . . . . . . . 66
11G. Failure to Act. . . . . . . . . . . . . . . . . . . . . . . . 67
11H. Resignation or Removal of Agent . . . . . . . . . . . . . . . 67
12 GENERAL. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
12A. Payment Application Date. . . . . . . . . . . . . . . . . . . 67
12B. Statement of Account. . . . . . . . . . . . . . . . . . . . . 67
12C. Manner of Application; Waiver of Setoff Prohibition . . . . . 68
12D. Suvival of Representations and Warranties . . . . . . . . . . 68
12E. Amendment and Restatement; Amendment; Assignment. . . . . . . 68
12F. No Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . 70
12G. Severability. . . . . . . . . . . . . . . . . . . . . . . . . 70
12H. Successors and Assigns. . . . . . . . . . . . . . . . . . . . 71
12I. Conflict with Other Agreements. . . . . . . . . . . . . . . . 71
12J. No Impairment by Termination. . . . . . . . . . . . . . . . . 71
12K. Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
12L. Costs, Fees and Expenses Related to Agreement and Other
Agreements. . . . . . . . . . . . . . . . . . . . . . . . . . 71
12M. Release . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
12N. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . 72
12O. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
12P. FORUM; AGENT; VENUE; JURY TRIAL WAIVER. . . . . . . . . . . . 72
12Q. Other Costs, Fees and Expenses. . . . . . . . . . . . . . . . 73
12R. Revival . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
12S. Acknowledgments . . . . . . . . . . . . . . . . . . . . . . . 73
12T. Headings. . . . . . . . . . . . . . . . . . . . . . . . . . . 73
12U. Counterparts. . . . . . . . . . . . . . . . . . . . . . . . . 73
12V. Effectiveness . . . . . . . . . . . . . . . . . . . . . . . . 73
iv
<PAGE>
INDEX TO EXHIBITS
Exhibit 1A(i) Note Agreement
Exhibit 1A(ii) Subsidiaries of Borrower
Exhibit 3A Form of Revolving Credit Note
Exhibit 3L(k) Existing Letters of Credit
Exhibit 4B(1)(ii)(b) Legal Opinion of Borrower's Counsel
Exhibit 4B(1)(ii)(i) Offset Sharing Agreement
Exhibit 5A Form of Term Loan A Note
Exhibit 6A Form of Term Loan B Note
Exhibit 9B Certain Other Obligations
Exhibit 9D Schedule of Debt
Exhibit 9O Affiliate Transactions and Agreements
Exhibit 9V Insurance
Exhibit 9W Assumed Corporate Names
v
<PAGE>
AMENDED AND RESTATED CREDIT AGREEMENT
THIS AMENDED AND RESTATED CREDIT AGREEMENT (this "Agreement") is made as
of December 30, 1997, by and among REGIS CORPORATION, a Minnesota corporation
("Borrower"), each of the lending institutions that is a signatory hereto
(each, a "Lender" and, collectively, the "Lenders"), and LASALLE NATIONAL
BANK, a national banking association, as agent for the Lenders (in such
capacity, together with its successors in such capacity, "Agent").
W I T N E S S E T H:
WHEREAS, Borrower, Lenders and Agent entered into a Credit Agreement
dated as of June 21, 1994, as amended by an Amendment to Credit Agreement
dated as of March 10, 1995, a Second Amendment to Credit Agreement dated as
of July 20, 1995, a Third Amendment to Credit Agreement dated as of March 19,
1996, a Fourth Amendment to Credit Agreement dated as of July 9, 1996, a
Fifth Amendment to Credit Agreement dated as of October 28, 1996, a Sixth
Amendment to Credit Agreement dated as of March 19, 1997, and a Seventh
Amendment to Credit Agreement dated as of July 11, 1997 (the "Original Credit
Agreement"); and
WHEREAS, Borrower and Lenders desire to amend and restate the covenants,
terms and conditions governing the loans and other financial accommodations
being provided by Lenders to Borrower pursuant to the Original Credit
Agreement, and to add back the concept of "Agent", which was deleted by the
Fourth Amendment to Credit Agreement;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements set forth herein, the parties hereto agree as
follows:
1 DEFINITIONS AND TERMS
1A. CERTAIN DEFINITIONS. The following words, terms and/or phrases
shall have the meanings set forth thereafter and such meanings shall be
applicable to the singular and plural form thereof, giving effect to the
numerical difference.
"ADJUSTED LIBOR RATE" means a rate per annum determined
pursuant to the following formula:
Adjusted LIBOR Rate = LIBOR RATE
---------------------------
100% - Reserve Percentage
"AFFILIATE" means (i) any Responsible Officer or member of the
Board of Directors of Borrower, (ii) any holder of at least 10% of the
total combined voting power of all classes of Voting Stock (or the
equivalent) of Borrower or of any corporation or other entity which
directly or indirectly controls Borrower, (iii) the spouse, any sibling
(by blood or adoption), or any descendant (by blood or adoption) of any
individual
1
<PAGE>
referred to in clause (i) or (ii) above, or any spouse of any such
sibling or descendant or any descendant of any such sibling, (iv) any
trust in which any Person referred to in clause (i), (ii) or (iii) above
has a substantial beneficial interest, (v) any corporation or other
entity (a) of which Borrower or any Person referred to in clause (i),
(ii), (iii) or (iv) above holds at least 10% of the total combined
economic interest of all classes of Common Stock (or the equivalent) or
at least 10% of the total combined voting power of all classes of Voting
Stock (or the equivalent) or (b) directly or indirectly controlled by
any Person referred to in clause (i), (ii), (iii) or (iv) above, and
(vi) any Person directly or indirectly controlling, controlled by, or
under direct or indirect common control with, Borrower, PROVIDED that a
Restricted Subsidiary shall not be an Affiliate. A Person shall be
deemed to control a corporation or other entity if such Person
possesses, directly or indirectly, the power to direct or cause the
direction of the management and policies of such corporation or other
entity, whether through the ownership of voting securities, by contract
or otherwise.
"AGGREGATE PERCENTAGE OF EARNINGS CAPACITY TRANSFERRED" means,
with respect to any eight consecutive fiscal quarter period subsequent
to June 30, 1994, the sum of the Percentages of Earnings Capacity
Transferred for each asset of Borrower and its Restricted Subsidiaries
that is Transferred during such period.
"AGGREGATE PERCENTAGE OF TOTAL ASSETS TRANSFERRED" means, with
respect to any eight consecutive fiscal quarter period subsequent to
June 30, 1994, the sum of the Percentages of Total Assets Transferred
for each asset of Borrower and its Restricted Subsidiaries that is
Transferred during such period.
"APPLICABLE LENDING OFFICE" means, for each Lender, the
"Lending Office" of such Lender (or an Affiliate thereof) designated on
the signature pages hereof or such other office of such Lender (or an
Affiliate thereof) as such Lender may from time to time specify to Agent
and Borrower as the office by which its Loans are to be made and
maintained.
"AVERAGE CONSOLIDATED NET INCOME" means, as of any time of
determination thereof, the average Consolidated Net Income of Borrower
and Restricted Subsidiaries for the three complete fiscal years of
Borrower then most recently ended.
"BASE RATE" means, for any date, the greater of (i) the
Federal Funds Rate in effect on such date plus one-half of one percent
(0.5%) per annum, and (ii) the rate of interest (expressed as a
percentage per annum) most recently announced or published publicly from
time to time by Agent as its prime rate of interest, which is not
necessarily the lowest or most favorable rate of interest charged by
Agent on commercial loans at any one time. The rate of interest shall
change automatically and immediately as and when the Federal Funds Rate
or Agent's prime rate of interest shall change, without notice to
Borrower, and any notice to which it may be entitled is hereby waived,
and any such change in the Federal Funds Rate or Agent's prime rate of
interest shall not affect
2
<PAGE>
any of the terms and conditions of this Agreement, all of which shall
remain in full force and effect.
"BASE RATE LOAN" means a Loan bearing interest based upon the
Base Rate.
"BORROWER'S LIABILITIES" means all obligations and liabilities
of Borrower in the aggregate to Lenders (including, without limitation,
all debts, claims, indebtedness, foreign exchange contracts and interest
rate swaps) whether primary, secondary, direct, contingent, fixed or
otherwise, heretofore, now and/or from time to time hereafter owing, due
or payable, however evidenced, created, incurred, acquired or owing and
however arising, whether under this Agreement or the Other Agreements,
or by oral agreement or operation of law or otherwise.
"BUSINESS DAY" means any day on which Agent is open for the
transaction of commercial banking business in Chicago, Illinois, other
than a Saturday or Sunday, and with respect to LIBOR Loans, dealing in
United States dollar deposits in London, England.
"CAPITALIZED LEASE OBLIGATION" means any rental obligation
which, under GAAP, is or will be required to be capitalized on the books
of Borrower or any Restricted Subsidiary, taken at the amount thereof
accounted for as indebtedness (net of interest expenses) in accordance
with GAAP.
"CASH EQUIVALENTS" means, at any time, any assets of Borrower
which are readily convertible into money, including, without limitation,
deposits with any bank or financial institution (whether as demand
deposits or time deposits, and whether or not evidenced by certificates
of deposit), and readily marketable securities of any type.
"CHANGE OF CONTROL" means the occurrence of either of the
following:
(a) individuals who constitute the Board of Directors of Borrower
(any such Board, an "Incumbent Board") cease for any reason,
during a period of two (2) consecutive years, to constitute at
least a majority of such Board, provided, that any new
director who is approved by a vote of at least two-thirds of
the applicable Incumbent Board shall be considered a member of
such Incumbent Board (other than an individual initially
assuming office as a result of either an actual or threatened
election contest or other actual or threatened solicitation of
proxies or consents by or on behalf of a person, entity or
group other than such Incumbent Board); or
(b) the approval by the stockholders of Borrower of a merger,
consolidation or reorganization involving Borrower, unless (i)
the stockholders of Borrower immediately before such merger,
consolidation or reorganization
3
<PAGE>
own immediately thereafter at least fifty-one percent (51%) of
the combined voting power of the outstanding voting securities
of the surviving corporation in substantially the same
proportion as their ownership of securities immediately before
any such transaction; and (ii) the individuals constituting an
Incumbent Board immediately prior to such merger,
consolidation or reorganization constitute at least a majority
of the Board of the applicable surviving corporation.
"CHARGES" means all national, federal, state, county, city,
municipal and/or other governmental (or any instrumentality, division,
agency, body or department thereof, including, without limitation, the
PBGC) taxes, levies, assessments, charges, liens, claims or encumbrances
upon and/or relating to Borrower's Liabilities, Borrower's business,
income and/or gross receipts.
"CODE" means the Internal Revenue Code of 1986, as amended
from time to time.
"COMMERCIAL L/C MARGIN" means sixty-two and one-half (62.5)
basis points; PROVIDED, HOWEVER, that as long as the ratio of Total Debt
to the sum of Total Debt and Consolidated Net Worth does not exceed .35
to 1.00, Commercial L/C Margin shall mean fifty-five (55) basis points.
"COMMON STOCK" means, as applied to any corporation, shares of
such corporation which shall not be entitled to preference or priority
over any other shares of such corporation in respect of either the
payment of dividends or the distribution of assets upon liquidation.
"COMPUTATION PARAGRAPHS" shall have the meaning assigned to
such term in PARAGRAPH 7A(iii).
"CONSOLIDATED INTEREST EXPENSE" means, with respect to any
period, the total consolidated interest expense of Borrower and its
Restricted Subsidiaries for such period determined in accordance with
GAAP (calculated (i) to include imputed interest on Capitalized Lease
Obligations pursuant to GAAP, the amount of the unused portion fee
described in PARAGRAPH 4A(14) and the amount of the unused Term Loan B
Commitment fee described in PARAGRAPH 6L, and (ii) to exclude
amortization of debt discount to the extent not actually paid in cash).
"CONSOLIDATED NET WORTH" means, at any date, (i) the
shareholders' equity (or deficit) of Borrower and its Restricted
Subsidiaries, as the same would be shown on a consolidated balance sheet
of Borrower and its Restricted Subsidiaries at such date prepared in
accordance with GAAP, MINUS (ii) the aggregate amount of Investments in
Unrestricted Subsidiaries which are deemed not to be Investments for
purposes of PARAGRAPH 8C(3) as a result of clause (vii)(b) thereof.
4
<PAGE>
"CONVERSION DATE" means the Business Day on which a Base Rate
Loan is converted to a LIBOR Loan.
"CURRENT DEBT" means, with respect to any Person, all
Indebtedness of such Person for borrowed money which by its terms or by
the terms of any instrument or agreement relating thereto matures on
demand or within one year from the date of the creation thereof,
PROVIDED that Indebtedness outstanding under a revolving credit or
similar agreement which obligates the lender or lenders to extend credit
over a period of more than one year shall constitute Current Debt and
not Funded Debt.
"DEBT" means Current Debt and Funded Debt.
"DEFAULT RATE" shall have the meaning assigned to such term in
PARAGRAPHS 3C(iii), 5C AND 6C(iii) hereof.
"EARLY TERMINATION DATE" means the date, pursuant to PARAGRAPH
10B, upon which, whether by notice or by right hereunder, Lenders'
obligation to extend credit hereunder is terminated.
"EBIT" means, with respect to any period, Consolidated Net
Income for such period (i) PLUS Consolidated Interest Expense for such
period, (ii) PLUS or MINUS (as appropriate) any provision for income
taxes for such period, all in accordance with GAAP.
"ENVIRONMENTAL LAWS" means all statutes, ordinances, orders,
rules, regulations, plans, policies, or decrees relating to (i)
protection of the environment, including, without limitation, those
relating to fines, injunctions, penalties, damages, contribution, cost
recovery compensation, losses or injuries resulting from the Release or
threatened Release of Hazardous Materials, (ii) the generation, use,
handling, transportation, storage, treatment or disposal of Hazardous
Materials or (iii) occupational safety and health, industrial hygiene or
the protection of human, plant or animal health or welfare related to
Hazardous Materials, in any manner applicable to Borrower or an
Affiliate (including any Restricted Subsidiary) or any of their
respective properties, including, without limitation, the Comprehensive
Environmental Response, Compensation, and Liability Act (42 U.S.C.
Section 9601 ET SEQ.), the Hazardous Materials Transportation Act (49
U.S.C. Section 1801 ET SEQ.), the Resource Conservation and Recovery Act
(42 U.S.C. Section 6901 ET SEQ.), the Federal Water Pollution Control
Act (33 U.S.C. Section 1251 ET SEQ.), the Clean Air Act(42 U.S.C.
Section 7401 ET SEQ.), the Toxic Substances Control Act (15 U.S.C.
Section 2601 ET SEQ.), the Occupational Safety and Health Act (29 U.S.C.
Section 651 ET SEQ.) and the Emergency Planning and Community
Right-To-Know Act (42 U.S.C. Section 11001 ET SEQ.), each as amended or
supplemented, and any analogous present or future local, state and
federal statutes and regulations promulgated pursuant thereto, each as in
effect as of the date of determination.
5
<PAGE>
"ERISA" means the Employee Retirement Income Security Act of
1974, as the same may be amended from time to time and, unless the
context otherwise requires, the regulations promulgated thereunder and
any successor statute.
"ERISA AFFILIATE" means each trade or business (whether or not
incorporated) which together with Borrower, a Subsidiary, or an
Affiliate would be deemed to be a "single employer" within the meaning
of SECTION 4001(b) of ERISA or, where applicable, would be treated as
"single employer" under SECTION 412(c)(11) of the Code.
"ERISA TERMINATION EVENT" means (i) a "Reportable Event"
described in SECTION 4043 of ERISA and the regulations thereunder (other
than a "Reportable Event" not subject to the provision for 30-day notice
to the PBGC under such regulations), (ii) the withdrawal of Borrower or
any ERISA Affiliate from a Plan during a plan year in which it was a
"substantial employer," as defined in SECTION 4001(a) of ERISA,
including a cessation of operations that is treated as a withdrawal by a
"substantial employer" under SECTION 4062(e) of ERISA, (iii) the filing
of a notice of intent to terminate a Plan or the treatment of a Plan
amendment as a termination under SECTION 4041 of ERISA, (iv) the
institution of proceedings to terminate a Plan by the PBGC, (v) any
other event or condition which in the reasonable judgment of Borrower is
likely to constitute grounds under SECTION 4042 of ERISA for the
termination of, or the appointment of a trustee to or any ERISA
administer, any Plan, or (vi) the partial or complete withdrawal of
Borrower or any ERISA Affiliate from a Multiemployer Plan.
"EVENT OF DEFAULT" shall have the meaning assigned to such
term in PARAGRAPH 10A hereof.
"EXCESS INTEREST" shall have the meaning assigned to such term
in PARAGRAPHS 3K AND 6K hereof.
"FEDERAL FUNDS RATE" means, for any day, the rate per annum
(rounded upwards, if necessary, to the nearest 1/100 of 1%) equal to the
weighted average of the rates on overnight Federal funds transactions
with members of the Federal Reserve System arranged by Federal funds
brokers on such day, as published by the Federal Reserve Bank of
New York on the Business Day next succeeding such day, provided
that (i) if the day for which such rate is to be determined is not a
Business Day, the Federal Funds Rate for such day shall be such rate on
such transactions on the next preceding Business Day as so published on
the next succeeding Business Day, and (ii) if such rate is not so
published for any day, the Federal Funds Rate for such day shall be the
average rate charged to Agent on such day on such transactions as
determined by the Agent.
"FINANCIALS" means those financial statements of Borrower
heretofore or concurrently herewith delivered by or on behalf of
Borrower to Agent.
6
<PAGE>
"FUNDED DEBT" means with respect to any Person, all
Indebtedness of such Person which by its terms or by the terms of any
instrument or agreement relating thereto matures, or which is otherwise
payable or unpaid, more than one year from, or is directly or indirectly
renewable or extendable at the option of the debtor to a date more than
one year from, the date of the creation thereof, PROVIDED that
indebtedness outstanding under a revolving credit or similar agreement
which obligates the lender or lenders to extend credit over a period of
more than one year shall constitute Current Debt and not Funded Debt.
"GAAP" means generally accepted accounting principles as in
effect from time to time.
"GENERAL INTANGIBLES" means all choses in action, causes of
action and all other intangible property of Borrower of every kind and
nature now owned or hereafter acquired by Borrower, including, without
limitation, corporate and other business records, deposit accounts,
inventions, designs, patents, patent and trademark registrations and
applications, trademarks, trade names, trade secrets, goodwill,
copyrights registrations, licenses, franchises, deferred tax benefits,
tax refund claims, prepaid expenses, computer programs not included in
Capital, Property and Equipment on the annual audited financial
statements of Borrower, covenants not to compete, customer lists and
mailing lists, contract rights, indemnification rights, causes of
actions and any letters of credit, guarantee claims, security interests
or other security held by or granted to Borrower.
"GOVERNMENTAL AUTHORIZATION" means any permit, license,
authorization, plan, directive, consent order or consent decree of or
from any federal, state or local governmental authority, agency or court
having jurisdiction over Borrower or any Facility.
"GUARANTEE" means, with respect to any Person, any direct or
indirect liability, contingent or otherwise, of such Person with respect
to any indebtedness, lease, dividend or other obligation of another,
including, without limitation, any such obligation directly or
indirectly guaranteed, endorsed (otherwise than for collection or deposit
in the ordinary course of business) or discounted or sold with recourse
by such Person, or in respect of which such Person is otherwise directly
or indirectly liable, including, without limitation, any such obligation
in effect guaranteed by such Person through any agreement (contingent or
otherwise) to purchase, repurchase or otherwise acquire such obligation
or any security therefor, or to provide funds for the payment or
discharge of such obligation (whether in the form of loans, advances,
stock purchases, capital contributions or otherwise), or to maintain the
solvency or any balance sheet or other financial condition of the
obligor of such obligation, or to make payment for any products,
materials or supplies or for any transportation or service, regardless of
the non-delivery or non-furnishing thereof, in any such case if the
purpose or intent of such agreement is to provide assurance that such
obligation will be paid or discharged, or that
7
<PAGE>
any agreements relating thereto will be complied with, or that the
holders of such obligation will be protected against loss in respect
thereof. The amount of any Guarantee shall be equal to the
outstanding principal amount of the obligation guaranteed or such
lesser amount to which the maximum exposure of the guarantor shall have
been specifically limited.
"INDEBTEDNESS" means, with respect to any Person,
without duplication, (i) all items (excluding items of (a) contingency
reserves, (b) reserves for deferred income taxes, (c) deferred
compensation to the extent that such deferred compensation items are
fully funded by life insurance policies, (d) deferred rent, (e) post
retirement benefits liabilities determined in accordance with
Financial Accounting Standards Board Statement No. 106, and (f)
current liabilities for trade payables, tax and payroll obligations)
which in accordance with GAAP would be included in determining total
liabilities as shown on the liability side of a balance sheet of
such Person as of the date on which Indebtedness is to be determined
(including all Capitalized Lease Obligations, all obligations of such
Person under commodity purchase or option agreements or other commodity
price hedging arrangements, in each case whether contingent or matured
and all obligations of such Person under any foreign exchange
contract, currency swap agreement, interest rate swap, cap or collar
agreement or other similar agreement or arrangement designed to alter
the risks of that Person arising from fluctuations in currency values
or interest rates, in each case whether contingent or matured), (ii)
all indebtedness secured by any Lien on any property or asset owned or
held by such Person subject thereto, whether or not the indebtedness
secured thereby shall have been assumed, and (iii) all indebtedness
and other obligations of others with respect to which such Person has
become liable by way of Guarantee.
"INTEREST COVERAGE RATIO" means, with respect to any
period, the ratio of (i) EBIT for such period to (ii) Consolidated
Interest Expense for such period.
"INTEREST PERIOD" means, with respect to the LIBOR
Loans, the period used for the computation of interest commencing on
the date the relevant LIBOR Loan is effected by conversion or continued
and concluding on the date one, two or three months thereafter, at
Borrower's option, with any subsequent Interest Period commencing on
the last day of the immediately preceding Interest Period and
concluding one, two or three months thereafter, at Borrower's option;
PROVIDED, HOWEVER, that no Interest Period for any LIBOR Loan may
extend beyond the applicable Maturity Date. Each Interest Period for
a LIBOR Loan which would otherwise end on a day which is not a Business
Day shall end on the next succeeding Business Day (unless such next
succeeding Business Day is the first Business Day of a calendar month,
in which case such Interest Period shall end on the next preceding
Business Day).
"INVESTMENT" shall have the meaning assigned to such term in
PARAGRAPH 8C(3) hereof.
8
<PAGE>
"L/C ISSUER" means any Revolving Credit Lender selected
by Agent and Borrower, PROVIDED that as to any Letters of Credit issued
by LNB pursuant to the Original Credit Agreement and outstanding on the
date of this Agreement, LNB shall be the L/C Issuer. In the event more
than one Revolving Credit Lender issues Letters of Credit, L/C Issuer
shall mean each such issuer.
"LENDER(S)" means each Lender listed on the signature pages
hereof and any future holder of all or any portion of the Notes.
"LETTER OF CREDIT OBLIGATIONS" means all outstanding
obligations incurred by the Revolving Credit Lenders or L/C Issuer at
the request of Borrower, whether direct or indirect, contingent or
otherwise, due or not due, in connection with the issuance by L/C
Issuer of Letters of Credit. The amount of such Letter of Credit
Obligations shall equal the maximum amount which may be payable by the
Revolving Credit Lenders or L/C Issuer thereupon or pursuant thereto.
"LETTERS OF CREDIT" means commercial or standby letters
of credit issued by L/C Issuer at the request and for the account of
Borrower for which the Revolving Credit Lenders or L/C Issuer has
incurred Letter of Credit Obligations pursuant thereto.
"LIBOR LOAN" means a Loan bearing interest based upon the
Adjusted LIBOR Rate.
"LIBOR MARGIN" means one and one-quarter percent
(1.25%); PROVIDED, HOWEVER, that as long as the ratio of Total Debt to
the sum of Total Debt and Consolidated Net Worth does not exceed .35 to
1.00, LIBOR Margin shall mean one and one tenth percent (1.10%).
"LIBOR RATE" means for each Interest Period the rate of
interest per annum as determined by Agent (rounded upward, if
necessary, to the nearest whole multiple of one-sixteenth of one
percent (1/16th of 1%) or such other integral multiple thereof at which
interest rates for LIBOR-based loans are commonly quoted to major banks
in the interbank eurodollar market) at which deposits of United States
Dollars in immediately available and freely transferable funds
would be offered at 11:00 a.m., Chicago time, three (3) Business Days
prior to the commencement of such Interest Period by the principal
offshore funding office of Agent to major banks in the interbank
eurodollar market upon request by such major banks for a period equal
to such Interest Period and in an amount equal to the principal amount
of the LIBOR Loan to be outstanding during such Interest Period. Each
determination of LIBOR made by Agent in accordance with this paragraph
shall be conclusive and binding on Borrower except in the case of
manifest error.
"LIEN" means, with respect to any asset, any
mortgage, pledge, security interest, encumbrance, lien or charge of any
kind (including any agreement to give any
9
<PAGE>
of the foregoing, any conditional sale or other title retention agreement,
any lease in the nature thereof and the filing of or agreement to give any
financing statement under the Uniform Commercial Code in effect in any
jurisdiction) or any other type of preferential arrangement for the purpose,
or having the effect, of protecting a creditor against loss or securing the
payment or performance of an obligation.
"LNB" means LaSalle National Bank.
"LOAN" or "LOANS" means and includes all Base Rate Loans and LIBOR
Loans made under the Revolving Credit Commitment and under the Term Loan B
Commitment, and also means and includes Term Loan A, unless the context in
which such term is used shall otherwise require.
"LOAN DOCUMENTS" means this Agreement and the Other Agreements.
"MATURITY DATE" means October 31, 1998 with respect to the Revolving
Credit Commitment, July 1, 2000 with respect to Term Loan A, and December 31,
1998 with respect to the Term Loan B Commitment.
"MAXIMUM RATE" shall have the meaning assigned to such term in
PARAGRAPHS 3K AND 6K hereof.
"MULTIEMPLOYER PLAN" means a plan defined as such in SECTION
4001(a)(3) of ERISA to which contributions are currently being made or have
been made by Borrower or an ERISA Affiliate.
"NOTE AGREEMENT" means that certain Note Agreement dated as of June
21, 1991, as amended by a certain letter amendment dated July 21, 1995, and
as further amended from time to time, by and among the Borrower and certain
parties signatory thereto for the issuance of $55,000,000 of 11.52% Senior
Term Notes due June 30, 1998, as fully set forth in EXHIBIT 1A(i), which is
hereby incorporated herein by this reference.
"NOTES" means the Revolving Credit Notes, the Term Loan A Note and
the Term Loan B Notes.
"OFFSET SHARING AGREEMENT" means the Offset Sharing Agreement dated
as of June 21, 1994, among The Prudential Insurance Company of America,
Lenders and the other lenders named as parties thereto (as such agreement may
be amended from time to time) as well as any similar agreement which
hereafter may be entered into by Lenders, the holders of the Senior Notes,
the holders of the Shelf Notes and other lenders to Borrower.
10
<PAGE>
"OTHER AGREEMENTS" means all agreements, instruments and documents,
including, without limitation, guaranties, mortgages, deeds of trust,
pledges, powers of attorney, consents, assignments, contracts, notices,
security agreements, leases, financing statements and all other written
matter heretofore, now and/or from time to time hereafter executed by
and/or on behalf of Borrower and delivered to Lenders including, without
limitation, the Notes and the Offset Sharing Agreement.
"OVER ADVANCE" shall have the meaning assigned to such term in
PARAGRAPH 4A(11) hereof.
"PBGC" means the Pension Benefit Guaranty Corporation and any entity
succeeding to any or all of its functions under ERISA.
"PERCENTAGE(S) OF EARNINGS CAPACITY TRANSFERRED" means, with respect
to each asset Transferred pursuant to clause (iii) of PARAGRAPH 8C(6), the
ratio (expressed as a percentage) of (i) Consolidated Net Income produced by,
or attributable to, such asset during the four fiscal quarter period most
recently ended prior to the effective date of such Transfer to (ii) Average
Consolidated Net Income.
"PERCENTAGE(S) OF TOTAL ASSETS TRANSFERRED" means, with respect to
each asset Transferred pursuant to clause (iii) of PARAGRAPH 8C(6), the ratio
(expressed as a percentage) of (i) the greater of such asset's fair market
value or net book value on the date of Transfer to (ii) the book value of the
consolidated assets of Borrower and Restricted Subsidiaries as of the last
day of the fiscal quarter immediately preceding the date of Transfer.
"PERMITTED INVESTMENTS" means Investments permitted by clauses (i)
to (viii), inclusive of PARAGRAPH 8(C)(3) hereof.
"PERMITTED LIENS" shall have the meaning assigned to such term in
PARAGRAPH 8(C)(1) hereof.
"PERMITTED SELLER CURRENT DEBT" shall mean Seller Current Debt that
(i) does not exceed $5,000,000 in aggregate outstanding principal amount,
either individually or collectively with all other Seller Current Debt
incurred in connection with the same purchase of an operating business, and
(ii) does not collectively with all other outstanding Seller Current Debt
exceed $10,000,000 in aggregate outstanding principal amount.
"PERSON" means and includes an individual, a partnership, a joint
venture, a corporation (whether or not for profit), a trust, an
unincorporated organization, a government or any department or agency
thereof or any other entity or organization.
"PLAN" means any single-employer plan, as defined in SECTION
4001(a)(15) of ERISA, which is subject to Title IV of ERISA, which is
maintained for employees of
11
<PAGE>
Borrower or an ERISA Affiliate, or to which Borrower or any ERISA Affiliate
has any liability.
"PRIORITY DEBT" means, as of any time of determination thereof, (i)
Debt of any Restricted Subsidiary, other then Debt owed to Borrower or a
Wholly-Owned Restricted Subsidiary, and (ii) Debt of Borrower secured by any
Lien.
"PRIVATE SHELF AGREEMENT" means the Private Shelf Agreement dated as
of July 25, 1995, between Borrower, on the one hand, and The Prudential
Insurance Company of America and each affiliate thereof which becomes a party
thereto, on the other hand, as amended by the Amendment to Private Shelf
Agreement dated July 11, 1997.
"REIMBURSEMENT AMOUNT" shall have the meaning assigned to such term
in PARAGRAPH 3L(e)(i) hereof.
"REQUIRED LENDERS" means Lenders (i) constituting a majority in
number of the Lenders and (ii) having more than sixty-six and two-thirds
percent (66-2/3%) of the aggregate amount of the Revolving Credit Commitments
and the Term Loan B Commitments, or, if the Revolving Credit and Term Loan B
Commitments shall have terminated, holding more than sixty-six and two-thirds
percent (66-2/3%) of the aggregate outstanding amount of the Revolving Credit
Loans, the Letter of Credit Obligations and the Term Loan B Loans.
"REQUIRED PAYMENT" shall have the meaning assigned to such term in
PARAGRAPH 4A(5) hereof.
"REQUIRED REVOLVING CREDIT LENDERS" means the Revolving Credit
Lenders having more than sixty-six and two-thirds percent (66-2/3%) of the
aggregate amount of the Revolving Credit Commitments, or, if the Revolving
Credit Commitments shall have terminated, Required Revolving Credit Lenders
shall mean the Revolving Credit Lenders holding more than sixty-six and
two-thirds percent (66-2/3%) of the aggregate outstanding amount of the
Revolving Credit Loans and the Letter of Credit Obligations.
"REQUIRED TERM LOAN A LENDERS" means the Term Loan A Lenders having
more than sixty-six and two-thirds percent (66-2/3%) of the aggregate amount
of the Term Loan A Commitments, or, if the Term Loan A Commitments shall have
terminated, Required Term Loan A Lenders shall mean the Term Loan A Lenders
holding more than sixty-six and two-thirds percent (66-2/3%) of the unpaid
principal amount of the Term Loan A Loans.
"REQUIRED TERM LOAN B LENDERS" means the Term Loan B Lenders having
more than sixty-six and two-thirds percent (66-2/3%) of the aggregate amount
of the Term Loan B Commitments, or, if the Term Loan B Commitments shall have
12
<PAGE>
terminated, Required Term Loan B Lenders shall mean the Term Loan B Lenders
holding more than sixty-six and two-thirds percent (66-2/3%) of the unpaid
principal amount of the Term Loan B Loans.
"RESERVE PERCENTAGE" means, for the purpose of computing the
Adjusted LIBOR Rate, the reserve requirement imposed by the Board of
Governors of the Federal Reserve System (or any successor) under Regulation D
on Eurocurrency Liabilities (as such term is defined in Regulation D) for the
applicable Interest Period as of the first day of such Interest Period, but
subject to any amendments of such reserve requirement by such Board or its
successor, and taking into account any transitional adjustments thereto
becoming effective during such Interest Period. For purposes of this
definition, LIBOR Loans shall be deemed to be Eurocurrency Liabilities as
defined in Regulation D without benefit of or credit for prorations,
exemptions or offsets under Regulation D.
"RESPONSIBLE OFFICER" means the Chief Executive Officer, Chief
Operating Officer, Chief Financial Officer or Chief Accounting Officer of
Borrower.
"RESTRICTED INVESTMENTS" means Investments made by Borrower or any
Restricted Subsidiary other than Investments permitted by clauses (i) to
(viii), inclusive, of PARAGRAPH 8C(3).
"RESTRICTED SUBSIDIARY" means any Subsidiary organized under the laws
of any state of the United States of America, Puerto Rico, Canada, or any
province of Canada, which conducts substantially all of its business in the
United States of America, Puerto Rico or Canada, and at least 80% of the
total combined voting power of all classes of Voting Stock of which shall, at
the time as of which any determination is being made, be owned by Borrower
either directly or through Restricted Subsidiaries, PROVIDED that no such
Subsidiary shall be a Restricted Subsidiary unless (i) it is listed as a
Restricted Subsidiary in EXHIBIT 1A(ii) attached hereto or (ii)(a) the Board
of Directors of Borrower hereafter designates such Subsidiary a Restricted
Subsidiary, (b) notice of such designation is given by Borrower to the holders
of the Notes with the next succeeding delivery of financial statements
pursuant to PARAGRAPH 7A and (c) on the date of and immediately after giving
effect to such designation, no Event of Default shall have occurred and be
continuing.
"REVOLVING CREDIT AVAILABILITY" means the positive difference, if
any, between (i) $25,000,000 and (ii) the sum of the aggregate principal
amounts outstanding in respect of the Revolving Credit Loans plus the
outstanding Letter of Credit Obligations.
"REVOLVING CREDIT COMMITMENT" means, as to each Lender, the
obligations of such Lender to make Revolving Credit Loans in an aggregate
amount at any one time outstanding up to but not exceeding the amount set
opposite such Lender's name on the respective signature pages hereof under
the caption "Revolving Credit Commitment".
13
<PAGE>
"REVOLVING CREDIT LENDERS" means the holders of the Revolving Credit
Notes.
"REVOLVING CREDIT LOANS" means the Loans made under the Revolving
Credit Commitment.
"REVOLVING CREDIT NOTES" means those certain Replacement Revolving
Credit Notes dated as of the date of this Agreement in the original
aggregate maximum principal amount of $25,000,000 made payable by Borrower to
the order of the Revolving Credit Lenders, as such Revolving Credit Notes may
be amended, modified or supplemented from time to time, and together with any
renewals thereof, and exchanges or substitutions therefor.
"REVOLVING CREDIT PERCENTAGE" means the percentage obtained by
dividing (a) the Revolving Credit Commitment of that Lender by (b) the Total
Revolving Credit Commitment, as such percentage may be adjusted by
assignments permitted pursuant to PARAGRAPH 12E.
"REVOLVING CREDIT TERMINATION DATE" means the earliest to occur of
(i) the Maturity Date or (ii) the Early Termination Date.
"SECURITIES LAWS FILINGS" shall have the meaning assigned to such
term in PARAGRAPH 9U hereof.
"SELLER CURRENT DEBT" shall mean Current Debt of the Company or a
Restricted Subsidiary that is (i) incurred in connection with the purchase
through asset purchase, stock purchase, merger or consolidation of any
operating business, (ii) is payable to the seller(s) of such business or to
the shareholders or other equity holders of the seller(s) of such business
and (iii) represents deferred purchase price for the purchases business.
"SENIOR NOTES" means the notes issued by Borrower pursuant to the
Note Agreement.
"SHELF NOTES" means the notes issued by Borrower pursuant to the
Private Shelf Agreement.
"STANDBY L/C MARGIN" means one and one-quarter percent (1.25%);
PROVIDED, HOWEVER, that as long as the ratio of Total Debt to the sum of
Total Debt and Consolidated Net Worth does not exceed .35 to 1.00, Standby
L/C Margin shall mean one and one tenth percent (1.10%).
"STOCK" means all shares, interests, participation or other
equivalents, however designated, of or in a corporation, whether or not
voting, including but not
14
<PAGE>
limited to common stock, warrants, options, preferred stock, convertible
debentures, and all agreements, instruments and documents convertible,
in whole or in part, into any one or more or all of the foregoing.
"SUBSIDIARY" means any corporation, association or other
business entity which is required to be consolidated in the financial
statements of Borrower in accordance with GAAP.
"TANGIBLE NET WORTH" means, at any time, Borrower's net worth,
as determined in accordance with GAAP, PLUS, to the extent not included
in assets, the amount of the cash surrender value of life insurance
policies maintained by Borrower on the lives of executive officers,
PLUS the amount of Debt permitted by this Agreement which is
subordinated to Borrower's Liabilities in a manner and form satisfactory
to the Agent and the Required Lenders in their sole discretion, as to
right and time of payment and as to any rights and remedies thereunder,
MINUS the sum of (i) the amount of any General Intangibles, (ii) amounts
due from Affiliates and (iii) the amount of Investments in Unrestricted
Subsidiaries.
"TERM LOAN A" shall have the meaning assigned to such term in
PARAGRAPH 5A hereof.
"TERM LOAN A LENDER" means the holder of the Term Loan A Note.
"TERM LOAN A NOTE" means that certain Replacement Term Loan A
Note dated as of the date of this Agreement in the principal amount of
$10,000,000 made payable by Borrower to the order of LNB, as such Term
Loan A Note may be amended, modified or supplemented from time to time,
and together with any renewals thereof, and exchanges or substitutions
therefor.
"TERM LOAN B" means the Loans made under the Term Loan B
Commitment.
"TERM LOAN B COMMITMENT" means, as to each Lender, the
obligations of such Lender to make Term Loan B Loans in an aggregate
amount at any time outstanding up to but not exceeding the amount set
opposite such Lender's name on the respective signature pages hereof
under the caption "Term Loan B Commitment".
"TERM LOAN B LENDERS" means the holders of the Term Loan B
Notes.
"TERM LOAN B NOTES" means those certain Replacement Term
Loan B Notes dated as of the date of this Agreement in the original
aggregate maximum principal amount of $15,000,000 made payable by
Borrower to the order of the Term Loan B Lenders, as such Term Loan B
Notes may be amended, modified or supplemented from
15
<PAGE>
time to time, and together with any renewals thereof, and exchanges or
substitutions therefor.
"TERM LOAN B PERCENTAGE" means the percentage obtained by
dividing (a) the Term Loan B Commitment of that Lender by (b) the Total
Term Loan B Commitment, as such percentage may be adjusted by
assignments permitted pursuant to PARAGRAPH 12E.
"TERM LOAN B TERMINATION DATE" means the earliest to occur of
(i) the Maturity Date or (ii) the Early Termination Date.
"TOTAL DEBT" means, as of any time of determination thereof,
the aggregate amount of (i) all Funded Debt of Borrower and Restricted
Subsidiaries, PLUS (ii) the average outstanding daily balance of all
Current Debt of Borrower and Restricted Subsidiaries during the twelve
calendar month period most recently ended as of any time of
determination, MINUS (iii) Debt of Restricted Subsidiaries owed to
Borrower or a Wholly-Owned Restricted Subsidiary.
"TOTAL REVOLVING CREDIT COMMITMENT" means the sum of the
commitments of all Revolving Credit Lenders with respect to the
Revolving Credit Commitment.
"TOTAL TERM LOAN B COMMITMENT" means the sum of the
commitments of all Term Loan B Lenders with respect to the Term Loan B
Commitment.
"TRANSFER" means, with respect to any item, the sale,
exchange, conveyance, lease, transfer or other disposition of such item.
"TRANSFEREE" means any direct or indirect transferee of all or
any part of any Senior Note purchased by any Purchaser under the Note
Agreement.
"UNRESTRICTED SUBSIDIARY" means any Subsidiary other than a
Restricted Subsidiary. No Subsidiary which is or becomes a Restricted
Subsidiary shall at any time thereafter become or be an Unrestricted
Subsidiary.
"VOTING STOCK" means any shares of Stock (or equivalent
interests) of Borrower or any Subsidiary whose holders are entitled
under ordinary circumstances to vote for the election of directors (or
persons performing similar functions) of Borrower or such Subsidiary
(irrespective of whether at the time Stock of any other class or classes
(or equivalent interests) shall have or might have voting power by
reason of the happening of any contingency).
"WHOLLY-OWNED RESTRICTED SUBSIDIARY" means a Restricted
Subsidiary, all the outstanding shares (other than directors' qualifying
shares, if required by law) of
16
<PAGE>
every class of stock of which are at the time owned by Borrower or by
one or more Wholly-Owned Restricted Subsidiaries.
1B. CERTAIN TERMS. Unless otherwise specifically provided herein, any
accounting term used in this Agreement shall have the meaning customarily
given such term in accordance with GAAP, and all financial computations
hereunder shall be computed in accordance with GAAP consistently applied.
That certain items or computations are explicitly modified by the phrase
"in accordance with GAAP" shall in no way be construed to limit the
foregoing. If any "Accounting Changes" (as defined below) occur and such
changes result in a change in the calculation of the financial covenants,
standards or terms used in the Agreement or any other Loan Document, then
Borrower, Agent and Lenders agree to enter into negotiations in order to
amend such provisions of this Agreement so as to equitably reflect such
Accounting Changes with the desired result that the criteria for evaluating
Borrower's and its Restricted Subsidiaries' financial condition shall be the
same after such Accounting Changes as if such Accounting Changes had not been
made; PROVIDED, however, that the agreement of Required Lenders to any
required amendments of such provisions shall be sufficient to bind all
Lenders. "ACCOUNTING CHANGES" means (a) changes in accounting principles
required by the promulgation of any rule, regulation, pronouncement or
opinion by the Financial Accounting Standards Board of the American Institute
of Certified Public Accountants (or successor thereto or any agency with
similar functions), (b) changes in accounting principles concurred in by
Borrower's certified public accountants; (c) purchase accounting adjustments
under A.P.B. 16 and/or 17 and EITF 88-16, and the application of the
accounting principles set forth in FASB 109, including the establishment of
reserves pursuant thereto and any subsequent reversal (in whole or in part)
of such reserves; and (d) the reversal of any reserves established as a
result of purchase accounting adjustments. All such adjustments resulting
from expenditures made subsequent to June 21, 1994 (including capitalization
of costs and expenses or payment of liabilities prior thereto) shall be
treated as expenses in the period the expenditures are made and deducted as
part of the calculation of EBIT in such period. If Agent, Borrower and
Required Lenders agree upon the required amendments, then after appropriate
amendments have been executed and the underlying Accounting Change with
respect thereto has been implemented, any reference to GAAP contained in this
Agreement or in any other Loan Document shall, only to the extent of such
Accounting Change, refer to GAAP, consistently applied after giving effect to
the implementation of such Accounting Change. If Agent, Borrower and Required
Lenders cannot agree upon the required amendments within thirty (30) days
following the date of implementation of any Accounting Change, then all
financial statements delivered and all calculations of financial covenants and
other standards and terms in accordance with this Agreement and the other
Loan Documents shall be prepared, delivered and made without regard to the
underlying Accounting Change. Any terms used in this Agreement which are not
specifically defined herein shall have the meaning given to them in the Note
Agreement.
17
<PAGE>
2 REVOLVING CREDIT LOANS: COMMITMENTS AND BORROWING PROCEDURES
2A. REVOLVING CREDIT COMMITMENTS. On the terms and subject to the
conditions set forth in this Agreement, each Revolving Credit Lender,
severally and not jointly, agrees to make revolving credit available to
Borrower from time to time prior to the Revolving Credit Termination Date in
such aggregate amounts as Borrower may from time to time request but in no
event exceeding such Lender's Revolving Credit Percentage of the Total
Revolving Credit Commitment minus the outstanding Letter of Credit
Obligations, PROVIDED that in each year during the term hereof or any
extension or renewal thereof, the Total Revolving Credit Commitment shall not
exceed Twenty-Five Million Dollars ($25,000,000), and PROVIDED FURTHER that
until the Note Agreement and the Private Shelf Agreement are amended to
permit Current Debt of $25,000,000 and the Offset Sharing Agreement is
amended to reflect this Agreement, the Total Revolving Credit Commitment
shall not exceed Twenty Million Dollars ($20,000,000). The Total Revolving
Credit Commitment shall be available to Borrower by means of the Revolving
Credit Loans, it being understood that the Revolving Credit Loans may be
repaid and used again during the period from the date hereof to and including
the Revolving Credit Termination Date, at which time the Revolving Credit
Commitments shall expire.
2B. BORROWING PROCEDURES UNDER THE REVOLVING CREDIT COMMITMENT.
Borrower shall give Agent irrevocable telephonic notice, written notice or
telecopied notice by no later than 12:00 p.m., Chicago time, on the date it
requests to make a Revolving Credit Loan hereunder if a Base Rate Loan, or
three (3) Business Days prior to the date it requests a Revolving Credit Loan
hereunder if a LIBOR Loan. Each such notice shall be effective upon receipt
by Agent and shall specify the date of the Revolving Credit Loan (which shall
be a Business Day), the amount of such Revolving Credit Loan, whether the
Revolving Credit Loan is a Base Rate Loan or LIBOR Loan and, with respect to
a LIBOR Loan, the Interest Period applicable thereto. Borrower shall give
Agent irrevocable telephonic notice (which notice shall be promptly confirmed
in writing) no later than 10:00 a.m., Chicago time, three (3) Business Days
prior to the date that it requests Agent to effect a conversion from a Base
Rate Loan to a LIBOR Loan, including a reborrowing as provided in
PARAGRAPH 3E. Borrower agrees that Agent may rely on any notice given by any
person it reasonably believes to be an authorized officer of Borrower without
the necessity of independent investigation. Each borrowing shall be on a
Business Day.
3 REVOLVING CREDIT LOANS: NOTES AND INTEREST
3A. REVOLVING CREDIT NOTES. The Revolving Credit Loans made by each
Revolving Credit Lender under the Revolving Credit Commitment shall be
evidenced by a single promissory note (herein, as the same may be amended,
modified or supplemented from time to time, and together with any renewals
thereof or exchanges or substitutions therefor, collectively called the
"Revolving Credit Notes") substantially in the form set forth in EXHIBIT 3A,
with appropriate insertions, dated the date hereof, payable to the order of
such Revolving Credit Lender in a principal amount not to exceed each such
Revolving Credit Lender's Revolving Credit Percentage of the Total Revolving
Credit Commitment. The unpaid principal amount of
18
<PAGE>
the Revolving Credit Loans shall bear interest and be due and payable as
provided in this Agreement and the Revolving Credit Notes. Payments to be
made by Borrower under the Revolving Credit Notes shall be made at the time,
in the amounts and upon the terms set forth herein and therein.
3B. RECORDATION. The date and amount of each Revolving Credit Loan
made by each Revolving Credit Lender, the interest rate and the date and
amount of each repayment of principal received by each Revolving Credit
Lender shall be recorded by such Revolving Credit Lender in its records. The
aggregate unpaid principal amount so recorded shall be prima facia evidence
of the principal amount owing and unpaid on the Revolving Credit Notes. The
failure to so record any such amount or any error in so recording any such
amount shall not limit or otherwise affect the obligations of Borrower
hereunder or under the Revolving Credit Notes to repay the principal amount
of the Revolving Credit Loans together with all interest accrued thereon.
3C. INTEREST RATES; DEFAULT RATE.
(i) Borrower hereby promises to pay interest on the unpaid
principal amount of each Revolving Credit Loan at a rate per annum equal
to the Base Rate from time to time in effect for the period commencing
on the date of such Revolving Credit Loan until such Base Rate Loan is
(A) converted to a LIBOR Loan pursuant to PARAGRAPH 3E hereof, or (B)
paid in full. Accrued interest on the outstanding principal amount of
Revolving Credit Loans shall be payable (i) monthly in arrears on the
last Business Day of each calendar month in the case of a Base Rate
Loan, (ii) on the last day of the Interest Period therefor in the case
of a LIBOR Loan, (iii) upon conversion of any Revolving Credit Loan
into a LIBOR Loan (such amount of accrued interest then coming due to be
calculated based on the principal amount of the Revolving Credit Loan so
converted), and (iv) upon the Revolving Credit Termination Date. After
the Revolving Credit Termination Date or Conversion Date, as applicable,
accrued interest on such Revolving Credit Loans shall be payable on
demand.
(ii) Each LIBOR Loan shall be in a minimum amount of
$100,000 or such greater amount which is an integral multiple of
$100,000 and shall bear interest on the unpaid principal amount thereof
from the date such LIBOR Loan is effected by conversion or continued
until maturity (whether by acceleration or otherwise) at a rate per annum
equal to the sum of the LIBOR Margin plus the Adjusted LIBOR Rate, with
such interest payable in accordance with PARAGRAPH 3C(i) above.
(iii) If any payment of principal on any Revolving Credit
Loan is not made when due, such Revolving Credit Loan shall bear
interest from the date such payment was due until paid in full, payable
on demand, at a rate per annum (the "Default Rate") equal to the sum of
three percent (3%) plus the applicable interest rate from time to time
in effect.
19
<PAGE>
3D. COMPUTATION OF INTEREST. Interest on each Revolving Credit Loan
shall be computed for the actual number of days elapsed on the basis of a
360-day year. The interest rate applicable to each Base Rate Loan shall
change simultaneously with each change in such Base Rate. Upon conversion of
less than all the aggregate principal amount of Base Rate Loans outstanding
at any one time to a LIBOR Loan, interest on the remaining principal amount
of Base Rate Loans outstanding after such conversion shall be calculated
assuming such LIBOR Loan replaced a corresponding amount of Base Rate Loans
bearing interest at the Base Rate applicable thereto immediately prior to such
conversion such that the remaining principal amount of Base Rate Loans
outstanding after such conversion shall bear interest at the Base Rate which
would have been applicable to such Base Rate Loans had no such conversion been
effected.
3E. CONVERSION AND REBORROWING OF LOANS.
(i) Provided that no Event of Default has
occurred and is continuing, Base Rate Loans may, subject to
PARAGRAPHS 2B AND 3C(ii) hereof, at any time be converted by
Borrower to LIBOR Loans, which LIBOR Loans shall mature and become
due and payable on the last day of the Interest Period applicable
thereto. Provided that no Event of Default has occurred and is
continuing, Borrower shall have the right, subject to the terms and
conditions of this Agreement, to reborrow through a new LIBOR Loan
in whole or in part, subject to PARAGRAPH 3C(ii), any LIBOR Loan
from any current Interest Period into a subsequent Interest Period,
provided that Borrower shall give Agent notice of the reborrowing
of any such LIBOR Loan as provided in PARAGRAPH 2B hereof.
(ii) In the event that (x) Borrower fails to
give notice pursuant to PARAGRAPH 2B hereof of the reborrowing of
any LIBOR Loan or fails to specify the Interest Period applicable
to such reborrowing or (y) an Event of Default has occurred and is
continuing at the time any such LIBOR Loan is to be reborrowed
hereunder, then such LIBOR Loan shall be automatically reborrowed
as a Base Rate Loan, subject to Paragraph 10B hereof if an Event of
Default has occurred and is continuing, unless the relevant LIBOR
Loan is paid in full on the last day of the then applicable
Interest Period.
3F. CHANGE OF LAW. Notwithstanding any other provisions of this
Agreement or the Revolving Credit Notes, if at any time any Lender shall
determine in good faith that any change in applicable law or regulation or in
the interpretation thereof makes it unlawful or impossible for such Lender
to effect a conversion of a Base Rate Loan into a LIBOR Loan or to continue
to maintain any LIBOR Loan, such Lender shall promptly give notice thereof
(together with an explanation of the reasons therefor) to Agent and Borrower,
and the obligation of such Lender to effect by conversion or continue such
LIBOR Loan under this Agreement shall terminate until it is no longer
unlawful or impossible for such Lender to effect by conversion or maintain
such LIBOR Loan. Upon the receipt of such notice, Borrower may elect to
either (i) pay or prepay, as the case may be, the outstanding principal
amount of any such LIBOR Loan, together with all interest accrued thereon and
all other amounts payable to the Revolving Credit Lenders under
20
<PAGE>
this Agreement, or (ii) convert the principal amount of such affected LIBOR
Loan to a Base Rate Loan available hereunder, subject to the terms and
conditions of this Agreement.
3G. UNAVAILABILITY OF DEPOSITS OR INABILITY TO ASCERTAIN THE LIBOR
RATE OR ADJUSTED LIBOR RATE. Notwithstanding any other provision of this
Agreement or the Revolving Credit Notes to the contrary, if prior to the
commencement of any Interest Period any Lender shall determine in good faith
(i) that deposits in the amount of any LIBOR Loan scheduled to be outstanding
are not available to such Lender in the relevant market or (ii) by reason of
circumstances affecting the relevant market, adequate and reasonable means do
not exist for ascertaining the LIBOR rate or Adjusted LIBOR Rate, then such
Lender shall promptly give notice thereof to Agent and Borrower, and the
obligation of such Lender to effect by conversion or continue any such LIBOR
Loan in such amount and for such Interest Period shall terminate until
deposits in such amount and for the Interest Period selected by Borrower
shall again be readily available in the relevant market and adequate and
reasonable means exist for ascertaining the LIBOR rate or Adjusted LIBOR
Rate, as the case may be. Upon the giving of such notice, Borrower may elect
to either (i) pay or prepay, as the case may be, the outstanding principal
amount of any such LIBOR Loan, together with all interest accrued thereon
and all other amounts payable to the Revolving Credit Lenders under this
Agreement or (ii) convert the principal amount of such affected LIBOR Loan to
a Base Rate Loan available hereunder, subject to all the terms and conditions
of this Agreement.
3H. YIELD PROTECTION, ETC.
(i) INCREASED COSTS. If (x) Regulation D of the
Board of Governors of the Federal Reserve System, or (y) the adoption
of any applicable law, treaty, rule, regulation or guideline, or any
change therein, or any change in the interpretation or administration
thereof by any governmental authority, central bank or comparable
agency charged with the interpretation or administration thereof, or
compliance by any Revolving Credit Lender or its lending branch with
any request or directive (whether or not having the force of law) of
any such authority, central bank or comparable agency,
(A) shall subject such Revolving Credit Lender, its
lending branch or any Revolving Credit Loan to any tax, duty,
change, stamp tax, fee, deduction, withholding or other
charge in respect of this Agreement, any Revolving Credit
Loan, the Revolving Credit Notes or the obligation of such
Revolving Credit Loan, or shall change the basis
of taxation of payments to such Revolving Credit Lender of the
principal of or interest on any Revolving Credit Loan or any
other amounts due under this Agreement in respect of any
Revolving Credit Loan or its obligation to make or maintain any
Revolving Credit Loan (except for changes in the rate of tax on
the overall net income of such Revolving Credit Lender imposed
by the federal, state or local jurisdiction in which such
Revolving Credit Lender's principal executive office or its
lending branch is located);
21
<PAGE>
(B) shall impose, modify or deem applicable any reserve
(including, without limitation, any reserve imposed by the Board
of Governors of the Federal Reserve System), special deposit or
similar requirement against assets of, deposits with or for the
account of, or credit extended by, any Revolving Credit Loan, the
Revolving Credit Notes or the obligation of such Revolving
Credit Lender to make or maintain any Revolving Credit Lender; or
(C) shall impose on any Revolving Credit
Lender any penalty with respect ot the foregoing or any other
condition affecting this Agreement, any Revolving Credit Loan,
the Revolving Credit Notes or the obligation of such Revolving
Credit Lender to make or maintain any Revolving Credit Loan;
and the result of any of the foregoing is to increase the
cost to (or to impose a cost on) any Revolving Credit
Lender of making or maintaining any Revolving Credit Loan,
or to reduce the amount of any sum received or receivable
by any Revolving Credit Lender under this Agreement or
under the Revolving Credit Notes with respect thereto, then
Agent shall notify Borrower after it receives final notice
of any of the foregoing and, within 45 days after demand by
Agent (which demand shall be accompanied by a statement
setting forth the basis of such demand), Borrower shall pay
directly to the applicable Revolving Credit Lender such
additional amount or amounts as will compensate such
Revolving Credit Lender on an after-tax basis for such
increased cost or such reduction.
(ii) CAPITAL ADEQUACY. If either (i) the introduction of or
any change in or change in the interpretation of any law or regulation
or (ii) compliance by any Revolving Credit Lender with any guideline or
request from any central bank or other governmental authority (whether or
not having the force of law) affects or would affect the amount of
capital required or expected to be maintained by such Revolving Credit
Lender or any corporation controlling such Revolving Credit Lender and
such Revolving Credit Lender determines that the amount of such capital
is increased solely by or solely based upon the existence of such
Revolving Credit Lender's commitment to lend hereunder and other
commitments of this type, then, upon demand by Agent, Borrower shall
immediately pay to the applicable Revolving Credit Lender, from
time to time as specified by the Revolving Credit Lender,
additional amounts sufficient to compensate such Revolving Credit
Lender on an after-tax basis in the light of such circumstances, to
the extent that such Revolving Credit Lender reasonably determines
such increase in capital to be allocable to the existence of such
Revolving Credit Lender's commitment to lend hereunder.
3I. FUNDING INDEMNITY. In the event any Revolving Credit Lender
shall incur any loss, cost or expense (including, without limitation, any
loss of profit and any loss, cost or expense incurred by reason of the
liquidation or re-employment of deposits or other funds acquired by such
Revolving Credit Lender to fund or maintain any LIBOR Loan or the relending
or reinvesting of such deposits or amounts paid or prepaid to such Revolving
Credit Lender) as a result of:
22
<PAGE>
(i) any payment of a LIBOR Loan on a date other
than the last day of the then applicable Interest Period;
(ii) any failure by Borrower to effect by
conversion or continue any LIBOR Loan on the date specified in the
notice given pursuant to PARAGRAPH 2B hereof;
(iii) any failure by Borrower to make any payment
of principal or interest when due on any LIBOR Loan, whether at
stated maturity, by acceleration or otherwise; or
(iv) the occurrence of any Event of Default;
then, upon the demand by Agent, Borrower shall pay to the applicable
Revolving Credit Lender such amount as will reimburse such Revolving Credit
Lender for such loss, cost or expense. If any Revolving Credit Lender makes
such a claim for compensation under this PARAGRAPH 3I, Agent shall provide to
Borrower a certificate setting forth the amount of such loss, cost or expense
in reasonable detail and such certificate shall be conclusive and binding on
Borrower as to the amount thereof except in the case of manifest error.
3J. DISCRETION OF LENDERS AS TO MANNER OF FUNDING. Notwithstanding any
provision of this Agreement to the contrary other than PARAGRAPH 3G, each
Lender shall be entitled to fund and maintain its funding of all or any part
of the Revolving Credit Loans in any manner it sees fit, it being understood,
however, that for the purposes of this Agreement all determinations hereunder
shall be made as if Lenders had actually funded and maintained each LIBOR
Loan during each Interest Period for such LIBOR Loan through the purchase of
deposits in the London Interbank Market having a maturity corresponding to
such Interest Period and bearing an interest rate equal to the Adjusted LIBOR
Rate for such Interest Period.
3K. INTEREST LAWS. Notwithstanding any provision to the contrary
contained in this Agreement or the Other Agreements, Borrower shall not be
required to pay, and neither Agent nor any Revolving Credit Lender shall be
permitted to collect, any amount of interest in excess of the maximum amount
of interest permitted by law ("Excess Interest"). If any Excess Interest is
provided for or determined by a court of competent jurisdiction to have been
provided for in this Agreement or in any of the Other Agreements, then in
such event: (a) the provisions of this Paragraph shall govern and control;
(b) Borrower shall not be obligated to pay any Excess Interest; (c) any Excess
Interest that Agent or any Revolving Credit Lender may have received herunder
shall be, at Agent's option, (i) applied as a credit against the outstanding
principal balance of Borrower's Liabilities or accrued and unpaid interest
(not to exceed the maximum amount permitted by law), (ii) refunded to the
payor thereof, or (iii) any combination of the foregoing; (d) the interest
rate(s) provided for herein shall be automatically reduced to the maximum
lawful rate allowed from time to time under applicable law (the "Maximum
Rate"), and this Agreement and the Other Agreements shall be deemed to have
been and shall be reformed and modified to reflect such reduction; and (e)
Borrower shall not have any action against Agent or any Revolving Credit
Lender for any damages arising out of the payment or collection of any Excess
Interest. Notwithstanding the foregoing, if for any period of time
23
<PAGE>
interest on any Borrower's Liabilities is calculated at the Maximum Rate
rather than the applicable rate under this Agreement, and thereafter such
applicable rate becomes less than the Maximum Rate, the rate of interest
payable on such Borrower's Liabilities shall remain at the Maximum Rate until
each Revolving Credit Lender shall have received the amount of interest
which such Revolving Credit Lender would have received during such period on
such Borrower's Liabilities had the rate of interest not been limited to the
Maximum Rate during such period.
3L. LETTERS OF CREDIT.
(a) Upon and subject to the terms and conditions hereinafter set
forth, L/C Issuer agrees to issue Letters of Credit, and each Revolving
Credit Lender agrees for itself only to incur, from time to time on
written request of Borrower to but excluding the Revolving Credit
Termination Date, Letter of Credit Obligations in respect of Letters of
Credit supporting obligations of Borrower arising in the ordinary course
of business; PROVIDED, HOWEVER, that the amount of all Letter of Credit
Obligations incurred by the Revolving Credit Lenders pursuant to this
PARAGRAPH 3L at any one time outstanding (whether or not then due and
payable) shall not exceed an amount equal to $5,000,000; and FURTHER
PROVIDED, HOWEVER, that no such Letter of Credit shall have an expiry
date later than the earlier of (i) one year following the date of
issuance thereof, or (ii) the Revolving Credit Termination Date. Subject
to the terms and conditions set forth in this Agreement, upon Borrower's
request that any Letter of Credit be issued, provided that the amount of
such Letter of Credit does not exceed the Revolving Credit Availability
at the time of the requested issuance of such Letter of Credit, L/C
Issuer shall issue the requested Letter of Credit and, upon the issuance
thereof, each Revolving Credit Lender shall incur Letter of Credit
Obligations with respect thereto ratably in accordance with its Revolving
Credit Percentage. Notwithstanding anything herein to the contrary, L/C
Issuer may decline to issue any Letter of Credit if the beneficiary or
the conditions of drawing are reasonably unacceptable to L/C Issuer or
if the purpose of issuance is illegal or is in contravention of any law,
rule, regulation or public policy or any judgment, decree, writ,
injunction, order or award of any arbitrator, court or governmental
authority. At the time of each request by Borrower that a Letter of
Credit be issued, L/C Issuer, at its option, may require Borrower to
execute and deliver to L/C Issuer an application for such Letter of
Credit in the form customarily prescribed by L/C Issuer to issue Letters
of Credit (the "Applications"). This Agreement supersedes any terms of
the Applications which are irrevocably inconsistent with the terms hereof.
(b) In the event that the Revolving Credit Lenders shall incur any
Letter of Credit Obligations pursuant hereto with respect to standby
Letters of Credit at the request of Borrower or on behalf of Borrower
hereunder, Borrower agrees to pay (i) to the L/C Issuer, solely for its
account, as compensation to the L/C Issuer for issuing such Letter of
Credit, a fee of 0.125% of the face amount of such standby Letter of
Credit and all customary administrative fees and charges customarily
imposed by the L/C Issuer for the administration of standby Letters of
Credit, and (ii) commencing with the calendar
24
<PAGE>
quarter in which such Letter of Credit Obligations are incurred by the
Revolving Credit Lenders and quarterly thereafter for each calendar quarter
during which such Letter of Credit Obligations shall remain outstanding, to
the Agent for the ratable benefit of the Revolving Credit Lenders, a fee in
an amount equal to the quotient of (x) the sum of the products of the daily
outstanding amount of such Letter of Credit Obligations on each day during
the previous calendar quarter, multiplied by a rate equal to the Standby L/C
Margin, divided by (y) 360. Fees payable in respect of Letter of Credit
Obligations shall be paid in arrears, on the first day of each calendar
quarter and on the Revolving Credit Termination Date.
(c) In the event that the Revolving Lenders shall incur any Letter of
Credit Obligations pursuant hereto with respect to commercial Letters of
Credit at the request of Borrower or on behalf of Borrower hereunder,
Borrower agrees to pay (i) to the L/C Issuer, solely for its account, as
compensation to the L/C Issuer for issuing such Letter of Credit, a fee of
0.125% of the fact amount of such commercial Letter of Credit and all
customary administrative fees and charges customarily imposed by the L/C
Issuer for the administration of commercial Letters of Credit, and (ii)
commencing with the calendar quarter in which such Letter of Credit
Obligations are incurred by the Revolving Credit Lenders and quarterly
thereafter for each calendar quarter during which such Letter of Credit
Obligations shall remain outstanding, to the Agent for the ratable benefit of
the Revolving Credit Lenders, a fee in an amount equal to the quotient of (x)
the sum of the products of the daily outstanding amount of such Letter of
Credit Obligations on each day during the previous calendar quarter,
multiplied by a rate equal to the Commercial L/C Margin, divided by (y) 360.
Fees payable in respect of Letter of Credit Obligations shall be paid in
arrears, on the first day of each calendar quarter and on the Revolving
Credit Termination Date.
(d) Upon the issuance of each Letter of Credit that is issued in
compliance with this Agreement, the L/C Issuer shall provide notice thereof
to Agent and each Revolving Credit Lender shall automatically acquire a pro
rata risk participation interest in the Letter of Credit based on its
respective Revolving Credit Percentage. If the L/C Issuer shall honor a draft
or other demand for payment presented or made under any Letter of Credit, the
L/C Issuer shall provide notice thereof to Agent on the date such draft or
demand is honored, unless Borrower shall have satisfied its reimbursement
obligation under PARAGRAPH 3L(e) hereof by payment to the L/C Issuer on such
date, and Agent shall promptly transmit such notice to each Revolving Credit
Lender. Each Revolving Credit Lender, on the date of such notice, shall wire
to an account designated by Agent, for the account of L/C Issuer, an amount
equal to such Revolving Credit Lender's Revolving Credit Percentage of the
amount paid by L/C Issuer and, upon receipt of such funds, Agent shall
transfer to an account designated by L/C Issuer the funds so received by
Agent for the account of L/C Issuer. If and to the extent any Revolving
Credit Lender shall not have made such amount available to Agent, such
Revolving Credit Lender and Borrower unconditionally and irrevocably
severally agree to pay to Agent, for the account of L/C Issuer, forthwith on
demand such amount,
25
<PAGE>
together with interest thereon for each day from the date such amount was
paid by L/C Issuer until such amount is so made available to L/C Issuer at a
per annum rate equal to the Federal Funds Rate for the first three days and
the Federal Funds Rate plus 2% thereafter. If such Revolving Credit Lender
shall pay such amount to Agent, for the account of L/C Issuer, together with
such interest, if any, accrued, such amount so paid shall constitute a
Revolving Credit Advance by such Revolving Credit Lender as part of the
borrowing disbursed in respect of the reimbursement obligation of Borrower
under PARAGRAPH 3L(e) hereof for purposes of this Agreement. The failure of
any Revolving Credit Lender to make an amount equal to its Revolving Credit
Percentage of any such amount paid by L/C Issuer available to Agent shall not
relieve any other Revolving Credit Lender of its obligation to make available
an amount equal to such other Revolving Credit Lender's Revolving Credit
Percentage of such amount, but no Revolving Credit Lender shall be
responsible for failure of any other Revolving Credit Lender to make its
Revolving Credit Percentage thereof available to Agent.
(e) (i) Borrower agrees to pay to L/C Issuer, not later than 1:00 P.M.
(New York time) on the date on which L/C Issuer shall honor a
draft or other demand for payment presented or made under such
Letter of Credit, an amount equal to the amount paid by L/C
Issuer in respect of such draft or other demand under such
Letter of Credit and all expenses paid or incurred by L/C
Issuer relative thereto (the "Reimbursement Amount"). L/C
Issuer shall, on the date of each demand for payment under any
Letter of Credit, give Agent and Borrower notice thereof and of
the amount of Borrower's reimbursement obligation and liability
for expenses relative thereto; PROVIDED that the failure of L/C
Issuer to give such notice shall not affect the reimbursement
and other obligations of Borrower under this PARAGRAPH 3L(e).
Unless Borrower shall have made such payment to L/C Issuer, on
such date, upon each such payment by L/C Issuer, Borrower shall
be deemed to have elected to satisfy its reimbursement
obligation by means of a Revolving Credit Loan in an amount
equal to the amount so paid by L/C Issuer in respect of such
draft or other demand under such Letter of Credit, and Agent
shall be deemed to have disbursed to Borrower, for the account
of the Revolving Credit Lenders, the Revolving Credit Loan, and
each Revolving Credit Lender shall make its Revolving Credit
Percentage of each such Revolving Credit Loan available to
Agent in accordance with this Agreement. Such Revolving Credit
Loans shall be deemed disbursed notwithstanding any failure to
satisfy any conditions for disbursement of any Revolving Credit
Loans and, to the extent of the Revolving Credit Loans so
disbursed, the reimbursement obligation of Borrower under this
PARAGRAPH 3L(e)(i) shall be deemed satisfied.
26
<PAGE>
(ii) If, for any reason (including without limitation as a result of
the occurrence of an Event of Default) Revolving Credit Loans
may not be made by the Revolving Credit Lenders as described
in PARAGRAPH 3L(e)(i) then (A) Borrower agrees that each
Reimbursement Amount not paid pursuant to the first sentence of
PARAGRAPH 3L(e)(i) shall bear interest, payable on demand by
Agent, at the Default Rate, and (B) effective on the date each
such Revolving Credit Loan would otherwise have been made, each
Revolving Credit Lender severally agrees that it shall
unconditionally and irrevocably, without regard to the
occurrence of any Event of Default, to the extent of such
Revolving Credit Lender's Revolving Credit Percentage, purchase
a participating interest in each Reimbursement Amount. Each
Revolving Credit Lender will immediately transfer to Agent, for
the account of L/C Issuer, in same day funds, the amount of its
participation and, upon receipt, Agent shall transfer such
funds to L/C Issuer. Each Revolving Credit Lender shall share
on a pro rata basis (calculated by reference to its Revolving
Credit Percentage) in any interest which accrues thereon and in
all repayments thereof. If and to the extent that any Revolving
Credit Lender shall not have so made the amount of such
participating interest available to Agent, such Revolving
Credit Lender agrees to pay to Agent, for the account of L/C
Issuer, forthwith on demand, such amount together with interest
thereon, for each day from the date of demand by L/C Issuer to
Agent until the date such amount is paid to Agent, at the
Federal Funds Rate for the first three days and the Federal
Funds Rate plus 2% thereafter, and, upon receipt thereof, Agent
shall transmit such funds to L/C Issuer.
(iii) Each Revolving Credit Lender shall be obligated, absolutely and
unconditionally, to make Revolving Credit Loans pursuant to
PARAGRAPH 3L(e)(i) and to purchase and fund participation
interests in Letters of Credit pursuant to PARAGRAPHS 3L(d) AND
(e)(ii) hereof and the obligation shall not be affected by any
circumstance whatsoever, including, without limitation, (i) any
set off, counterclaim, recoupment, defense or other right which
such Revolving Credit Lender or Borrower may have against L/C
Issuer, Borrower or anyone else for any reason whatsoever,
(ii) the occurrence of any Event of Default, (iii) any adverse
change in the condition (financial or otherwise) of Borrower or
any of its Subsidiaries, (iv) any breach of this Agreement by
Borrower or any of its Subsidiaries, or (v) any other
circumstance, happening or event whatsoever, whether or not
similar to any of the foregoing, including without limitation
the termination of the
27
<PAGE>
Revolving Credit Commitments; PROVIDED, HOWEVER, that no
Revolving Credit Lender shall be obligated to purchase or
fund a participating interest in Letters of Credit if to
do so would result in such Revolving Credit Lender's
Revolving Credit Percentage of the sum of the outstanding
Revolving Credit Loans and Letter of Credit Obligations
exceeding such Revolving Credit Lender's Revolving Credit
Commitment.
(f) In the event that any Letter of Credit Obligation, whether or
not then due and payable, shall for any reason be outstanding on the
Revolving Credit Termination Date, Borrower shall pay to Agent cash or
Cash Equivalents in an amount equal to the outstanding Letter of Credit
Obligations. Such funds or Cash Equivalents shall be held by Agent in a
cash collateral account (the "Cash Collateral Account"). The Cash
Collateral Account shall be in the name of Agent (as a cash collateral
account), and shall be under the sole dominion and control of Agent and
subject to the terms of this PARAGRAPH 3L. Borrower hereby pledges, and
grants to Agent a security interest in, all such funds or Cash
Equivalents held in the Cash Collateral Account from time to time and all
proceeds thereof, as security for the payment of all amounts due in
respect of the Letter of Credit Obligations, whether or not then due.
From time to time after funds are deposited in the Cash Collateral
Account, Agent may apply such funds or Cash Equivalents then held in the
Cash Collateral Account to the payment of any amounts as shall be or
shall become due and payable by Borrower to the Revolving Credit Lenders
or the L/C Issuer with respect to such Letter of Credit Obligations,
first to the L/C Issuer's expenses, second to the fees of the L/C Issuer
and the Revolving Credit Lenders, and third to the Reimbursement Amounts.
Neither Borrower nor any person or entity claiming on behalf of or
through Borrower shall have any right to withdraw any of the funds or
Cash Equivalents held in the Cash Collateral Account, except that upon
the expiration or the termination of any Letter of Credit Obligation in
accordance with its terms and the payment of all amounts payable by
Borrower to the Revolving Credit Lenders and the L/C Issuer in respect
thereof, any funds or Cash Equivalents remaining in the Cash Collateral
Account in excess of the then remaining Letter of Credit Obligations
shall be returned to Borrower.
Agent shall not have any obligation to invest the funds in the Cash
Collateral Account or deposit such funds in an interest-bearing account,
and interest and earnings thereon, if any, shall be the property of Agent
for the ratable benefit of the Revolving Credit Lenders and L/C Issuer.
Interest and earnings on the Cash Equivalents in the Cash Collateral
Account shall be the property of Borrower.
(g) The reimbursement obligation of Borrower under this PARAGRAPH
3L with respect to each Letter of Credit Obligation shall be absolute,
unconditional and irrevocable and shall remain in full force and effect
until all such obligations of Borrower
28
<PAGE>
to the Revolving Credit Lenders, Agent and L/C Issuer with respect to
such Letter of Credit Obligations shall have been satisfied, and such
obligations of Borrower shall not be affected, modified or impaired upon
the happening of any of the following events, whether or not with notice
to, or the consent of, Borrower:
(i) Any lack of validity or enforceability of any Letter of
Credit or any documentation relating to any Letter of Credit or to
any transaction related in any way to such Letter of Credit (the
"Letter of Credit Documents");
(ii) Any amendment, modification, waiver, consent, or any
substitution, exchange or release of or failure to perfect any
interest in collateral or security, with respect to any of the
Letter of Credit Documents;
(iii) The existence of any claim, setoff, defense or other
right which Borrower may have at any time against any beneficiary or
any transferee of any Letter of Credit (or any persons or entities
for whom any such beneficiary or any such transferee may be acting),
L/C Issuer, Agent or any Revolving Credit Lender or any other
Person, whether in connection with any of the Letter of Credit
Documents, the transactions contemplated herein or therein or any
unrelated transactions;
(iv) Any draft or other statement or document presented under
any Letter of Credit proving to be forged, fraudulent, invalid or
insufficient in any respect or any statement therein being untrue or
inaccurate in any respect;
(v) Payment by L/C Issuer to the beneficiary under any Letter
of Credit against presentation of documents which do not comply with
the terms of the Letter of Credit, including failure of any
documents to bear any reference or adequate reference to such Letter
of Credit;
(vi) Any failure, omission, delay or lack on the part of L/C
Issuer, Agent or any Revolving Credit Lender or any party to any of
the Letter of Credit Documents to enforce, assert or exercise any
right, power or remedy conferred upon L/C Issuer, Agent, any
Revolving Credit Lender or any such party; or
(vii) Any other event or circumstance that would, in the
absence of this clause, result in the release or discharge by
operation of law or otherwise of Borrower from the performance or
observance of any obligation, covenant or agreement contained in
this PARAGRAPH 3L.
29
<PAGE>
No setoff, counterclaim, reduction or diminution of any obligation or any
defense of any kind or nature which Borrower has or may have against the
beneficiary of any Letter of Credit shall be available hereunder to Borrower
against L/C Issuer, Agent or any Revolving Credit Lender. Nothing in this
PARAGRAPH 3L shall limit the liability, if any, of L/C Issuer, Agent or any
Revolving Credit Lender to Borrower pursuant to PARAGRAPH 3L(h) hereof.
(h) Borrower hereby indemnifies and agrees to hold harmless the Revolving
Credit Lenders, L/C Issuer, Agent, and their respective officers, directors,
employees and agents, harmless from and against any and all claims, damages,
losses, liabilities, costs or expenses of any kind or nature whatsoever which
the Revolving Credit Lenders, L/C Issuer, Agent or any such Person may incur
or which may be claimed against any of them by reason of or in connection
with any Letter of Credit, and neither any Revolving Credit Lender, L/C
Issuer, Agent or any of their respective officers, directors, employees or
agents shall be liable or responsible for: (i) the use which may be made of
any Letter of Credit or for any acts or omissions of any beneficiary in
connection therewith; (ii) the validity, sufficiency or genuineness of
documents or of any endorsement thereon, even if such documents should in
fact prove to be in any or all respects invalid, insufficient, fraudulent or
forged; (iii) except as set forth below, payment by L/C Issuer to the
beneficiary under any Letter of Credit against presentation of documents
which do not comply with the terms of any Letter of Credit, including failure
of any documents to bear any reference or adequate reference to such Letter
of Credit; (iv) 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; or (v) any other event or circumstance
whatsoever arising in connection with any Letter of Credit; PROVIDED,
HOWEVER, that Borrower shall not be required to indemnify L/C Issuer and L/C
Issuer shall be liable to Borrower to the extent, but only to the extent, of
any direct, as opposed to consequential or incidental, damages suffered by
Borrower which were caused by (A) L/C Issuer's wrongful dishonor of any
Letter of Credit after the presentation to it by the beneficiary thereunder
of a draft or other demand for payment and other documentation strictly
complying with the terms and conditions of such Letter of Credit, or (B) the
payment by L/C Issuer to the beneficiary under any Letter of Credit against
presentation of documents which do not comply with the terms of the Letter of
Credit to the extent, but only to the extent, that such payment constitutes
gross negligence or willful misconduct of L/C Issuer. It is understood that
in making any payment under a Letter of Credit L/C Issuer will rely on
documents presented to it under such Letter of Credit as to any and all
matters set forth therein without further investigation and regardless of any
notice or information to the contrary, and such reliance and payment against
documents presented under a Letter of Credit substantially complying with the
terms thereof shall not be deemed gross negligence or willful misconduct of
L/C Issuer in connection with such payment.
(i) Each Revolving Credit Lender hereby appoints and authorizes L/C
Issuer to take such action on its behalf and to exercise such powers
under this PARAGRAPH 3L as are delegated to L/C Issuer by the terms
hereof, together with such powers as are reasonably incidental thereto.
As to any matters not expressly provided for in this PARAGRAPH 3L, L/C
Issuer shall not be required to exercise any discretion or take any
30
<PAGE>
action, but shall be required to act or to refrain from acting (and in
all events shall be fully protected in so acting or refraining from
acting) upon the instructions of the Required Revolving Credit Lenders,
and such instructions shall be binding upon all Revolving Credit Lenders;
PROVIDED, HOWEVER, that L/C Issuer shall not be required to take any
action which exposes L/C Issuer to personal liability or which is
contrary to this PARAGRAPH 3L or applicable law. Notwithstanding anything
to the contrary contained in this PARAGRAPH 3L, L/C Issuer shall have no
duties or responsibilities to any Revolving Credit Lender except as
expressly set forth in this PARAGRAPH 3L, and without limiting the
generality of the foregoing, shall in no event have a trust or fiduciary
relationship with any Revolving Credit Lender, and no implied covenants,
responsibilities, duties, obligations or liabilities shall be read into
this PARAGRAPH 3L or otherwise exist as against L/C Issuer.
(j) Neither L/C Issuer nor any of its directors, officers, agents
or employees shall be liable for any action taken or omitted to be taken
by it or them under or in connection with this PARAGRAPH 3L, except for
its or their own gross negligence or willful misconduct, as determined by
a final non-appealable judgment. Without limitation of the generality of
the foregoing, L/C Issuer: (i) may consult with legal counsel (including
counsel for Borrower), independent public accountants and other experts
selected by it and shall not be liable for any action taken or omitted to
be taken in good faith by it in accordance with the advice of such
counsel, accountants or experts, and (ii) shall incur no liability under
or in respect of this PARAGRAPH 3L by acting upon any notice, consent,
certificate or other instrument or writing (which may be by telecopy,
telegram, cable or telex) believed by it to be genuine and signed or sent
by the proper party or parties.
(k) The Letters of Credit issued by LNB pursuant to the Original
Credit Agreement and outstanding on the date of this Agreement are listed
in the Schedule of Existing Letters of Credit attached hereto as
Exhibit 3L(k).
3M. UNUSED PORTION FEE. From and after June 21, 1994, Borrower shall
pay to Agent, for the account of the Revolving Credit Lenders, a fee in an
amount equal to the Revolving Credit Commitment less the average daily
balance of the Revolving Credit Loans during the preceding quarter,
multiplied by one-quarter of one percent (0.25%) per annum, such fee to be
calculated on the basis of a 360-day year for the actual number of days
elapsed and to be payable quarterly in arrears on the first Business Day of
July, 1994 and on the first Business Day of each calendar quarter thereafter.
Such amount shall be paid to Agent as provided in PARAGRAPH 4A(1) hereof.
3N. USE OF PROCEEDS. Borrower shall apply the proceeds of the Revolving
Credit Loan to working capital and general corporate purposes.
31
<PAGE>
4 LOANS: GENERAL TERMS AND CONDITIONS TO LENDING
4A. GENERAL CONDITIONS.
4A(1) PAYMENTS TO AGENT. That portion of Borrower's Liabilities
consisting of: (a) principal payable on account of the Loans made by the
Lenders to Borrower pursuant to this Agreement shall be payable by Borrower
to Agent for account of each Lender as provided in the Notes in respect of
the Loans; (b) costs, fees and expenses payable pursuant to this Agreement
shall be payable by Borrower to Agent for account of each Lender, on demand;
(c) interest payable pursuant to this Agreement shall be payable by Borrower
to Agent for account of each Lender as provided in PARAGRAPHS 3C, 5C and 6C;
and (d) the balance of Borrower's Liabilities, if any, shall be payable by
Borrower to Agent for account of each Lender as and when provided in this
Agreement or the Other Agreements.
4A(2) AUTOMATIC DEBIT. In order to cause timely payment to be made
to Agent in accordance with PARAGRAPH 4A(1) above, for the account of the
Lenders, of all Borrower's Liabilities as and when due, Borrower hereby
authorizes and directs Agent, at Agent's option, to debit the amount of such
Borrower's Liabilities to any ordinary deposit account of Borrower or
increase the principal balance due under the Loans.
4A(3) PAYMENT TO LENDERS. Each payment received by Agent under this
Agreement or the Notes for account of a Lender shall be paid to such Lender,
on the day received, if received by 2:00 p.m., Chicago time, and no later
than the next Business Day, in immediately available funds, for account of
such Lender at the Applicable Lending Office of such Lender.
4A(4) PRO RATA TREATMENT; SHARING OF PAYMENTS.
(i) Except to the extent otherwise provided herein: (i) each
borrowing from the Revolving Credit and Term Loan B Lenders under
PARAGRAPHS 2A and 6A hereof shall be made, respectively, from the Revolving
Credit Lenders and the Term Loan B Lenders and shall be applied to the
Revolving Credit and Term Loan B Commitments of the Lenders, based upon each
Lender's respective Revolving Credit and Term Loan B Percentage; (ii) each
payment or prepayment of principal of the Revolving Credit and Term Loan B
Loans by Borrower shall be made for account of the Revolving Credit and Term
Loan B Lenders pro rata in accordance with the respective unpaid principal
amounts of the Revolving Credit and Term Loan B Loans held by the Revolving
Credit and Term Loan B Lenders; and (iii) each payment of interest on
Revolving Credit and Term Loan B Loans to Borrower shall be made for account
of the Revolving Credit and Term Loan B Lenders pro rata in accordance with
the amounts of interest due and payable to the respective Revolving Credit
and Term Loan B Lenders.
(ii) Subject to the provisions of the Offset Sharing
Agreement, if any Lender shall obtain payment of any principal of or interest
on any Loan made by it to Borrower under this Agreement or any Other
Agreement through the exercise of any right of set-off,
32
<PAGE>
banker's lien or counterclaim or similar right or otherwise, and, as a result
of such payment, such Lender shall have received a greater percentage of the
principal or interest then due hereunder by Borrower to such Lender than the
percentage received by other Lenders, it shall promptly purchase from such
other Lenders a participation in (or, if and to the extent specified by such
Lender, direct interest in) the Loans made by such other Lenders (or in
interest due thereon, as the case may be) in such amounts, and make such
other adjustments from time to time as shall be equitable, to the end that
each Lender shall share the benefit of such excess payment (net of any
expenses which may be incurred by such Lender in obtaining or preserving such
excess payment) pro rata in accordance with the unpaid principal and/or
interest on the respective Loans held by each of the Lenders. Each Lender
shall make appropriate adjustments among themselves (by the resale of
participations sold or otherwise) if such payment from Borrower is rescinded
or must otherwise be restored.
(iii) Subject to the provisions of the Offset Sharing
Agreement, Borrower agrees that any Lender so purchasing a participation (or
direct interest) in the Loans made by other Lenders (or in interest due
thereon, as the case may be) may exercise all rights of set-off, bankers'
lien, counterclaim or similar rights with respect to such participation as
fully as if such Lender were a direct holder of Loans in the amount of such
participation.
(iv) Nothing contained herein shall require any Lender to
exercise any such right or shall affect the right of any Lender to exercise,
and retain the benefits of exercising, any such right with respect to any
other indebtedness or obligation of Borrower. If under any applicable
bankruptcy, insolvency or other similar law, any Lender receives a secured
claim in lieu of a set-off to which this PARAGRAPH 4A(4) applies, such Lender
shall, to the extent practicable and subject to the provisions of the Offset
Sharing Agreement, exercise its rights in respect of such secured claim in a
manner consistent with the rights of the Lenders entitled under this
PARAGRAPH 4A(4) to share in the benefits of any recovery on such secured
claim.
(v) To the extent that any provision of this PARAGRAPH 4(A)(4)
is inconsistent with the provisions of the Offset Sharing Agreement, the Offset
Sharing Agreement shall govern and control.
4A(5) NON-RECEIPT OF FUNDS BY THE AGENT. Unless Agent shall have
been notified by Borrower prior to the date on which Borrower is scheduled to
make payment to Agent for account of one or more of the Lenders hereunder
(such payment being herein called the "Required Payment"), which notice shall
be effective upon receipt, that the Borrower does not intend to make the
Required Payment to Agent, Agent may assume that the Required Payment has
been made and may, in reliance upon such assumption (but shall not be
required to), make the amount thereof available to the intended recipient(s)
on such date and, if Borrower has not in fact made the required Payment to
Agent, the recipient(s) of such payment shall, on demand, repay to Agent the
amount so made available together with interest thereon in respect of each
day during the period commencing on the date such amount was so made
available by Agent until the date such amount was so made available by Agent
until the date Agent recovers such amount at a rate per annum equal to the
Federal Funds Rate for such day.
33
<PAGE>
4A(6) CONDITIONS PRECEDENT EVENTS. Each Loan made by the Lenders to
Borrower at the request of Borrower pursuant to this Agreement or the Other
Agreements shall in any event be subject to the following conditions
precedent: (a) there shall not then exist an Event of Default or any event or
condition which with notice, lapse of time and/or the making of such Loan
would constitute an Event of Default; (b) the representations and warranties
of Borrower contained in this Agreement shall be true and correct as of the
date of such Loan with the same effect as though made on such date; and (c)
all of the requirements of this Agreement with respect to such Loan shall
have been complied with. Each Loan to Borrower hereunder shall be deemed a
representation and warranty by Borrower that the foregoing conditions have
been fulfilled as of the date of the making of such Loan. Each Lender shall
have received upon request by Agent a certificate signed by the President or
Chief Financial Officer of Borrower dated the date of such requested Loan
certifying satisfaction of the conditions specified in clauses (a)-(c) of
this PARAGRAPH 4A(6).
4A(7) OFFSET. Subject to the provisions of the Offset Sharing
Agreement, Borrower agrees that, in addition to (and without limitation of)
any right of set-off, bankers' lien or counterclaim a Lender may otherwise
have, each Lender shall be entitled, at its option, to offset balances held
by it for account of Borrower at any of its offices, in United States Dollars
or in any other currency, against any principal of or interest on any of such
Lender's Loans, or any other amount payable to such Lender hereunder, which
is not paid when due (regardless of whether such balances are then due to
Borrower), in which case it shall promptly notify Borrower and Agent thereof,
provided that such Lender's failure to give such notice shall not affect the
validity thereof.
4A(8) DISCRETIONARY DISBURSEMENTS. Agent, in its sole and absolute
discretion, may immediately upon notice to Borrower, disburse any or all
proceeds of Loans made or available to Borrower pursuant to this Agreement
and/or the Other Agreements to pay any fees, costs, expenses or other amounts
required to be paid by Borrower hereunder to Agent or Lenders and not so
paid. All monies so disbursed by Agent shall be a part of Borrower's
Liabilities, payable by Borrower on demand.
4A(9) TERMINATION DATES; CONTINUANCE OF OBLIGATIONS, ETC. This
Agreement, each Lender's obligation to loan monies to Borrower, and
Borrower's ability to borrow monies from the Lenders shall be in effect until
the Revolving Credit Termination Date, as to the Revolving Credit Commitment,
the Term Loan B Termination Date, as to Term Loan B, and July 1, 2000, as to
Term Loan A. Notwithstanding the foregoing and until such date when
Borrower's Liabilities shall be paid in full, Borrower's obligations hereunder
and under the Other Agreements shall continue, interest shall continue to be
paid in accordance with the foregoing and the Lenders shall retain all of
their rights and remedies under this Agreement.
4A(10) LOAN EVIDENCE. Loans made by the Lenders to Borrower pursuant
to this Agreement may or may not (at Agent's sole and absolute discretion) be
evidenced by notes or other instruments issued or made by Borrower to the
Lenders. Where such Loans are not so evidenced, such Loans shall be evidenced
solely by entries upon the ledgers, books, records
34
<PAGE>
and/or computer records of each Lender maintained for that purpose, which
entries shall be rebuttably presumptive evidence of such Loans.
4A(11) OVER-ADVANCES. If, at any time and for any reason, the
aggregate amount of Borrower's Liabilities outstanding in respect of the
Revolving Credit Commitment plus the outstanding Letter of Credit Obligations
exceeds the amount of the Total Revolving Credit Commitment set forth in
PARAGRAPH 2A (an "Over-Advance"), then Borrower, upon Agent's election and
demand, shall immediately pay to Agent, in cash, the amount of such
Over-Advance. If such Over-Advance remains outstanding for more than one (1)
day, and Agent has demanded payment thereof, until such Over-Advance is so
repaid to Agent, the amount of such Over-Advance shall bear interest at the
applicable Default Rate.
4A(12) LENDING OFFICES. The Loans made by each Lender shall be made
and maintained at such Lender's Applicable Lending Office.
4A(13) SEVERAL OBLIGATIONS; REMEDIES INDEPENDENT. The failure of any
Lender to make any Loan to be made by it on the date specified therefor shall
not relieve any other Lender of its obligation to make its Loan on such date,
but neither any Lender nor Agent shall be responsible for the failure of any
other Lender to make a Loan to be made by such other Lender. The amounts
payable by Borrower at any time hereunder and under the Notes to each Lender
shall be a separate and independent debt and each Lender shall be entitled to
protect and enforce its rights arising out of this Agreement and the Other
Agreements, and it shall not be necessary for any other Lender or Agent to
consent to, or be joined as an additional party in, any proceedings for such
purposes.
4A(14) PREPAYMENT.
(i) PREPAYMENT. The principal, accrued interest and all other
amounts of the Revolving Credit and Term Loan B Loans may be prepaid at any
time by Borrower, in whole or in part, without premium or penalty. Term Loan
A may be prepaid subject to the provisions of PARAGRAPH 5E.
(ii) APPLICATION AFTER DEFAULT. Notwithstanding anything
contained in this Agreement to the contrary, upon the occurrence and during
the continuance of an Event of Default, any prepayments made under this
PARAGRAPH 4A(14) shall be applied to Borrower's Liabilities in such order of
priority as Lenders, in their sole discretion, shall determine, and, unless
otherwise agreed by Lenders, to Term Loan A, Term Loan B and the Revolving
Credit Loans pro rata based upon the principal amount outstanding on each.
4B. CONDITIONS TO LENDING.
4B(1) INITIAL LOAN CONDITIONS PRECEDENT. In addition to those
conditions set forth in PARAGRAPH 4A(6) above with respect to the Loans and
any advances hereunder, prior to or
35
<PAGE>
contemporaneously with the making of the initial advance of funds, each
Lender's obligation to make any Loan is subject to the satisfaction of the
following conditions precedent:
(i) FEES AND EXPENSES. Borrower shall have paid all fees owed
to Agent and reimbursed Agent and the Lenders, as applicable, for all expenses
due and payable hereunder on or before the date hereof including, but not
limited to, counsel fees provided for in PARAGRAPH 12L hereof.
(ii) DOCUMENTS. Agent shall have received the following
documents, in form and substance satisfactory to Agent, and all of the
transactions contemplated by each such document shall have been consummated
or each condition contemplated by each such document shall have been
satisfied:
(a) RELATED DOCUMENTS. Copies of this Agreement and one
copy each of the Notes payable to each applicable Lender conforming to
the requirements hereof duly executed by Borrower.
(b) LEGAL OPINIONS. The legal opinion of Borrower's
counsel in the form of EXHIBIT 4B(1)(ii)(b).
(c) OFFICER'S CERTIFICATE. A certificate executed by the
President or Chief Financial Officer of Borrower, stating that (A) no
default or Event of Default has occurred and is continuing, (B) no
material adverse change in the financial condition or operations of the
business of Borrower has occurred since June 30, 1997, and (C) each
condition precedent to the consummation of the Loans contemplated hereby
has been met or satisfied.
(d) INSURANCE POLICIES. Certificates from Borrower's
insurance carriers evidencing that all insurance policies and coverage
required by PARAGRAPH 5J of the Note Agreement is in effect.
(e) ARTICLES OF INCORPORATION AND BYLAWS. A copy of
Borrower's Articles of Incorporation, and all amendments, certified by
the Secretary of State of Minnesota and a copy of Borrower's By-laws
certified by the Secretary of Borrower.
(f) GOOD STANDING CERTIFICATES. A Good Standing
Certificate for Borrower from the State of Minnesota and an opinion of
counsel as to the good standing of Borrower in each state in which
Borrower is required to be qualified to transact business as a foreign
corporation.
(g) BOARD RESOLUTIONS. Certified copies of resolutions
of the Board of Directors of Borrower authorizing the execution and
delivery of and the consummation of the transactions contemplated by this
Agreement and the Other
36
<PAGE>
Agreements and all other documents or instruments to be executed and
delivered in conjunction herewith and therewith by Borrower.
(h) INCUMBENCY CERTIFICATES. A certificate of the
Secretary or an Assistant Secretary of Borrower certifying the names of
the officer or officers of Borrower authorized to sign this Agreement and
the Other Agreements together with a sample of the true signature of each
such officer.
(i) AMENDED AND RESTATED OFFSET SHARING AGREEMENT. An
Amended and Restated Offset Sharing Agreement in the form attached hereto
as EXHIBIT 4(B)(1)(ii)(i) executed by the Lenders, Borrower and the
Purchasers (as defined in the Note Agreement).
(j) OTHER DOCUMENTS. Such other documents as Agent may
reasonably request.
(iii) LENDER'S REVIEW. The Lenders' review of and
satisfaction with the ownership, capital, corporate, organizational and legal
structure of Borrower and its Affiliates.
4B(2) ACCOUNTANT'S LETTER. On or prior to the date hereof, Borrower
agrees that it will deliver to Coopers & Lybrand, a letter (in form and
substance acceptable to Agent) authorizing such accountants to communicate
with Agent and acknowledging the Lenders' reliance on future financial
statements audited by such accountants, and Borrower shall use its best
efforts to cause such accountants to accept and agree to such letter.
5 TERM LOAN A
5A. TERM LOAN A COMMITMENT; TERM LOAN A NOTE. On the terms and subject
to the conditions set forth in this Agreement, LNB agrees to make a term loan
(the "Term Loan A") to Borrower in the principal amount of Ten Million
Dollars ($10,000,000). Term Loan A shall be evidenced by a promissory note to
be executed and delivered by Borrower at or before the funding date
substantially in the form set forth in Exhibit 5A hereto (the "Term Loan A
Note").
5B. BORROWING PROCEDURE UNDER THE TERM LOAN A COMMITMENT. Borrower
shall give LNB irrevocable telephonic notice, written notice or telecopied
notice by no later than 12:00 p.m., Chicago time, on the date it requests the
Term Loan A to be made.
5C. INTEREST RATE; DEFAULT RATE. Borrower hereby promises to pay
interest on the unpaid principal amount of Term Loan A at the rate of 7.535%
per annum (the "Fixed Rate"). If any payment of principal on Term Loan A is
not paid when due, Term Loan A shall bear interest from the date such payment
was due until paid in full, payable on demand, at a rate per annum equal to
the sum of 3% plus the Fixed Rate. Interest on Term Loan A shall be computed
for the actual number of days elapsed on the basis of a 360-day year.
Interest shall be payable in arrears on the last Business Day of each
calendar month.
37
<PAGE>
5D. INSTALLMENT PAYMENTS OF PRINCIPAL. The principal amount of Term
Loan A shall be payable in three installments as follows: Three Million
Dollars ($3,000,000) on July 1, 1998, Three Million Dollars ($3,000,000) on
July 1, 1999, and Four Million Dollars ($4,000,000) on July 1, 2000.
5E. PREPAYMENTS. Borrower may, from time to time, prepay Term Loan A
in whole or in part and shall pay a prepayment fee equal to the "Make Whole
Amount", if any. Prepayments of less than all of the outstanding balance of
Term Loan A shall be applied to Term Loan A in reverse order of application.
The Make Whole Amount shall mean as of any prepayment date, to the extent
that the "Reinvestment Yield" on such date is lower than the "Base Rate", the
product of (a) the number of days remaining until maturity of Term Loan A,
multiplied by (b) the product of (i) the principal balance being prepaid,
multiplied by (ii) a percentage obtained by dividing (X) the difference
between the Reinvestment Yield and the Base Rate by (Y) 360. To the extent
that the Reinvestment Yield on any prepayment date is equal to or higher than
the interest rate payable on or in respect of such Term Loan less 150 basis
points, the Make Whole Amount is zero. Base Rate shall mean the Fixed Rate
less 150 basis points. Reinvestment Yield shall mean the yield as set forth
on page "USD" of the Bloomberg Financial Markets Service at 10:00 A.M.
(Chicago time) on the prepayment date for actively traded U.S. Treasury
securities having a maturity equal to the "Weighted Average Life to Maturity"
of the Term Note rounded to the nearest month, or if such yields shall not be
reported as of such time or the yields as of such time are not ascertainable
in accordance with the preceding clause, then the arithmetic mean of the
yields published in the statistical release designated H.15(519) of the Board
of Governors of the Federal Reserve System under the caption "U.S. Government
Securities--Treasury Constant Maturities" for the maturity corresponding to
the remaining Weighted Average Life to Maturity of Term Note A as of the date
of such prepayment rounded to the nearest month. If no maturity exactly
corresponding to such rounded Weighted Average Life to Maturity shall appear
therein, yields of the two most closely corresponding published maturities
(one of which occurs prior and the other subsequent to the Weighted Average
Life to Maturity) shall be calculated pursuant to the foregoing sentence and
the Reinvestment Yield shall be interpolated from such yields on a
straight-line basis (rounding, in each of such relevant periods, to the
nearest month). For purposes hereof, Weighted Average Life to Maturity shall
mean the number of years obtained by dividing (a) the then outstanding
principal amount of the Term Loan A Note to be prepaid into (b) the sum of the
products obtained by multiplying (i) the amount of each then remaining other
required prepayment, installment or payment, including payment at final
maturity, foregone by such prepayment by (ii) the number of years (calculated
to the nearest 1/12th) which would have elapsed between such date and the
making of such prepayment or payment.
6 TERM LOAN B
6A. TERM LOAN B COMMITMENTS; TERM LOAN B NOTES; RECORDATION. On the
terms and subject to the conditions set forth in this Agreement, each Term
Loan B Lender, severally and not jointly, agrees to make a term loan ("Term
Loan B") to Borrower in an aggregate principal
38
<PAGE>
amount of such Lender's Term Loan B Percentage of the Total Term Loan B
Commitment. The Total Term Loan B Commitment is Fifteen Million Dollars
($15,000,000). Term Loan B shall be available to Borrower by means of one or
more Loans, from the date hereof to December 30, 1998, it being understood
that Term Loan B may be repaid in whole or in part at any time, subject to
PARAGRAPH 6I, but no amount repaid may be reborrowed. The Term Loan B made by
each Term Loan B Lender under the Term Loan B Commitment shall be evidenced
by a single promissory note (herein, as the same may be amended, modified or
supplemented from time to time, and together with any renewals thereof or
exchanges or substitutions therefor, collectively called the "Term Loan B
Notes") substantially in the form set forth in EXHIBIT 6A hereto, with
appropriate insertions, dated the date hereof, payable to the order of such
Term Loan B Lender in a principal amount not to exceed such Term Loan B
Lender's Term Loan B Percentage of the Total Term Loan B Commitment. The
unpaid principal amount of Term Loan B shall bear interest and be due and
payable as provided in this Agreement and, if not sooner paid in full, on
December 31, 1998. Payments to be made by Borrower under the Term B Notes
shall be made at the time, in the amounts and upon the terms set forth
herein and therein.
The date and amount of each Term Loan B made by each Term Loan B Lender
shall be recorded by such Term Loan B Lender in its records. The aggregate
unpaid principal amount so recorded shall be prima facia evidence of the
principal amount owing and unpaid on the Term Loan B Notes. The failure to so
record any such amount or any error in so recording any such amount shall not
limit or otherwise affect the obligations of Borrower hereunder or under the
Term Loan B Notes to repay the principal amount of the Term Loan B together
with all interest accrued thereon.
6B. BORROWING PROCEDURES UNDER THE TERM LOAN B COMMITMENT. Borrower
shall give Agent irrevocable telephonic notice, written notice or telecopied
notice by no later than 12:00 p.m., Chicago time, on the date it requests to
make a Term Loan B Loan hereunder. Each such notice shall be effective upon
receipt by Agent and shall specify the date of the Term Loan B (which shall
be a Business Day), the amount of such Term Loan B, whether the Term Loan B
is a Base Rate Loan or LIBOR Loan and, with respect to a LIBOR Loan, the
Interest Period applicable thereto. Borrower shall give Agent irrevocable
telephonic notice (which notice shall be promptly confirmed in writing) no
later than 10:00 a.m., Chicago time, three (3) Business Days prior to the
date that it requests Agent to effect a conversion from a Base Rate Loan to a
LIBOR Loan, including a reborrowing as provided in PARAGRAPH 6E. Borrower
agrees that Agent may rely on any notice given by any person it reasonably
believes to be an authorized officer of Borrower without the necessity of
independent investigation. Each borrowing shall be on a Business Day.
6C. INTEREST RATES; DEFAULT RATE.
(i) Borrower hereby promises to pay interest on the unpaid
principal amount of each Term Loan B at a rate per annum equal to
the Base Rate from time to time in effect for the period commencing
on the date of such Term Loan B until such Base Rate Loan is (A)
converted to a LIBOR Loan pursuant to PARAGRAPH 6E hereof, or (B)
paid
39
<PAGE>
in full. Accrued interest on the outstanding principal amount of Term
Loan B shall be payable (i) monthly in arrears on the last Business
Day of each calendar month in the case of a Base Rate Loan, (ii) on
the last day of the Interest Period therefor in the case of a LIBOR
Loan, (iii) upon conversion of any Term Loan B into a LIBOR Loan (such
amount of accrued interest then coming due to be calculated based on the
principal amount of the Term Loan B so converted), and (iv) upon the
Maturity Date. After the Maturity Date or Conversion Date, as applicable,
accrued interest on such Term Loan B shall be payable on demand.
(ii) Each LIBOR Loan shall be in a minimum amount of $100,000 or
such greater amount which is an integral multiple of $100,000 and shall
bear interest on the unpaid principal amount thereof from the date such
LIBOR Loan is effected by conversion or continued until maturity (whether
by acceleration or otherwise) at a rate per annum equal to the sum of
the LIBOR Margin plus the Adjusted LIBOR Rate, with such interest payable
in accordance with PARAGRAPH 6C(i) above.
(iii) If any payment of principal on any Term Loan B is not made
when due, such Term Loan B shall bear interest from the date such payment
was due until paid in full, payable on demand, at a rate per annum (the
"Default Rate") equal to the sum of three percent (3%) plus the
applicable interest rate from time to time in effect (computed on the
basis of a 360 day year and actual days elapsed).
6D. COMPUTATION OF INTEREST. Interest on each Term Loan B shall be
computed for the actual number of days elapsed on the basis of a 360-day
year. The interest rate applicable to each Base Rate Loan shall change
simultaneously with each change in such Base Rate. Upon conversion of less
than all the aggregate principal amount of Base Rate Loans outstanding at any
one time to a LIBOR Loan, interest on the remaining principal amount of Base
Rate Loans outstanding after such conversion shall be calculated assuming
such LIBOR Loan replaced a corresponding amount of Base Rate Loans bearing
interest at the Base Rate applicable thereto immediately prior to such
conversion such that the remaining principal amount of Base Rate Loans
outstanding after such conversion shall bear interest at the Base Rate which
would have been applicable to such Base Rate Loans had no such conversion
been effected.
6E. CONVERSION AND REBORROWING OF LOANS.
(i) Provided that no Event of Default has occurred and is
continuing, Base Rate Loans may, subject to PARAGRAPHS 6B AND 6C(ii)
hereof, at any time be converted by Borrower to LIBOR Loans, which
LIBOR Loans shall mature and become due and payable on the last day of
the Interest Period applicable thereto. Provided that no Event of Default
has occurred and is continuing, Borrower shall have the right, subject to
the terms and conditions of this Agreement, to reborrow through a new
LIBOR Loan in whole or in part, subject to PARAGRAPH 6C(ii), any LIBOR
Loan from any current Interest Period into a subsequent Interest Period,
provided that Borrower shall give Agent notice of the reborrowing of any
such LIBOR Loan as provided in PARAGRAPH 6B hereof.
40
<PAGE>
(ii) In the event that (x) Borrower fails to give notice pursuant
to PARAGRAPH 6B hereof of the reborrowing of any LIBOR Loan or fails to
specify the Interest Period applicable to such reborrowing or (y) an
Event of Default has occurred and is continuing at the time any such
LIBOR Loan is to be reborrowed hereunder, then such LIBOR Loan shall be
automatically reborrowed as a Base Rate Loan, subject to PARAGRAPH 10B
hereof if an Event of Default has occurred and is continuing, unless the
relevant LIBOR Loan is paid in full on the last day of the then
applicable Interest Period.
6F. CHANGE OF LAW. Notwithstanding any other provisions of this
Agreement or the Term Loan B Notes, if at any time any Lender shall determine
in good faith that any change in applicable law or regulation or in the
interpretation thereof makes it unlawful or impossible for such Lender to
effect a conversion of a Base Rate Loan into a LIBOR Loan or to continue to
maintain any LIBOR Loan, such Lender shall promptly give notice thereof
(together with an explanation of the reasons therefor) to Agent and Borrower,
and the obligation of such Lender to effect by conversion or continue such
LIBOR Loan under this Agreement shall terminate until it is no longer
unlawful or impossible for such Lender to effect by conversion or maintain
such LIBOR Loan. Upon the receipt of such notice, Borrower may elect to
either (i) pay or prepay, as the case may be, the outstanding principal
amount of any such LIBOR Loan, together with all interest accrued thereon, or
(ii) convert the principal amount of such affected LIBOR Loan to a Base Rate
Loan available hereunder, subject to the terms and conditions of this
Agreement.
6G. UNAVAILABILITY OF DEPOSITS OR INABILITY TO ASCERTAIN THE LIBOR RATE
OR ADJUSTED LIBOR RATE. Notwithstanding any other provision of this
Agreement or the Term B Note to the contrary, if prior to the commencement of
any Interest Period any Lender shall determine in good faith (i) that
deposits in the amount of any LIBOR Loan scheduled to be outstanding are not
available to such Lender in the relevant market or (ii) by reason of
circumstances affecting the relevant market, adequate and reasonable means do
not exist for ascertaining the LIBOR rate or Adjusted LIBOR Rate, then such
Lender shall promptly give notice thereof to Agent and Borrower, and the
obligation of such Lender to effect by conversion or continue any such LIBOR
Loan in such amount and for such Interest Period shall terminate until
deposits in such amount and for the Interest Period selected by Borrower
shall again be readily available in the relevant market and adequate and
reasonable means exist for ascertaining the LIBOR rate or Adjusted LIBOR
Rate, as the case may be. Upon the giving of such notice, Borrower may elect
to either (i) pay or prepay, as the case may be, the outstanding principal
amount of any such LIBOR Loan, together with all interest accrued thereon, or
(ii) convert the principal amount of such affected LIBOR Loan to a Base Rate
Loan available hereunder, subject to all the terms and conditions of this
Agreement.
6H. YIELD PROTECTION, ETC.
(i) INCREASED COSTS. If (x) Regulation D of the Board of
Governors of the Federal Reserve System, or (y) the adoption of any
applicable law, treaty, rule, regulation or guideline, or any change
therein, or any change in the interpretation or administration thereof
by any governmental authority, central bank or comparable agency
41
<PAGE>
charged with the interpretation or administration thereof, or compliance
by any Term Loan B Lender or its lending branch with any request or
directive (whether or not having the force of law) of any such authority,
central bank or comparable agency,
(A) shall subject such Term Loan B Lender, its lending branch
or any Term Loan B to any tax, duty, change, stamp tax, fee,
deduction, withholding or other charge in respect of this Agreement,
any Term Loan B, the Term Loan B Note or the obligation of such Term
Loan B Lender to make or maintain any Loan, or shall change the
basis of taxation of payments to such Term Loan B Lender of the
principal of or interest on any Term Loan B or any other amounts
due under this Agreement in respect of any Term Loan B or its
obligation to make or maintain any Term Loan B (except for changes
in the rate of tax on the overall net income of such Term Loan B
Lender imposed by the federal, state or local jurisdiction in which
such Term Loan B Lender's principal executive office or its lending
branch is located);
(B) shall impose, modify or deem applicable any reserve
(including, without limitation, any reserve imposed by the Board of
Governors of the Federal Reserve System), special deposit or similar
requirement against assets of, deposits with or for the account of,
or credit extended by, any Term Loan B Lender; or
(C) shall impose on any Term Loan B Lender any penalty with
respect to the foregoing or any other condition affecting this
Agreement, any Term Loan B, the Term Loan B Note or the obligation
of such Term Loan B Lender to make or maintain any Loan;
and the result of any of the foregoing is to increase the cost to
(or impose a cost on) any Term Loan B Lender of making or
maintaining any Term Loan B, or to reduce the amount of any such sum
received or receivable by any Term Loan B Lender, under this
Agreement or under the Term Loan B Note with respect thereto, then
Agent shall notify Borrower after it receives final notice of any
of the foregoing and, within 45 days after demand by Agent (which
demand shall be accompanied by a statement setting forth the basis
of such demand), Borrower shall pay directly to the applicable Term
Loan B Lender such additional amount or amounts as will compensate
such Term Loan B Lender on an after-tax basis for such increased
cost or such reduction.
(ii) CAPITAL ADEQUACY. If either (i) the introduction of or any
change in or change in the interpretation of any law or regulation or
(ii) compliance by any Term Loan B Lender with any guideline or
request from any central bank or other governmental authority (whether
or not having the force of law) affects or would affect the amount
of capital required or expected to be maintained by such Term Loan B
Lender or any corporation controlling such Term Loan B Lender and such
Term Loan B Lender determines that the amount of such capital is
increased solely by or solely based upon the
42
<PAGE>
existence of such Term Loan B Lender's commitment to lend hereunder and
other commitments of this type, then, upon demand by Agent, Borrower shall
immediately pay to the applicable Term Loan B Lender from time to time as
specified by such Term Loan B Lender, additional amounts sufficient to
compensate such Term Loan B Lender on an after-tax basis in the light of
such circumstances, to the extent that such Term Loan B Lender reasonably
determines such increase in capital to be allocable to the existence of
such Term Loan B Lender's commitment to lend hereunder.
6I. FUNDING INDEMNITY. In the event any Term Loan B Lender shall
incur any loss, costs or expense (including, without limitation, any loss of
profit and any loss, cost or expense incurred by reason of the liquidation
or re-employment of deposits or other funds acquired by such Term Loan B
Lender to fund or maintain any LIBOR Loan or the relending or reinvesting of
such deposits or amounts paid or prepaid to such Term Loan B Lender) as a
result of:
(i) any payment of a LIBOR Loan on a date other than the last day
of the then applicable Interest Period;
(ii) any failure by Borrower to effect by conversion or continue
any LIBOR Loan on the date specified in the notice given pursuant to
PARAGRAPH 6B hereof;
(iii) any failure by Borrower to make any payment of principal or
interest when due on any LIBOR Loan, whether at stated maturity, by
acceleration or otherwise; or
(iv) the occurrence of any Event of Default;
then, upon the demand by Agent, Borrower shall pay to the applicable Term Loan
B Lender such amount as will reimburse such Term Loan B Lender for such loss,
cost or expense. If any Term Loan B Lender makes such a claim for
compensation under this PARAGRAPH 6I, Agent shall provide to Borrower a
certificate setting forth the amount of such loss, cost or expense in
reasonable detail and such certificate shall be conclusive and binding on
Borrower as to the amount thereof except in the case of manifest error.
6J. DISCRETION OF LENDERS AS TO MANNER OF FUNDING. Notwithstanding any
provision of this Agreement to the contrary other than PARAGRAPH 6G, each
Lender shall be entitled to fund and maintain its funding of all or any part
of the Loans in any manner it sees fit, it being understood, however, that
for the purposes of this Agreement all determinations hereunder shall be made
as if Lenders had actually funded and maintained each LIBOR Loan during each
Interest Period for such LIBOR Loan through the purchase of deposits in the
London Interbank Market having a maturity corresponding to such Interest
Period and bearing an interest rate equal to the Adjusted LIBOR Rate for such
Interest Period.
6K. INTEREST LAWS. Notwithstanding any provision to the contrary
contained in this Agreement or the Other Agreements, Borrower shall not be
required to pay, and neither Agent nor any Term Loan B Lender shall be
permitted to collect, any amount of interest in excess of
43
<PAGE>
the maximum amount of interest permitted by law ("Excess Interest"). If any
Excess Interest is provided for or determined by a court of competent
jurisdiction to have been provided for in this Agreement or in any of the
Other Agreements, then in such event: (a) the provisions of this Paragraph
shall govern and control; (b) Borrower shall not be obligated to pay any
Excess Interest; (c) any Excess Interest that any Term Loan B Lender may have
received hereunder shall be, at Agent's option, (i) applied as a credit
against the outstanding principal balance of Term Loan B, or accrued and
unpaid interest (not to exceed the maximum amount permitted by law), (ii)
refunded to the payor thereof, or (iii) any combination of the foregoing; (d)
the interest rate(s) provided for herein shall be automatically reduced to
the maximum lawful rate allowed from time to time under applicable law (the
"Maximum Rate"), and this Agreement and the Other Agreements shall be deemed
to have been and shall be reformed and modified to reflect such reduction;
and (e) Borrower shall not have any action against Agent or any Term Loan B
Lender for any damages arising out of the payment or collection of any Excess
Interest. Notwithstanding the foregoing, if for any period of time interest
on Term Loan B is calculated at the Maximum Rate rather than the applicable
rate under this Agreement, and thereafter such applicable rate becomes less
than the Maximum Rate, the rate of interest payable on Term Loan B shall
remain at the Maximum Rate until each Term Loan B Lender shall have received
the amount of interest which such Term Loan B Lender would have received
during such period on Term Loan B had the rate of interest not been limited
to the Maximum Rate during such period.
6L. UNUSED TERM LOAN B COMMITMENT FEE. From and after July 11, 1997,
Borrower shall pay to Agent, for the account of the Term Loan B Lenders, a
fee in an amount equal to the product of the average daily unborrowed amount
of the Term Loan B Commitment during the preceding quarter, multiplied by
one-quarter of one percent (0.25%) per annum, such fee to be calculated on the
basis of a 360-day year for the actual number of days elapsed and to be
payable quarterly in arrears on the first Business Day of October, 1997, and
on the first Business Day of each calendar quarter thereafter and on the
maturity date of Term Loan B. Such amount shall be paid to Agent as provided
in PARAGRAPH 4A(1) hereof.
6M. USE OF PROCEEDS. Borrower shall apply the proceeds of Term Loan B
to the payment of the costs of the construction and equipment relating to
the completion of Borrower's Tennessee distribution center.
7 AFFIRMATIVE COVENANTS
At all times prior to the Maturity Date and thereafter for so long as
any amounts are due or owing to the Lenders hereunder, or any Letter of
Credit is outstanding, Borrower hereby covenants that it will, unless
Required Lenders otherwise consent in writing:
7A. FINANCIAL STATEMENTS. Deliver to Agent and each Lender in
duplicate:
(i) as soon as practicable and in any event within forty-five
(45) days after the end of each month in each fiscal year, a consolidated
balance sheet of Borrower and
44
<PAGE>
its Restricted Subsidiaries and Borrower and its Subsidiaries as at the
end of such month and the related consolidated statements of income and
cash flows of Borrower and its Restricted Subsidiaries and Borrower and
its Subsidiaries for such month setting forth, in each case in comparative
form, figures for the corresponding month in the preceding fiscal year,
all in reasonable detail and certified quarterly on a calendar quarter
basis by the chief financial officer or chief accounting officer of
Borrower as fairly presenting the consolidated financial position of
Borrower and its Restricted Subsidiaries and Borrower and its
Subsidiaries as at the dates indicated and the consolidated results of
their operations and cash flows, in each case for the months indicated,
in conformity with GAAP applied on a basis consistent with prior periods
(except as disclosed in such certificate), subject to changes resulting
from normal year-end adjustments;
(ii) as soon as practicable and in any event within ninety (90)
days after the end of each fiscal year, a consolidated and consolidating
balance sheet of Borrower and its Subsidiaries as at the end of such year
and the related consolidated and consolidating statements of income and
cash flows of Borrower and its Subsidiaries for such year, all in
reasonable detail and satisfactory in scope to the Lenders, and
(a) in the case of such consolidated financial statements, setting forth
in each case in comparative form corresponding consolidated figures for
the preceding fiscal year, and accompanied by a report thereon of
independent certified public accountants of recognized national
standing selected by Borrower, which report shall state that, subject
only to standard qualifications and limitations generally contained in
an unqualified audit report, such consolidated financial statements
present fairly the consolidated financial position of Borrower and
its Subsidiaries as at the dates indicated and the consolidated results
of their operations and cash flows for the periods indicated in
conformity with GAAP applied on a basis consistent with prior years
(except as otherwise specified in such report) and that the audit by
such accountants in connection with such consolidated financial
statements has been made in accordance with GAAP, and (b) in the case
of such consolidating financial statements, (w) setting forth on
supplemental schedules, in one column, the total amounts for Borrower
and its Restricted Subsidiaries, and in a second column, the total
amounts for Borrower's other subsidiaries all eliminations and
adjustments made in aggregating the amounts of such columns to arrive at
Borrower's consolidated financial statements, (s) setting forth in
comparative form the corresponding consolidated figures for Borrower and
its Restricted Subsidiaries for the preceding fiscal year, and (y)
accompanied by a report thereon of the independent certified public
accountants reporting on the consolidated financial statements of Borrower
and its Subsidiaries for such fiscal year, which report shall state that,
subject to the qualifications and limitations contained in their report
on the consolidated financial statements of Borrower and its Subsidiaries,
and to the further qualification that the principles of consolidation
followed in the preparation of such consolidated figures for Borrower and
its Restricted Subsidiaries conform to the provisions of this Agreement
rather than to GAAP, such consolidated figures for Borrower and its
Restricted Subsidiaries present fairly the consolidated financial
position of Borrower and its Restricted Subsidiaries as at the dates
indicated and the consolidated results of their operations and cash flows
for the periods indicated in conformity with
45
<PAGE>
GAAP applied on a basis consistent with prior periods (except as otherwise
specified in such report);
(iii) together with each delivery of financial statements pursuant
to clauses (i) and (ii) of this PARAGRAPH 7A, an officer's certificate
executed by a Responsible Officer (a) stating that the Responsible Officer
has reviewed the terms of this Agreement and the Notes and has made, or
caused to be made under his or her supervision, a review in reasonable
detail of the transactions and condition of Borrower and its Restricted
Subsidiaries during the fiscal period covered by such financial statements
and that such review has not disclosed the existence during or at the end
of such fiscal period, and that the Responsible Officer does not have
knowledge of the existence as at the date of the officer's certificate,
of any condition or event which constitutes an Event of Default or with
the giving of notice or passage of time or both would constitute an Event
of Default, or, if any such condition or event existed or exists,
specifying the nature and period of existence thereof and what action
Borrower has taken or is taking or proposes to take with respect thereto,
and (b) demonstrating (with computations in reasonable detail) compliance
by Borrower with the provisions of PARAGRAPHS 8A(i), 8A(ii), 8A(iii),
8C(1)(v), 8C(2), 8C(3)(vii), 8C(3)(viii) and 8C(6)(iii) of this Agreement
(herein called the "COMPUTATION PARAGRAPHS");
(iv) together with each delivery of financial statements of
Borrower and its Subsidiaries pursuant to clause (ii) of this
PARAGRAPH 7A, a certificate by Borrower's independent certified public
accountants stating (a) that their audit examination has included a review
of the terms of this Agreement and of the Notes as they relate to
accounting matters and that such review is sufficient to enable them to
make the statement referred to in subclause (c) of this clause (iv),
(b) whether, in the course of their audit examination there has been
disclosed the existence during the fiscal year covered by such financial
statements (and whether they have knowledge of the existence as of the
date of such accountants' certificate) of any condition or event which
constitutes an Event of Default, or with the giving of notice or passage
of time or both would constitute an Event of Default, and if during their
audit examination there has been disclosed (or if they have knowledge of)
such a condition or event, specifying the nature and period of existence
thereof (it being understood, however, that such accountants shall not be
liable to any Person by reason of their failure to obtain knowledge of
any Event of Default which would not be disclosed in the course of an
audit conducted in accordance with generally accepted auditing standards),
and (c) that based on their annual audit examination, including a review
of the Computation Paragraphs, nothing came to their attention which
causes them to believe that the information relating to the Computation
Paragraphs contained in the officer's certificate delivered therewith
pursuant to clause (iii) of this PARAGRAPH 7A is not correct or that the
matters set forth in such officer's certificate are not stated in
accordance with the terms of this Agreement;
(v) promptly upon their becoming available, copies of all
Securities Laws Filings, financial statements, reports, notices and proxy
statements sent or made available
46
<PAGE>
generally by Borrower and its Restricted Subsidiaries to its security
holders (other than Borrower in the case of Restricted Subsidiaries), of
all regular and periodic reports and all registration statements and
prospectuses, if any, filed by borrower or any of its Restricted
Subsidiaries with any securities exchange or with the Securities and
Exchange Commission or with NASDAQ, and of all press releases and other
written statements made available generally by Borrower or any of its
Restricted Subsidiaries to the public concerning material developments in
the business of Borrower and its Restricted Subsidiaries;
(vi) promptly upon receipt thereof by Borrower, copies of all
reports submitted to Borrower by independent certified public accountants
in connection with each annual, interim or special audit of the books of
Borrower or any of its Restricted Subsidiaries made by such accountants;
(vii) promptly upon any Responsible Officer obtaining knowledge (a)
that a condition or event exists that constitutes, or with the passage of
time or giving of notice or both would constitute, an Event of Default,
(b) that the holder of any Note has given any notice or taken any other
action with respect to a claimed Event of Default under this Agreement,
(c) of any condition or event which could reasonably be expected to have
a material adverse effect on the business, condition (financial or other),
assets, properties, operations or prospects of Borrower or Borrower and
its Restricted Subsidiaries taken as a whole (other than matters of a
general economic or political nature which do not affect Borrower or its
Restricted Subsidiaries uniquely), (d) that any Person has given any
notice to Borrower or any Restricted Subsidiary or taken any other action
with respect to a claimed default or event or condition of the type
referred to in clause (n) of PARAGRAPH 10A, (e) of the institution of
any litigation involving claims against Borrower or any Restricted
Subsidiary in excess of the coverage provided under Borrower's of such
Restricted Subsidiary's insurance policies (treating any portion of such
coverage which is subject to self-insurance or deductibles as a part of
such excess) if the amount of the excess of such claims individually
exceeds $500,000, or, when aggregated with the excess over insurance
coverage of all other outstanding claims, exceeds $1,000,000, (f) of the
initiation by the Securities and Exchange Commission of any proceeding
against Borrower or any Restricted Subsidiary or of any investigation of
Borrower or any Restricted Subsidiary, or (g) of the initiation by any
other governmental agency of any proceeding against Borrower or any
Restricted Subsidiary or of any investigation of Borrower or any
Restricted Subsidiary involving allegations (or which could reasonably
be expected to result in allegations) of material illegal activities or
misconduct on the part of Borrower or any Restricted Subsidiary, an
officer's certificate, executed by an Responsible Officer, specifying
the nature and period of existence of any such condition or event, or
specifying the notice given or action taken by such holder or Person and
the nature of such claimed Event of Default, event or condition, or
specifying the nature of such litigation, proceeding or investigation,
and what action Borrower has taken, is taking or proposes to take with
respect thereto;
47
<PAGE>
(viii) as soon as practicable and in any event within twenty (20)
days after any Responsible Officer obtains knowledge of the occurrence
of any of the following events which would result in a material
liability to Borrower: (a) any event or condition which constitutes a
"reportable event", as such term is defined in section 4043 of ERISA,
whether or not the PBGC has by regulation waived the requirement to
notify it within thirty (30) days, (b) any transaction which constitutes
a "prohibited transaction", as such term is defined in section 4975 of
the Code or section 406 of ERISA, except to the extent that an
administrative or statutory exemption is applicable, (c) the taking of
any action in connection with the termination of any Plan, or
proceedings to terminate any Plan which are pending or threatened, or
(d) any liability to or on account of a Plan under Title IV of ERISA or
the penalty, excise tax or joint and several liability provisions of the
Code relating to employee benefit plans which will or may be incurred
Borrower, any Subsidiary or any ERISA Affiliate, a written notice
specifying the nature thereof, what action Borrower has taken, is taking
or proposes to take with respect thereto, and, when known, any action
taken or threatened by the PBGC, the United States Department of Labor
or the Internal Revenue Service with respect thereto; and
(ix) with reasonable promptness, such other information and data
with respect to Borrower or any of its Subsidiaries as from time to time
may be reasonably requested by Agent or any Lender, including, without
limitation, the same store sales analysis contained in Borrower's
Financials for the period ended March 31, 1994, in the form which
Borrower has previously provided to Agent.
7B. INSPECTION OF PROPERTY. Permit any Person designated by any Lender
or Agent in writing, at such Lender's or Agent's expense (unless an Event of
Default shall have occurred and be continuing, in which case at Borrower's
expense), to visit and inspect any of the properties of Borrower and its
Restricted Subsidiaries, to examine the corporate books and financial records
of Borrower and its Restricted Subsidiaries and make copies thereof or
extracts therefrom and to discuss the affairs, finances and accounts of any
of such corporations with the Responsible Officers or Borrower's independent
certified public accountants, all at such reasonable times during normal
business hours and as often as such Lender or Agent may reasonably request.
7C. COVENANTS TO SECURE NOTES EQUALLY. If Borrower or any Restricted
Subsidiary shall create or assume any Lien upon any of its property or
assets, whether now owned or hereafter acquired, other than Permitted Liens
(unless prior written consent to the creation or assumption thereof shall
have been obtained pursuant to PARAGRAPH 12E(i)), Borrower will make or cause
to be made effective provision whereby the Notes will be secured by such Lien
equally and ratably with any and all other Debt thereby secured so long as
any such other Debt shall be so secured. Securing the Notes by such Lien
shall not, however, constitute a cure or waiver of any Event of Default
resulting from the creation or assumption of the non-permitted Lien.
7D. KEEPING OF BOOKS AND BANK ACCOUNTS. Borrower covenants that it
will, and will cause each of its Restricted Subsidiaries to, (i) keep
separate and proper books of record and
48
<PAGE>
account in which full and correct entries shall be made of all transactions,
including any transactions between Borrower or any Restricted Subsidiary and
any Affiliate, all in accordance with GAAP, and (ii) maintain bank accounts
which are separate and segregated from the bank accounts of any Unrestricted
Subsidiary or Affiliate.
7E. INCORPORATION OF OTHER DEBT COVENANTS. Borrower covenants that if
it is or shall become subject to any operational or financial covenant in any
document evidencing or pertaining to Debt of Borrower which is more favorable
to a lender or other beneficiary than those set forth in ARTICLE 8 hereof,
then (i) this Agreement shall be deemed to be automatically amended to
include such more favorable covenant, (ii) Borrower shall promptly give each
of the Lenders notice thereof, and (iii) if requested by Agent or any Lender,
Borrower shall promptly execute and deliver a written amendment to this
Agreement specifically incorporating such covenant herein. Once any such
covenant has been included in this Agreement (whether or not pursuant to a
written amendment), it may only be modified or eliminated by an amendment
hereto entered into as contemplated by PARAGRAPH 12E hereof.
7F. CORPORATE EXISTENCE, ETC. At all times preserve and keep in full
force and effect its corporate existence, and rights and franchises material
to its business, and those of each of its Restricted Subsidiaries, except as
otherwise specifically permitted by PARAGRAPHS 8C(4) and 8C(5), and will
qualify, and cause each of its Restricted Subsidiaries to qualify, to do
business in any jurisdiction where the failure to do so would have a material
adverse effect on the business, condition (financial or other), assets,
properties, prospects or operations of Borrower or Borrower and its
Restricted Subsidiaries taken as a whole, PROVIDED that the corporate
existence of any Subsidiary may be terminated if, in the good faith judgment
of the Board of Directors of Borrower, such termination is in the best
interests of Borrower.
7G. PAYMENT OF TAXES AND CLAIMS. Pay, and cause of its Subsidiaries to
pay, all income taxes before the same shall become delinquent, except where
such income taxes are being contested in good faith by appropriate
proceedings promptly instituted and diligently conducted, if adequate
reserves therefor have been established on the books of Borrower or its
Subsidiaries in accordance with GAAP. Borrower covenants that it will, and
will cause each of its Subsidiaries to, pay all other taxes, assessments and
other governmental charges imposed upon it or any of its properties or assets
or in respect of any of its franchises, business, income or profits before
any penalty accrues thereon, and all claims (including, without limitation,
claims for labor, services, materials and supplies) for sums which have
become due and payable and which by law have or may become a Lien upon any of
its properties or assets, PROVIDED that no such tax, assessment, charge or
claim need be paid if it is being contested in good faith by appropriate
proceedings promptly instituted and diligently conducted and if such accrual
or other appropriate provision, if any, as shall be required by GAAP shall
have been made therefor.
7H. COMPLIANCE WITH LAWS, ETC. Comply with, and cause each of its
Restricted Subsidiaries to comply with, the requirements of all applicable
laws, rules, regulations and orders of any governmental authority, the
noncompliance with which would materially adversely
49
<PAGE>
affect the business, condition (financial or other), assets, properties,
operations or prospects of Borrower or Borrower and its Restricted
Subsidiaries taken as a whole.
7I. MAINTENANCE OF PROPERTIES; INSURANCE. Maintain or cause to be
maintained in good repair, working order and condition all properties used or
useful in the business of Borrower and its Restricted Subsidiaries and from
time to time will make or cause to be made all appropriate repairs, renewals
and replacements thereof. Borrower will maintain or cause to be maintained,
with financially sound and reputable insurers, (i) insurance with respect to
its properties and business and the properties and business of its Restricted
Subsidiaries against loss or damage of the kinds customarily insured against
by corporations of established reputation engaged in the same or similar
business and similarly situated, of such types and in such amounts as are
customarily carried under similar circumstances by such other corporations
and (ii) life insurance, with Borrower as the owner and named beneficiary, on
the lives of Myron Kunin and Paul Finkelstein, in the amounts, net of any
premium loans thereon and interest due in connection therewith, of not less
than $2,700,000 and $2,400,000, respectively, each of which life insurance
policies shall be free of premium loans (except as specifically provided
herein) and other Liens on or offsets against proceeds payable to Borrower.
7J. COVENANT TO AMEND. Provide each Lender and Agent with at least
five (5) Business Days prior notice of any amendment or modification of the
Note Agreement. Borrower further covenants that it will, if and as requested
by Agent or any Lender, in its sole and absolute discretion, immediately
amend or modify the terms of this Agreement in a similar manner.
7K. MAINTENANCE OF ACCOUNTS. Borrower agrees to maintain its primary
operational accounts with Agent and shall maintain an average balance of
collected, available funds in a non-interest bearing demand deposit account
with Agent (the "Operating Account"). Borrower acknowledges that Agent will
charge Borrower negotiated service charges in effect from time to time for
various services performed by Agent in connection with any aspect of the
relationship between Borrower and Agent. Agent may cause interest and other
amounts payable on the obligations of Borrower to Agent and the Lenders
hereunder to be paid by making a direct charge to the applicable Operating
Account in accordance with the terms hereof. Subject to the provisions of the
Offset Sharing Agreement, Agent shall apply its offset rights to Term Loan A,
Term Loan B and the Revolving Credit Loans pro rata based upon the principal
amount outstanding on each.
8 NEGATIVE COVENANTS
Prior to the Maturity Date and thereafter for so long as any amount is
due or owing to the Lenders hereunder, or any Letter of Credit is
outstanding, unless the Required Lenders shall otherwise consent in writing,
(i) in the case of PARAGRAPHS 8A, 8D, AND 8E below, Borrower shall not and
(ii) in the case of PARAGRAPHS 8B-8C below, Borrower shall not, and shall not
permit any Restricted Subsidiary to:
50
<PAGE>
8A. (i) INTEREST COVERAGE. Permit the Interest Coverage Ratio
determined as at each December 31, March 31, June 30 and September 30 for the
four quarters then ended to be less than 2.0 to 1.0.
(ii) CONSOLIDATED NET WORTH. Permit Consolidated Net Worth at any
time to be less than $60,000,000 plus, to the extent positive, 50% of
Consolidated Net Income for the period (taken as one accounting period)
commencing July 1, 1995 and ending on the last day of the fiscal quarter most
recently ended as of any date of determination (said amount being $76,814,000
as of September 30, 1997).
(iii) TANGIBLE NET WORTH. Permit Tangible Net Worth at any time to
be less than $10,000,000, which Tangible Net Worth amount shall be determined
at each September 30, December 31, March 31 and June 30.
8B. INTENTIONALLY OMITTED.
8C(1) LIENS. Create, assume or suffer to exist any Lien upon any of its
property or assets, whether now owned or hereafter acquired (whether or not
provision is made for the equal and ratable securing of the Notes in
accordance with the provisions of PARAGRAPH 7C), except the following
"Permitted Liens":
(i) Liens for taxes, assessments or governmental charges not yet
due or which are being actively contested in good faith by appropriate
proceedings;
(ii) Liens incidental to the conduct of its business or the
ownership of its property and assets which do not secure Debt and which
do not in the aggregate materially detract from the value of its
property or assets or materially impair the use thereof in the operation
of its business;
(iii) Liens on property or assets of a Restricted Subsidiary to
secure obligations of such Restricted Subsidiary to Borrower or a
Wholly-Owned Restricted Subsidiary;
(iv) Liens which are the subject of an Offset Sharing Agreement;
and
(v) other Liens securing Debt permitted by PARAGRAPH 8C(2),
PROVIDED that Priority Debt shall at no time exceed 15% of Consolidated
Net Worth.
8C(2) DEBT. Create, incur, assume or suffer to exist any Debt, EXCEPT:
(i) Funded Debt evidenced by the Senior Notes;
(ii) Funded Debt which is from time to time outstanding under the
Private Shelf Agreement;
51
<PAGE>
(iii) Current Debt, PROVIDED that any holder of such Current Debt
(other than a holder of Permitted Seller Current Debt) is party to an
Offset Sharing Agreement; and
(iv) other Funded Debt,
provided that at no time shall (a) the ratio of Total Debt to the sum of
Total Debt and Consolidated Net Worth exceed .50 to 1.00 or (b) Priority Debt
exceed 15% of Consolidated Net Worth.
8C(3) INVESTMENTS. Make or permit to remain outstanding any loan or
advance to, or own, purchase or acquire any Stock, obligations or securities
of, or any other interest in, or make any capital contribution to, any Person
(all of the foregoing being referred to herein as "Investments"), EXCEPT that
Borrower or any Restricted Subsidiary may:
(i) make or permit to remain outstanding Investments to or in
any Restricted Subsidiary or any corporation which immediately following
such Investment will be a Restricted Subsidiary;
(ii) own, purchase or acquire marketable direct obligations
issued or unconditionally guaranteed by the United States of America or
any agency thereof and maturing within one (1) year from the date of
acquisition thereof;
(iii) make demand deposits in banks in the ordinary course of
business, and make deposits or own certificates of deposit of United
States dollars maturing within one year from the date of acquisition
thereof issued by commercial banks chartered under the laws of the
United States of America or any state thereof or the District of
Columbia, each having as at any date of determination combined capital,
surplus and undivided profits of not less than $100,000,000 (determined
in accordance with GAAP);
(iv) own, purchase or acquire commercial paper maturing no more
than 270 days from the date of acquisition thereof and rated A-1 by
Standard & Poor's Corporation or P-1 by Moody's Investors Service, Inc.;
(v) make and own Investments in mutual funds which invest at
least 95% of their assets in instruments described in clauses (ii),
(iii) and (iv) of this PARAGRAPH 8C(3);
(vi) endorse negotiable instruments for collection in the
ordinary course of business;
(vii) make or permit to remain outstanding Investments to or in
Unrestricted Subsidiaries, PROVIDED that (a) the aggregate amount (at
original cost) of all Investments in Unrestricted Subsidiaries shall at
no time exceed 10% of Consolidated Net Worth and (b) any Investment made
in an Unrestricted Subsidiary subsequent to June 30, 1995 shall
52
<PAGE>
only be deemed an Investment for purposes of this PARAGRAPH 8C(3) to the
extent it involves a cash or other asset contribution or advance (net of
any return thereof); and
(viii) make or permit to remain outstanding other Investments
(exclusive of Investments in Unrestricted Subsidiaries), PROVIDED that
the aggregate amount thereof shall at no time exceed 5% of Consolidated
Net Worth.
8C(4) SALE OF STOCK AND DEBT OF RESTRICTED SUBSIDIARIES. Sell or
otherwise dispose of, or part with control of, any shares of Stock or Debt of
any Restricted Subsidiary, except to Borrower or a Wholly-Owned Restricted
Subsidiary, and except that all shares of Stock and Debt of any Restricted
Subsidiary at the time owned by or owed to Borrower and all Restricted
Subsidiaries may be sold as an entirety for a cash consideration which
represents the fair value (as determined in good faith by the Board of
Directors of Borrower) at the time of sale of the shares of Stock and Debt so
sold, provided that (i) such sale or other disposition, if treated as a
Transfer of assets of such Restricted Subsidiary, would be permitted by
PARAGRAPH 8C(6), and (ii) at the time of such sale, such Restricted
Subsidiary shall not own, directly or indirectly, any shares of Stock or Debt
of any other Restricted Subsidiary (unless all of the shares of Stock and
Debt of such other Restricted Subsidiary owned, directly or indirectly, by
Borrower and all Restricted Subsidiaries are simultaneously being sold as
permitted by this PARAGRAPH 8C(4)).
8C(5) MERGER AND CONSOLIDATION. Merge or consolidate with or into, acquire
all or substantially all of the assets or capital stock of, or otherwise
combine with, any other Person, EXCEPT that:
(i) any Restricted Subsidiary may merge or consolidate with or into
Borrower, PROVIDED that Borrower is the continuing or surviving
corporation;
(ii) any Restricted Subsidiary may merge or consolidate with or
into another Restricted Subsidiary, PROVIDED that a Wholly-Owned
Restricted Subsidiary shall be the continuing or surviving corporation; and
(iii) Borrower may merge or consolidate with any other corporation,
PROVIDED that (a) either (x) Borrower shall be the continuing or surviving
corporation, or (y) the successor or acquiring corporation shall be a
corporation organized under the laws of any state of the United States of
America and shall expressly assume in writing all of the obligations of
Borrower under this Agreement and on the Senior Notes, including all
covenants herein and therein contained, and such successor or acquiring
corporation shall succeed to and be substituted for Borrower with the same
effect as if it had been named herein as a party hereto, and (b) the
continuing or surviving corporation or the successor or acquiring
corporation, as the case may be, shall be in the same line of business as
Borrower prior to such transaction, and (c) immediately after giving
effect to such transaction, no Default or Event of Default would exist
hereunder (including a Default or Event of Default under PARAGRAPH 8A or
under clause (iii) of PARAGRAPH 8C(2)).
53
<PAGE>
8C(6) TRANSFACTIONS OF ASSETS. Transfer any of its assets EXCEPT that:
(i) any Restricted Subsidiary may Transfer assets to Borrower or a
Wholly-Owned Restricted Subsidiary;
(ii) Borrower or any Restricted Subsidiary may sell inventory in
the ordinary course of business; and
(iii) Borrower or any Restricted Subsidiary may otherwise Transfer
assets, PROVIDED that after giving effect thereto (a) the Aggregate
Percentage of Earnings Capacity Transferred pursuant to this clause (iii)
shall not exceed 10% and (b) the Aggregate Percentage of Total Assets
Transferred pursuant to this clause (iii) shall not exceed 10%.
8C(7) SALE OR DISCOUNT OF RECEIVABLES. Sell with recourse, or discount or
otherwise sell for less than the face value thereof, any of its notes or
accounts receivable.
8C(8) TRANSACTIONS WITH AFFILIATES. Directly or indirectly, engage in any
transaction (including, without limitation, the purchase, sale or exchange of
assets or the rendering of any service) with any Affiliate, unless (i) such
transaction is in the ordinary course of and pursuant to the reasonable
requirements of Borrower's or such Affiliate's business and upon fair and
reasonable terms that are comparable to those which might be obtained in an
arm's-length transaction between unaffiliated parties, and (ii) in the case
of any such transaction in which the aggregate value of the assets or
services involved, or of the payments made, exceeds $1,000,000, such
transaction is authorized by a majority of the independent members of the
Board of Directors of Borrower.
8C(9) RESTRICTED SUBSIDIARY DIVIDEND RESTRICTIONS. Enter into, or
otherwise be subject to, any contract or agreement (including its certificate
or articles of incorporation), which limits the amount of, or otherwise
imposes restrictions on the payment of, dividends by any Restricted
Subsidiary.
8C(10) TAX CONSOLIDATION. Consent to or permit the filing of or be a
party to any consolidated income tax return of Borrower and its Subsidiaries).
8D. TRANSACTIONS BY RESTRICTED SUBSIDIARIES. Permit any Restricted
Subsidiary (i) (either directly, or indirectly by the issuance of rights or
options for, or securities convertible into, such shares) to issue, sell or
otherwise dispose of (i) any shares of any class of its Stock (other than
Common Stock) except to Borrower or another Restricted Subsidiary or (ii) any
shares of Common Stock except (a) to Borrower or another Restricted
Subsidiary and (b) concurrently with dispositions under (a) above to any
minority shareholders of such Restricted Subsidiary to the extent necessary
to maintain such minority shareholders' percentage ownership of outstanding
shares of Common Stock of such Restricted Subsidiary.
54
<PAGE>
8E. COMPLIANCE WITH ERISA. Permit any Subsidiary or ERISA Affiliate to:
(i) engage in any transaction in connection with which Borrower,
any Subsidiary or any ERISA Affiliate could be subject to either a civil
penalty assessed pursuant to section 502(i) of ERISA or a tax imposed by
section 4975 of the Code, terminate or withdraw from any Plan (other than
a Multiemployer Plan) in a manner, or take any other action with respect
to any such Plan (including, without limitation, a substantial cessation
of operations within the meaning of section 4068(f) of ERISA or an
amendment of a Plan within the meaning of section 4041(e) of ERISA), which
could result in any liability of Borrower or any ERISA Affiliate to the
PBGC, to a Plan, to a participant or beneficiary or to a trustee appointed
under section 4042(b) or (c) of ERISA, incur any liability to the PBGC or
a Plan on account of a withdrawal from or a termination of a Plan under
Section 4063 or 4064 of ERISA, incur any liability in respect of employees
or former employees of Borrower, any Subsidiary or any ERISA Affiliate for
post-employment welfare benefits (other than for continuation coverage
required to be provided pursuant to section 4980B of the Code), fail to
make full payment when due of all amounts which, under provisions of any
Plan or applicable law, Borrower, any Subsidiary or any ERISA Affiliate is
required to pay as contributions thereto, or permit to exist any
accumulated funding deficiency, whether or not waived, with respect to any
Plan (other than a Multiemployer Plan), if, in any such case, such penalty or
tax or such liability, or the failure to make such payment, or the
existence of such deficiency, as the case may be, could reasonably be
expected to result in a liability of Borrower, any Subsidiary or any ERISA
Affiliate in excess of $500,000 either alone or when aggregated with all
such events which may occur or exist;
(ii) at any time permit the present value of all benefit
liabilities under all Plans or under any Plan maintained at such time by
Borrower, any of its Subsidiaries or any ERISA Affiliate (other than
Multiemployer Plans) to exceed the current value of the assets of all such
Plans or of any such Plan allocable to such benefit liabilities by more
than $5000,000;
(iii) permit the aggregate complete or partial withdrawal liability
under Title IV of ERISA with respect to Multiemployer Plans incurred by
Borrower, its Subsidiaries or any ERISA Affiliate to exceed $750,000; or
(iv) permit the sum of (a) the amount by which the present value of
all benefit liabilities referred to in clause (ii) of this PARAGRAPH 8E
exceeds the current value of the assets referred to in such clause (ii)
and (b) the amount of the aggregate incurred withdrawal liability referred
to in clause (iii) of this PARAGRAPH 8E to exceed $750,000.
For the purposes of clauses (iii) and (iv) of this PARAGRAPH 8E, the amount
of the withdrawal liability of Borrower, its Subsidiaries and any ERISA
Affiliate at any date shall be the aggregate present value of the amount
claimed to have been incurred less any portion thereof as to which Borrower
reasonably believes, after appropriate consideration of possible adjustments
arising
55
<PAGE>
under sections 4219 and 4221 of ERISA, Borrower, its Subsidiaries and any
ERISA Affiliates will have no liability, provided that Borrower shall
obtain prompt written advice from independent actuarial consultants
supporting such determination. Borrower agrees that at the request of Agent
or any Lender it will (x) once in each calendar year request and obtain a
current statement of withdrawal liability from each Multiemployer Plan and
(y) transmit a copy of such statement to Agent and each Lender, within 21
days after Borrower receives the same. As used in this PARAGRAPH 8E, the term
"accumulated funding deficiency" has the meaning specified in section 302 of
ERISA and section 412 of the Code, the terms "present value" and "current
value" have the meanings specified in section 3 of ERISA and the term
"benefit liabilities" has the meaning specified in section 4001(a)(16) of
ERISA.
9 REPRESENTATIONS, COVENANTS AND WARRANTIES
9A. ORGANIZATION; SUBSIDIARIES. Borrower is a corporation duly organized
and existing in good standing under the laws of the State of Minnesota, each
Restricted Subsidiary is duly organized and existing in good standing under
the laws of the jurisdiction in which it is incorporated, Borrower is and
each Restricted Subsidiary is duly qualified to do business in any
jurisdiction where the failure to do so could reasonably be expected to have
a material adverse effect on the business, condition (financial or other),
assets, properties, prospects or operations of Borrower or Borrower and its
Restricted Subsidiaries taken as a whole, and Borrower has and each
Restricted Subsidiary has the corporate power to own its respective property
and to carry on its respective business as now being conducted, and, in the
case of Borrower, to execute and deliver this Agreement and the Notes and
otherwise carry out the transactions contemplated by this Agreement. This
Agreement and the Notes have been duly authorized by all necessary corporate
action on the part of Borrower and, when executed and delivered by Borrower,
will constitute legal, valid and binding obligations of Borrower. EXHIBIT
1A(ii) attached hereto lists all Restricted Subsidiaries and all Unrestricted
Subsidiaries. All of the outstanding stock of each Restricted Subsidiary is
owned by Borrower or a Restricted Subsidiary, except as otherwise disclosed
in EXHIBIT 1A(ii). All of the outstanding shares of Stock of Borrower and
each Restricted Subsidiary are validly issued, fully paid and non-assessable.
9B. FINANCIAL STATEMENTS AND CONDITION. The financial statements and
balance sheet (including the notes thereto) of Borrower as at June 30, 1997,
and the related statements of income and equity and statements of cash flows
of Borrower for the fiscal year then ended, audited by Coopers & Lybrand,
independent certified public accounts of Borrower, and the internally
prepared financial statements and balance sheet (including the notes thereto)
of Borrower as at August 31, 1997, and the related statements of income and
equity and statements of cash flows of Borrower for such period then ended
are complete and correct and fairly present the financial condition of
Borrower as at such dates and the results of the operations of Borrower for
the year and period ended, respectively, on such date, in accordance with
GAAP, and since June 30, 1997, there has been no material adverse change in
Borrower's business, condition (financial or other), assets, properties,
operations or prospects. Except as set forth on EXHIBIT 9B hereto, Borrower,
as of the date of this Agreement, has no material contingent obligations,
56
<PAGE>
long-term leases or material forward or long-term commitments which are not
reflected in the foregoing statements (and the related notes hereto).
9C. ACTIONS PENDING. There is no action, suit, investigation or
proceeding pending or, to the knowledge of Borrower, threatened against
Borrower or any of its Restricted Subsidiaries, or any properties or rights
of Borrower or any of its Restricted Subsidiaries, by or before any court,
arbitrator or administrative or governmental body which might result in any
material adverse change in the business, condition (financial or other),
assets, properties, operations or prospects of Borrower or Borrower and its
Restricted Subsidiaries taken as a whole.
9D OUTSTANDING DEBT. Neither Borrower nor any of its Restricted
Subsidiaries has outstanding any Debt except Debt of any Restricted
Subsidiary to Borrower or any Wholly-Owned Restricted Subsidiary and Debt
listed in the Schedule of Debt attached hereto as EXHIBIT 9D. There exists no
default under the provisions of any instrument evidencing such Debt or of any
agreement relating thereto.
9E. TITLE TO PROPERTIES. Each of Borrower and its Restricted Subsidiaries
has good and indefeasible title to its respective real properties (other than
properties which it leases) and good title to all of its other respective
properties and assets, including the properties and assets reflected in the
balance sheets included in the Financials as at June 30, 1997 (other than
properties and assets disposed of in the ordinary course of business),
subject to no Lien of any kind except Permitted Liens. All leases necessary
in any material respect for the conduct of the respective business of
Borrower and its Restricted Subsidiaries are valid and subsisting and are in
full force and effect; neither Borrower nor any of its Restricted
Subsidiaries has assigned or created any Lien on its leasehold interest under
any such lease: Borrower and its Restricted Subsidiaries have performed all
of their material obligations under all of such leases and no material
default by Borrower or any of its Restricted Subsidiaries, or by the lessor
thereunder, exists with respect to any such lease; Borrower and its
Restricted Subsidiaries enjoy undisturbed possession of the leased property
under all of such leases; and, to the knowledge of any Responsible officer,
no claim has been made by any lessor under any such lease or by any other
Person having an interest in the leased property which would have any
material probability of interfering with such undisturbed possession under
any such lease prior to the scheduled termination thereof. All of the
outstanding capital stock of each Restricted Subsidiary is validly issued,
fully paid and non-assessable, and all such capital stock owned by Borrower
or any Restricted Subsidiary is owned free and clear of any Lien of any kind.
9F. TAXES. Borrower has and each of its Restricted Subsidiaries has filed
(or caused to be filed) all Federal, State and other income tax returns which
are required to be filed, and each has paid all taxes as shown on such
returns and on all assessments received by it to the extent that such taxes
have become due, except such taxes as are being contested in good faith by
appropriate proceedings and for which adequate reserves have been established
in accordance with GAAP. The charges, accruals and reserves on the books of
Borrower, and reflected in the Financials, are adequate under GAAP. There are
no Federal or state income taxes payable by
57
<PAGE>
any member of the affiliated group (as such term is defined in section
1504(a) of the Code) included or to be included in such consolidated income
tax returns for any such income tax period, and neither Borrower nor any of
its Restricted Subsidiaries will have any liability for the payment of any
such Federal or state income taxes for any such income tax period or for any
Federal or state income taxes for any other tax period payable by any other
member of any affiliated group (as so defined) other than Borrower and its
Restricted Subsidiaries.
9G. CONFLICTING AGREEMENTS AND OTHER MATTERS. Neither Borrower nor any
of its Restricted Subsidiaries is a party to any contract or agreement or
subject to any charter or other corporate restriction which materially and
adversely affects its business, condition (financial or other), assets,
properties, operations or prospects. Neither the execution nor delivery of
this Agreement or the Notes, nor fulfillment of nor compliance with the terms
and provisions hereof and of the Notes will conflict with, or result in a
breach of the terms, conditions or provisions of, or constitute a default
under, or result in any violation of, or result in the creation of any Lien
upon any of the properties or assets of Borrower or any of its Restricted
Subsidiaries pursuant to, the charter or by-laws of Borrower or any of its
Restricted Subsidiaries, any award of any arbitrator or any agreement
(including any agreement with stockholders), instrument, order, judgment,
decree, statute, law, rule or regulation to which Borrower or any of its
Restricted Subsidiaries is subject. Neither Borrower nor any of its Restricted
Subsidiaries is a party to, or otherwise subject to any provision contained
in, any instrument evidencing Debt of Borrower or such Restricted Subsidiary,
any agreement relating thereto or any other contract or agreement (including
its charter) which limits the amount of, or otherwise imposes restrictions on
the incurring of, Funded Debt of Borrower of the type to be evidenced by the
Notes.
9H. REGULATION U. Neither Borrower nor any of its Restricted
Subsidiaries is engaged in the business of extending credit for the purpose
of purchasing or carrying margin stock (within the meaning of Regulation U
issued by the Board of Governors of the Federal Reserve System), and no
proceeds of any Loan or advance made by Lenders to Borrower hereunder will be
used to purchase or carry any margin stock or to extend credit to others for
the purpose of purchasing or carrying any margin stock.
9I. ERISA. (a) Neither Borrower, any Restricted Subsidiary nor any
ERISA Affiliate has breached the fiduciary rules of ERISA or engaged in any
transaction in connection with which Borrower, any Restricted Subsidiary or
any ERISA Affiliate could be subjected to a suit for damages, a civil penalty
assessed pursuant to section 502(i) of ERISA or a tax imposed by section 4975
of the Code, in any such case which could reasonably be expected to have a
material adverse effect on Borrower and its Restricted Subsidiaries taken as
a whole.
(b) No Plan nor any trust created under any Plan has been terminated
within the meaning of Title IV of ERISA since September 2, 1974 under
circumstances that could result in liability which could be materially
adverse to Borrower and its Restricted Subsidiaries taken as a whole. Other
than premiums due and owing in the normal course, no liability to the PBGC
has been incurred and remains unsatisfied or its expected by Borrower to be
incurred with respect to any Plan by Borrower or any ERISA Affiliate which is
or would be materially adverse to
58
<PAGE>
Borrower and its Restricted Subsidiaries taken as a whole. There has been no
reportable event (within the meaning of section 4043(b) of ERISA) or any
other event or condition with respect to any Plan which presents a risk of
termination of any such Plan by the PBGC under circumstances which in any case
could result in liability which would be materially adverse to Borrower and
its Restricted Subsidiaries taken as a whole.
(c) Neither Borrower nor any ERISA Affiliate has within the past six
years contributed, or had any obligation to contribute, to a single employer
plan that has at least two contributing sponsors not under common control or
ceased operations at a Facility under circumstances which could result in
liability under section 4068(f) of ERISA.
(d) There are no Multiemployer Plans to which Borrower or any ERISA
Affiliate is or has ever been obligated to contribute under Title IV of ERISA.
(e) No accumulated funding deficiency (as defined in section 302 of
ERISA and section 412 of the Code), whether or not waived, exists with
respect to any Plan (other than a Multiemployer Plan). Full payment has been
made within the time required under section 412 of the Code of all amounts
that Borrower or any of its ERISA Affiliates is required under the terms of
each Plan and applicable law to have paid as contributions to such Plan as of
the date hereof. Each Plan satisfies the minimum funding standard of section
412 of the Code.
(f) The present value of the benefit liabilities (within the meaning
of Title IV of ERISA) under all Plans (other than Multiemployer Plans)
determined as of Borrower's most recently ended fiscal year and on the basis
of PBGC assumptions required under Title IV of ERISA did not exceed the
current value of the assets of all such Plans determined as of such date.
(g) Neither Borrower nor any ERISA Affiliate has engaged in any
transaction that could result in the incurrence of any liabilities under
section 4069 or section 4212 of ERISA.
(h) Borrower is not a party in interest with respect to any employee
benefit plan, except for the Regis Corporation Employee Profit Sharing Plan,
the Regis Sure-Care Medical Plan, Regis Corporation Employee Stock Purchase
Plan, Regis Corporation Employee Stock Option Plan and Regis Corporation
Executive Stock Award Plan, and securities of Borrower are not employer
securities with respect to any such plan other than the above-listed plans.
For such purpose, the term "employee benefit plan" shall have the meaning
assigned to such term in section 3 of ERISA and the term "employer security"
shall have the meaning assigned to such term in Section 407(d)(1) of ERISA.
The execution and delivery of this Agreement and the Notes will not involve
any transaction which is subject to the prohibitions of section 406 of ERISA
or in connection with which a tax could be imposed pursuant to section 4975
of the Code.
59
<PAGE>
9J. GOVERNMENTAL CONSENT. No consent, approval or authorization of, or
declaration or filing with, any govenmental authority is required in
connection with the execution or delivery of this Agreement, the consummation
of the transactions contemplated hereby or the delivery of this Agreement and
the Notes, or the fulfillment of and compliance with the terms and provisions
hereof and of the Notes.
9K. STATUS UNDER CERTAIN FEDERAL STATUTES. (i) Borrower is not (a) an
"investment company" or a company "controlled" by an "investment company",
within the meaning of the Investment Company Act of 1940, as amended, (b) a
"holding company" or a "subsidiary company" of a "holding company", or an
"affiliate" of a "holding company" or of a "subsidiary company" of a "holding
company", as such terms are defined in the Public Utility Holding Company Act
of 1935, as amended, or (c) a "public utility" as such term is defined in the
Federal Power Act, as amended; and (ii) neither Borrower nor any of its
Restricted Subsidiaries is a "rail carrier or a person controlled by or
affiliated with a rail carrier", within the meaning of Title 49, U.S.C., and
Borrower is not a "carrier" to which 49 U.S.C. Section 11301(b)(1) is
applicable.
9L. FOREIGN ASSETS CONTROL REGULATIONS, ETC. Neither Loans made by the
Lenders nor Borrower's use of the proceeds thereof as contemplated by this
Agreement or the Other Agreements will violate the Foreign Assets Control
Regulations, the Transaction Control Regulations, the Cuban Assets Control
Regulations, the Foreign Funds Control Regulations, the Iranian Assets
Control Regulations, the Nicaraguan Assets Control Regulations, the South
African Transactions Regulations, the Libyan Sanctions Regulations, of the
United States Treasury Department (31 C.F.R., Chapter V, as amended) or the
restrictions set forth in Executive Orders No. 8389, 9193, 12544 (Libya),
12543 (Libya), 12722 (Iraq), 12723 (Kuwait), 12724 (Iraq) or 12725 (Kuwait),
as amended, of the President of the United States of America or of any rules
or regulations issued thereunder.
9M. INTELLECTUAL PROPERTY. Borrower and each of its Restricted
Subsidiaries owns, is licensed under, or otherwise has the rights to, all
patents, trademarks, service-marks, trade names, copyrights, technology,
know-how and processes, free from any burdensome restrictions, used in or
necessary for the conduct of their repetitive businesses as currently
conducted and as proposed to be conducted.
9N. ENVIRONMENTAL MATTERS. Borrower and each of its Restricted
Subsidiaries have obtained and are in compliance with all permits, licenses,
and other authorizations that are required under all Environmental Laws,
including laws relating to emissions, discharges, releases, or threatened
releases of contaminants into the environment (including, without limitation,
ambient air, surface water, ground water, or land) or otherwise relating to
the manufacture, processing, distribution, use, treatment, storage disposal,
transport, or handling of contaminants, except to the extent that failure to
have any such permit, license, or other authorization does not have a
material adverse effect on the business, condition (financial or other),
assets, properties, operations or prospects of Borrower and its Restricted
Subsidiaries, taken as a whole.
60
<PAGE>
9O. AFFILIATE TRANSACTIONS AND AGREEMENTS. EXHIBIT 90 attached hereto
correctly describes the nature and terms (including contracts and corporate
policies) of all continuing transactions or agreements between the Borrower
and each Restricted Subsidiary or any Affiliate other than a Restricted
Subsidiary. There exists no default under the provisions of any such
agreement or violation of any corporate policy with respect to any such
transaction.
9P. ACCURACY OF INFORMATION. All factual information taken as a whole
heretofore or contemporaneously furnished by or on behalf of Borrower to
Agent and Lenders for purposes of or in connection with this Agreement or any
transaction contemplated hereby (excluding factual information superseded or
replaced prior to the date hereof) is, and all other factual information
(taken as a whole) hereafter furnished by or on behalf of Borrower to Agent
and Lenders will be, true and accurate in every material respect on the date
as of which such information is dated or certified, and Borrower has not
omitted and will not omit any material fact necessary to prevent such
information from being false or misleading. Borrower has disclosed to Agent,
in writing, all facts which Borrower believes might materially and adversely
affect the business, condition (financial or other), assets, properties,
operations, or prospects of Borrower or any Affiliate or which Borrower
believes might materially and adversely affect any material portion of
Borrower's or any Borrower's properties, or Borrower's ability to perform its
obligations under this Agreement or the Other Agreements.
9Q. SECURITIES TRANSACTION. No proceeds of any Loan or advance made by
Lender to Borrower hereunder will be used to acquire any security in any
transaction which is subject to Section 13 or 14 of the Securities Exchange
Act of 1934, as amended.
9R. COMPLIANCE WITH LAWS. Borrower and all Subsidiaries are in
compliance with all laws, orders, regulations and ordinances of all federal,
foreign, state and local governmental authorities binding upon or affecting
the business, operation or assets of Borrower and such Subsidiaries
including, without limitation, zoning or other ordinances relating to
permissive non-conforming uses of property, except where the failure to be in
compliance would not have a material adverse effect on the business,
condition (financial or other), assets, properties, operations or prospects
of Borrower or any of its Subsidiaries taken as a whole.
9S. LABOR. None of the employees of Borrower or any of its Restricted
Subsidiaries is subject to any collective bargaining agreement, and there are
no strikes, work stoppages, election or decertification petitions or
proceedings, unfair labor charges, equal employment opportunity proceedings,
wage payment or material unemployment compensation proceedings, material
workmen's compensation proceedings or other material labor or
employee-related controversies pending or threatened involving Borrower, its
Restricted Subsidiaries and any of their respective employees, except for any
of the foregoing which would not in the aggregate have a material adverse
effect on the business, condition (financial or other), assets, properties,
operations or prospects of Borrower and its Restricted Subsidaries, taken as
a whole.
9T. SOLVENCY. As of the date of this Agreement, Borrower has capital
sufficient to carry on its business and transactions and all businesses and
transactions in which it is about to
61
<PAGE>
engage and is solvent and able to pay its debts as they mature and Borrower
owns property the fair saleable value of which is greater than the amount
required to pay Borrower's Debt. No transfer of property is being made and no
Debt is being incurred in connection with the transactions contemplated by
this Agreement with the intent to hinder, delay or defraud either present or
future creditors of Borrower or any of its Subsidiaries.
9U. SECURITIES LAWS FILINGS. Borrower has previously made available to
the Lenders true and complete copies of its (i) proxy statements relating to
all meetings of stockholders (whether special or annual) during the calendar
years 1991, 1992, 1993, 1994, 1995 and 1996, and (ii) all other reports, as
amended, or filings, as amended, required to be filed under the Securities
Exchange Act of 1934, as amended, by Borrower with any applicable
governmental authority since March 31, 1991, including without limitation
Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current
Reports on Form 8-K (such reports and other filings, together with any
amendments thereto, are collectively referred to as the "Securities Laws
Filings"). As of their respective dates, and to the best knowledge of
Borrower, the Securities Laws Filings were in compliance in all material
respects with the requirements of their respective forms and were true and
complete and did not contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading.
9V. INSURANCE. EXHIBIT 9V sets forth a complete and accurate description
of all policies of insurance that will be in effect as of the date of this
Agreement for Borrower and its Subsidiaries as required pursuant to
PARAGRAPH 5J of the Note Agreement. As of the date of this Agreement,
Borrower and its Subsidiaries are adequately insured under such policies, no
notice of cancellation has been received with respect to such policies and
Borrower and its Subsidiaries are in compliance with all conditions contained
in such policies.
9W. CORPORATE NAMES. Except as disclosed on EXHIBIT 9W, as of the date of
this Agreement, Borrower has no assumed corporate names and is not doing
business under any corporate name other than "Regis Corporation."
10 DEFAULT
10A. EVENTS OF DEFAULT. The occurrence of any one of the following
events shall constitute a default ("Event of Default") by Borrower under this
Agreement: (a) if Borrower fails or neglects to perform, keep or observe any
covenant or agreement contained in PARAGRAPHS 7A, 7B, 7C or 7D, or any
subparagraph of PARAGRAPH 8 of this Agreement which is required to be
performed, kept or observed by Borrower; (b) if Borrower fails or neglects to
perform, keep or observe any covenant or agreement contained in PARAGRAPH 7E
through PARAGRAPH 7J, inclusive, and such failure or neglect shall not be
cured within ten (10) days after Borrower obtains actual knowledge thereof;
(c) if Borrower fails or neglects to perform, keep or observe any other
covenant or agreement contained in this Agreement or the Other Agreements and
such failure or neglect shall not be cured within thirty (30) days after
Borrower obtains actual knowledge
62
<PAGE>
thereof; (d) if any representation or warranty made by Borrower herein or in
any Other Agreement is breached or is false or misleading in any material
respect when made, or any exhibit, schedule, certificate, financial
statement, report, notice or other writing furnished by Borrower or any of
its Responsible Officers to Agent or any Lender is false or misleading in any
material respect on the date as of which the facts therein set forth are
stated or certified; (e) if Borrower fails to pay Borrower's Liabilities when
due and payable or declared due and payable; provided, however, that in the
case of the payment of interest, costs, fees and expenses payable hereunder,
such failure continues for five (5) days after any such payment is due; (f)
if any of the property of Borrower or its Restricted Subsidiaries having an
aggregate value in excess of $500,000 is attached, seized, subjected to a
writ or distress warrant or is levied upon, or comes within the possession of
any receiver, trustee, custodian or assignee for the benefit of creditors and
the same is not terminated or dismissed within twenty (20) days thereafter;
(g) if a petition under any section or chapter of the Bankruptcy Reform Act
of 1978, as amended, or any similar law or regulation shall be filed by
Borrower or any of its Restricted Subsidiaries or if Borrower or any of its
Restricted Subsidiaries shall make an assignment for the benefit of creditors
or if any case or proceeding is filed by Borrower or any of its Restricted
Subsidiaries for their respective dissolution or liquidation; (h) if Borrower
or any of its Restricted Subsidiaries is enjoined, restrained or in any way
prevented by court order from conducting all or any material part of its
business affairs or if a petition under any section or chapter of the
Bankruptcy Reform Act of 1978, as amended, or any similar law or regulation
is filed against Borrower or any of its Restricted Subsidiaries or if any
case or proceeding is filed against Borrower or any of its Restricted
Subsidiaries for its dissolution or liquidation and such injunction,
restraint or petition is not dismissed or stayed within thirty (30) days
after the entry or filing thereof; (i) if an application is made by Borrower
or any of its Restricted Subsidiaries for the appointment of a receiver,
trustee or custodian for any assets of Borrower or its Restricted
Subsidiaries; (j) if an application is made by any Person other than Borrower
or its Restricted Subsidiaries for the appointment of a receiver, trustee or
custodian for the property of the Borrower or its Restricted Subsidiaries
having an aggregate value in excess of $500,000 and the same is not dismissed
within thirty (30) days after the application therefor; (k) if a notice of
lien, levy, or assessment is filed of record with respect to any of the
property of the Borrower or its Restricted Subsidiaries having an aggregate
value in excess of $500,000 by the United States or any department, agency or
instrumentality thereof or by any state, county, municipal or other
governmental agency, including without limitation the PBGC, or if any taxes
or debts owing at any time or times thereafter to any one of them becomes a
lien or encumbrance upon any of the property of the Borrower or its
Restricted Subsidiaries having an aggregate value in excess of $500,000 and
the same is not released within thirty (30) days after the same becomes a
lien or encumbrance; (l) if Borrower or any Restricted Subsidiary becomes
insolvent or is generally unable to pay its debts as they become due; (m) a
final judgment in an amount in excess of $500,000 is rendered against
Borrower or any Restricted Subsidiary and, within thirty (30) days after
entry thereof, such judgment is not discharged or execution thereof stayed
pending appeal, or within thirty (30) days after the expiration of any such
stay, such judgment is not discharged; (n) the Borrower or any Restricted
Subsidiary defaults beyond any period of grace provided with respect thereto
in any payment of principal of or premium or interest on any other obligation
for money borrowed (or any Capitalized Lease Obligation, any obligation under
a conditional sale
63
<PAGE>
or other title retention agreement, any obligation issued or assumed as full
or partial payment for property whether or not secured by a purchase money
mortgage or any obligation under notes payable or drafts accepted
representing extensions of credit), or the Borrower or any Restricted
Subsidiary fails to perform or observe any other agreement, term or condition
contained in any agreement under which any such obligation is created (or if
any other event thereunder or under any such agreement shall occur and be
continuing) and the effect of such failure or other event is to cause, or to
permit the holder or holders of such obligation (or a trustee on behalf of
such holder or holders) to cause, such obligation to become due prior to any
stated maturity, PROVIDED that the aggregate amount of all obligations as to
which such a payment default shall occur and be continuing or such a failure
or other event causing or permitting acceleration shall occur and be
continuing exceeds $500,000; (o) the occurrence of a material breach, a
default or an event of default by Borrower under any of the Other Agreements
after any cure period applicable to any such default or event of default has
expired; (p) the occurrence of a Change of Control; and (q) the occurrence of
a "Default" or "Event of Default" (as defined by the Note Agreement) by
Borrower under the Note Agreement (after the expiration of any applicable
cure periods thereunder).
10B. ACCELERATION AND TERMINATION OF LOANS. Upon the occurrence of an
Event of Default, (a) upon notice by Agent to Borrower, given in Agent's
discretion or at the direction of the Required Lenders, Borrower's
Liabilities shall immediately become due and payable, unless there shall have
occurred an Event of Default under subparagraphs 10A(f),(g),(h),(i),(j),(k)
or (l), in which case Borrower's Liabilities shall automatically become due
and payable without notice or demand, and (b) without notice or demand, and
without notice by Agent to or demand by Agent of Borrower, the Revolving
Credit, Term Loan A and Term Loan B Commitments shall terminate and the
Lenders shall have no further obligation to and may then forthwith cease
advancing monies or extending credit to or for the benefit of Borrower under
this Agreement and the Other Agreements.
10C. OTHER REMEDIES. If any Event of Default shall occur and be
continuing, each of Lenders and Agent may proceed to protect and enforce its
rights under this Agreement and the Notes by exercising such remedies as are
available to the Lenders and Agent in respect thereof under applicable law,
either by suit in equity or by action at law, or both, whether for specific
performance of any covenant or other agreement contained in this Agreement or
in aid of the exercise of any power granted in this Agreement. No remedy
conferred in this Agreement or the Other Agreements upon the Agent or any
Lender is intended to be exclusive of any other remedy, and each and every
such remedy shall be cumulative and shall be in addition to every other
remedy conferred herein or now or hereafter existing at law or in equity or
by statute or otherwise.
64
<PAGE>
11 THE AGENT
11A. APPOINTMENT, POWERS AND IMMUNITIES. Each Lender hereby irrevocably
appoints and authorizes Agent to act as its agent hereunder and under the
Other Agreements with such powers as are specifically delegated to Agent by
the terms of this Agreement and of the Other Agreements, together with such
other powers as are reasonably incidental thereto. Agent (as such term is
used shall include its Affiliates and its own and its Affiliates' officers,
directors, employees and agents): (a) shall have no duties or
responsibilities except those expressly set forth in this Agreement and in
the Other Agreements, and shall not by reason of this Agreement or the Other
Agreements be a trustee for any Lender; (b) shall not be responsible to the
Lenders for any recitals, statements, representations or warranties contained
in this Agreement or the Other Agreements, or in any certificate or other
document referred to or provided for in, or received by any of them under,
this Agreement or the Other Agreements, or for the value, validity,
effectiveness, genuineness, enforceability or sufficiency of this Agreement
or the Other Agreements or any other document referred to or provided for
herein or therein or for any failure by Borrower or any other Person to
perform any of its obligations hereunder or thereunder; (c) shall not be
required to initiate or conduct any litigation or collection proceedings
hereunder or under the Other Agreements; and (d) shall not be responsible for
any action taken or omitted to be taken by it hereunder or under the Other
Agreements or under any other document or instrument referred to or provided
for herein or therein or in connection herewith or therewith, except for its
gross negligence or willful misconduct, as determined by a final
non-appealable judgment. Agent may employ agents and attorneys-in-fact and
shall not be responsible for the negligence or misconduct of any such agents
or attorneys-in-fact selected by it in good faith. Agent may deem and treat
the payee of each of the Notes as the holder thereof for all purposes hereof
unless and until a written notice of the assignment or transfer thereof shall
have been filed with Agent, together with the written consent of the Borrower
to such assignment or transfer, and Agent shall have consented to such
assignment or transfer.
11B. RELIANCE BY AGENT. Agent shall be entitled to rely upon any
certification, notice or other communication (including any thereof by
telephone, telex, telegram or cable) believed by it to be genuine and correct
and to have been signed or sent by or on behalf of the proper Person or
Persons, and upon advice and statements of legal counsel, independent
accountants and other experts selected by Agent in good faith. As to any
matters not expressly provided for by this Agreement or the Other Agreements,
Agent shall in all cases be fully protected in acting, or in refraining from
acting, hereunder and thereunder in accordance with instructions signed by
the Required Lenders, and such instructions of the Required Lenders and any
action taken or failure to act pursuant thereto shall be binding on all of
the Lenders.
11C. DEFAULTS. Agent shall not be deemed to have knowledge or notice of
the occurrence of an Event of Default (other than the non-payment of principal
of or interest on Loans) unless Agent has received notice from a Lender or
Borrower specifying such Event of Default and stating that such notice is a
"Notice of Default". In the event that Agent receives such a notice of the
occurrence of an Event of Default, Agent shall give prompt notice thereof to
the Lenders (and shall give each Lender prompt notice of each such
non-payment). Agent
65
<PAGE>
shall (subject to PARAGRAPH 11G hereof) take such action with respect to such
Event of Default as shall be directed by the Required Lenders, PROVIDED THAT,
unless and until Agent shall have received such directions, Agent may (but
shall not be obligated to) take such action, or refrain from taking such
action, with respect to such Event of Default as it shall deem advisable in
the best interest of the Lenders.
11D. RIGHTS AS A LENDER. With respect to its Commitments and the Loans
made by it, Agent (and any successor acting as Agent) in its capacity as a
Lender hereunder shall have the same rights and powers hereunder as any other
Lender and may exercise the same as though it were not acting as Agent, and
the term "Lender" or "Lenders" shall, unless the context otherwise indicates,
include Agent in its individual capacity. Agent (and any successor acting as
agent) and its Affiliates may (without having to account therefor to any
Lender) accept deposits from, lend money to and generally engage in any kind
of banking, trust or other business with Borrower (and any of its Affiliates)
as if it were not acting as Agent, and Agent and its Affiliates may accept
fees and other consideration from Borrower for services in connection with
this Agreement or otherwise without having to account for the same to the
Lenders.
11E. INDEMNIFICATION. The Lenders agree to indemnify Agent (to the
extent not reimbursed under PARAGRAPHS 12L and 12Q hereof, but without
limiting the obligations of Borrower under said PARAGRAPHS 12L and 12Q, and
including in any event any payments under any indemnity which Agent is
required to issue), ratably in accordance with the aggregate principal amount
of the Loans made by the Lenders (or, if no Loans are at the time
outstanding, ratably in accordance with their respective Commitments), for
any and all liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements of any kind and nature
whatsoever which may be imposed on, incurred by or asserted against Agent in
any way relating to or arising out of this Agreement or the Other Agreements
or any other documents contemplated by or referred to herein or therein or
the transactions contemplated hereby (including, without limitation, the
costs and expenses which Borrower is obligated to pay under PARAGRAPHS 12L
and 12Q hereof, and including also any payments under any indemnity which
Agent is required to issue, but excluding normal administrative costs and
expenses incident to the performance of its agency duties hereunder) or the
enforcement of any of the terms hereof or thereof or of any such other
documents, provided that no Lender shall be liable for any of the foregoing
to the extent they arise from the gross negligence or willful misconduct of
the party to be indemnified.
11F. NON-RELIANCE ON AGENT AND OTHER LENDERS. Each Lender agrees that it
has, independently and without reliance on Agent or any other Lender, and
based on such documents and information as it has deemed appropriate, made
its own credit analysis of Borrower, its Restricted Subsidiaries and its
Affiliates and decision to enter into this Agreement and that it will,
independently and without reliance upon 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 analysis and decisions in taking or not taking
action under this Agreement or the Other Agreements. Agent shall not be
required to keep itself informed as to the performance or
66
<PAGE>
observance by Borrower of this Agreement or the Other Agreements or any other
document referred to or provided for herein or therein or to inspect the
properties or books of the Borrower, its Restricted Subsidiaries or its
Affiliates. Except for notices, reports and other documents and information
expressly required to be furnished to the Lenders by Agent hereunder, Agent
shall not have any duty or responsibility to provide any Lender with any
credit or other information concerning the affairs, financial condition or
business of the Borrower, its Restricted Subsidiaries or its Affiliates which
may come into the possession of Agent or any of its Affiliates.
11G. FAILURE TO ACT. Except for action expressly required of Agent
hereunder and under the Other Documents, Agent shall in all cases be fully
justified in failing or refusing to act hereunder and thereunder unless it
shall receive further assurances to its satisfaction from the Lenders of their
indemnification obligations under PARAGRAPH 11E hereof against any and all
liability and expense which may be incurred by it by reason of taking or
continuing to take any such action.
11H. RESIGNATION OR REMOVAL OF AGENT. Subject to the appointment and
acceptance of a successor Agent as provided below, Agent may resign at any
time by giving notice thereof to the Lenders and Borrower, and may be removed
by the Required Lenders. Upon any such resignation or removal, the Lenders
shall have the right to appoint a successor Agent, which successor Agent
shall be reasonably acceptable to Borrower and Borrower agrees that such
consent shall not be unreasonably withheld or delayed, provided that
Borrower's consent shall not be required following the occurrence of an Event
of Default and during the continuance thereof. If no successor Agent shall
have been so appointed by the Lenders and shall have accepted such
appointment within thirty (30) days after the retiring Agent's giving of
notice of resignation, then the retiring Agent may, on behalf of the Lenders,
appoint a successor Agent, which shall be a bank with a combined capital and
surplus of at least $500,000,000. Upon the acceptance of any appointment as
Agent hereunder by a successor Agent, such successor Agent shall thereupon
succeed to and become vested with all the rights, powers, privileges and
duties of the retiring Agent, and the retiring Agent shall be discharged from
its duties and obligations hereunder. After any retiring Agent's resignation
hereunder as Agent, the provisions of this ARTICLE 11 shall continue in
effect for its benefit in respect of any actions taken or omitted to be taken
by it while it was acting as Agent.
12 GENERAL
12A. PAYMENT APPLICATION DATE. Any check, draft, or similar item of
payment by or for the account of Borrower delivered to Agent or any Lender on
account of Borrower's Liabilities shall be applied by Agent or such Lender on
account of Borrower's Liabilities on the date final settlement thereof is
reflected by irrevocable credit to Agent or such Lender, as applicable.
12B. STATEMENT OF ACCOUNT. Each statement of account by Agent or any
Lender delivered to Borrower relating to Borrower's Liabilities shall be
presumed correct and accurate,
67
<PAGE>
absent manifest error, and shall constitute an account stated between Borrower
and Agent or such Lender unless, within ninety (90) days after Borrower's
receipt of said statement, Borrower delivers to Agent or such Lender, by
registered or certified mail addressed to Agent or such Lender at its Address
for Notices specified on the signature pages hereto, written objection
thereto specifying the error or errors, if any, contained in any such
statement.
12C. MANNER OF APPLICATION; WAIVER OF SETOFF PROHIBITION. Borrower
waives the right to direct the application of any and all payments at any
time or times hereafter received by Agent or any Lender on account of
Borrower's Liabilities and Borrower agrees that Agent or any Lender shall
have the right, in its absolute and sole discretion, to apply and re-apply
any and all such payments in such manner as Agent or such Lender may deem
advisable, notwithstanding any entry by Agent or such Lender upon any of its
books and records. Borrower further waives any right under or benefit of any
law that would restrict or limit the right or ability of Agent or any Lender
to obtain payment of Borrower's Liabilities, including any law that would
restrict or limit Agent or such Lender in the exercise of its right to
appropriate any indebtedness owing from Agent or such Lender to Borrower and
any deposits or other property of Borrower in the possession or control of
Agent or such Lender and apply the same toward or setoff the same against the
payment of Borrower's Liabilities.
12D. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. Borrower covenants,
warrants and represents to the Lenders that all representations and
warranties of Borrower contained in this Agreement and the Other Agreements
shall be true at the time of Borrower's execution of this Agreement and the
Other Agreements and shall survive the execution, delivery and acceptance
thereof by the parties thereto and the closing of the transactions described
therein or related thereto.
12E. AMENDMENT AND RESTATEMENT; AMENDMENT; ASSIGNMENT.
(i) This Agreement amends and restates in its entirety the
Original Credit Agreement and, upon effectiveness of this Agreement, the
terms and provisions of the Original Credit Agreement shall, subject to this
PARAGRAPH 12E(i), be superseded hereby and thereby. All references to "Credit
Agreement" contained in the Other Agreements delivered in connection with the
Original Credit Agreement shall be deemed to refer to this Amended and
Restated Credit Agreement. Notwithstanding the amendment and restatement of
the Original Credit Agreement by this Agreement, the Loans owing to the
Lenders by Borrower under the Original Credit Agreement remain outstanding as
of the date hereof and constitute continuing Borrower's Liabilities
hereunder. The Loans shall in all respects be continuing, and this Agreement
shall not be deemed to evidence or result in a novation or repayment and
reborrowing of the Loans. In furtherance of and without limiting the
foregoing, from and after the date of this Agreement, the terms, conditions
and covenants governing the Loans, the Revolving Credit Commitment, the Term
Loan A Commitment and the Term Loan B Commitment shall be solely as set forth
in this Agreement, which shall supersede the Original Credit Agreement in its
entirety.
68
<PAGE>
(ii) This Agreement and the Other Agreements may not be
modified, altered or amended except by an agreement in writing signed by
Borrower, Agent and the Required Lenders, or by Borrower and Agent acting
with the consent of the Required Lenders, and no provision of this Agreement
may be waived except with the consent of the Required Lenders or by the Agent
acting with the consent of the Required Lenders; PROVIDED, that: (a) no
amendment or waiver shall, unless signed by each Lender directly affected
thereby, increase or decrease any Commitment of any Lender, reduce the amount
of or rate applicable to or postpone the date for payment of, any principal
of or interest on any Loan or of any fee payable hereunder, alter, amend or
modify the provisions of this SECTION 12E, the definitions of Required
Lenders, Required Revolving Credit Lenders or Required Term Loan B Lenders,
or any condition precedent set forth in Sections 4A(6) and 4B hereof or the
provisions of Sections 4(A)(4), 7C, 8C(1), 8C(2), 8C(4), 8C(5) and 8C(10), or
affect the number of Lenders required to take any action hereunder; (b) any
amendment of PARAGRAPH 3L hereof, or which increases the obligations of L/C
Issuer, shall require the consent of the L/C Issuer; (c) any amendment of
ARTICLE 11 hereof, or which increases the obligations of the Agent hereunder,
shall require the consent of the Agent; (d) any provision of ARTICLE 5 hereof
(Term Loan A) may be amended or waived by a writing signed by Borrower, Agent
and the Required Term Loan A Lenders; and (e) any provision of Article 6
hereof (Term Loan B) may be amended or waived by a writing signed by
Borrower, Agent and the Required Term Loan B Lenders.
(iii) Borrower may not sell, assign or transfer this Agreement,
or the Other Agreements or any portion thereof, including without limitation
Borrower's rights, titles, interests, remedies, powers and/or duties
hereunder or thereunder without the prior written consent of all of the
Lenders and the Agent.
(iv) Any Lender may at any time sell, assign or transfer any of
its Loan, its Note or its Commitments, subject to approval of Borrower, Agent
and L/C Issuer, which shall not be unreasonably withheld or delayed,
provided that Borrower's consent shall not be required following the
occurrence of an Event of Default and during the continuance thereof. Upon
written notice to Borrower and Agent of an assignment permitted by the
provisions of the preceding sentence (which notice shall identify the
assignee Lender, the amount of the assigning Lender's Commitment and Loan
assigned in detail reasonably satisfactory to Agent) and upon the
effectiveness of any such assignment, the assignee shall have, to the extent
of such assignment (unless otherwise provided in such assignment), the
obligations, rights and benefits of a Lender hereunder holding the Commitment
and Loan (or portions thereof) assigned to it (in addition to the Commitment
and Loan, if any, theretofore held by such assignee) and the assigning Lender
shall, to the extent of such assignment, be released from the Commitment (or
portions thereto) so assigned.
(v) A Lender may sell or agree to sell to one or more other
Persons a participation in all or any part of any Loan held by it or Loans
made or to be made by it, in which event each such participant shall be
entitled to the rights and benefits of PARAGRAPH 7A hereof with respect to
its participation in such Loan as if (and Borrower shall be directly
obligated to such participant under such provisions as if) such participant
were a "Lender" for
69
<PAGE>
purposes of said Paragraph, but shall not have any other rights or benefits
under this Agreement or the Other Agreements (the participant's rights
against such Lender in respect of such participation to be those set forth in
the agreement (the "Participation Agreement") executed by such Lender in
favor of the participant). All amounts payable by Borrower to any Lender
hereunder shall be determined as if such Lender had not sold or agreed to
sell any participation in such Loan and as if such Lender were funding all of
such Loan in the same way that it is funding the portion of such Loan in
which no participation have been sold. In no event shall a Lender that sells
a participation be obligated to the participant under the Participation
Agreement to take or refrain from taking any action hereunder or under the
Other Agreements except that such Lender may agree in the Participation
Agreement that it will not, without the consent of the participant, agree to
(i) the increase or extension of the term, or the extension of time or the
waiver of any requirement for the reduction or termination, of such Lender's
Commitment, (ii) the extension of any date fixed for the payment of principal
of or interest on the related Loan or Loans or any portion of any fees
payable to the participant, or (iii) the reduction of any payment of
principal thereof.
(vi) Anything in this PARAGRAPH 12E to the contrary
notwithstanding, any Lender may assign and pledge all or any portion of its
Loans to any Federal Reserve Bank as collateral security pursuant to
Regulation A of the Board of Governors of the Federal Reserve System and any
operating circular issued by such Federal Reserve Bank. No such assignment
shall release assigning Lender from its obligations hereunder.
(vii) A Lender may furnish any information concerning Borrower in
the possession of such Lender from time to time to assignees and participants
(including prospective assignees and participants).
12F. NO WAIVER. Any Lender's or Agent's failure at any time or times
hereafter to require strict performance by Borrower of any provision of this
Agreement shall not waive, affect or diminish any right of such Lender or
Agent thereafter to demand strict compliance and performance therewith. Any
suspension or waiver by any Lender or Agent of an Event of Default by
Borrower under this Agreement or the Other Agreements shall not suspend,
waive or affect any other Event of Default by Borrower under this Agreement
or the Other Agreements, whether the same is prior or subsequent thereto and
whether of the same or of a different type. None of the undertakings,
agreements, warranties, covenants or representations of Borrower contained in
this Agreement or the Other Agreements and no Event of Default by Borrower
under this Agreement or the Other Agreements shall be deemed to have been
suspended or waived by any Lender or Agent unless such suspension or waiver
is by an instrument in writing specifying such suspension or waiver and given
pursuant to the requirements of PARAGRAPH 12E(ii) hereof,
12G. SEVERABILITY. If any provision of this Agreement or the Other
Agreements or the application thereof to any Person or circumstance is held
invalid or unenforceable, the remainder of this Agreement and the Other
Agreements and the application of such provision to other
70
<PAGE>
Persons or circumstances will not be affected thereby and the provisions of
this Agreement and the Other Agreements shall be severable in any such
instance.
12H. SUCCESSORS AND ASSIGNS. This Agreement and the Other Agreements
shall be binding upon and inure to the benefit of the successors and assigns
of Borrower, the Lenders and Agent. This provision, however, shall not be
deemed to modify PARAGRAPH 12E hereof.
12I. CONFLICT WITH OTHER AGREEMENTS. Except as otherwise provided in
the Other Agreements by specific reference to the applicable provision of
this Agreement, if any provision contained in this Agreement is in conflict
with, or inconsistent with, any provision in the Other Agreements, the
provision contained in this Agreement shall govern and control.
12J. NO IMPAIRMENT BY TERMINATION. Except to the extent provided to
the contrary in this Agreement and in the Other Agreements, no termination or
cancellation (regardless of cause or procedure) of this Agreement, the Other
Agreements or the Note Agreement shall in any way affect or impair the powers,
obligations, duties, rights and liabilities of Borrower, the Lenders or Agent
in any way or respect relating to (a) any transaction or event occurring
prior to such termination or cancellation, and/or (b) any of the
undertakings, agreements, covenants, warranties and representations of
Borrower contained in this Agreement, the Other Agreements or the Note
Agreement. All such undertakings, agreements, covenants, warranties and
representations shall survive such termination or cancellation.
21K. WAIVERS. Except as otherwise specifically provided in this
Agreement, Borrower waives any and all notice or demand which Borrower might
be entitled to receive with respect to this Agreement or the Other Agreements
by virtue of any applicable statute or law and waives presentment, demand and
protest and notice of presentment, protest, default, dishonor, non-payment,
maturity, release, compromise, settlement, extension or renewal of any or all
commercial paper, accounts, contract rights, documents, instruments, chattel
paper and guaranties at any time held by the Lenders or Agent on which
Borrower may in any way be liable and hereby ratifies and confirms whatever
the Lenders or Agent may do in this regard.
12L. COSTS, FEES AND EXPENSES RELATED TO AGREEMENT AND OTHER
AGREEMENTS. In accordance with this Agreement on or prior to the date hereof
and thereafter upon demand by Agent or L/C Issuer therefor, Borrower shall
pay or reimburse Agent and L/C Issuer for all costs, fees and expenses
incurred by Agent or L/C Issuer, or for which Agent or L/C Issuer
becomes obligated, in connection with the negotiation, preparation and
consummation of this Agreement and the Other Agreements, including but not
limited to, reasonable attorneys' fees, costs and expenses; search fees,
costs and expenses; and all taxes payable in connection with this Agreement
or the Other Agreements. That portion of Borrower's Liabilities consisting of
costs, expenses or advances to be reimbursed by Borrower to Agent or L/C
Issuer pursuant to this Agreement or the Other Agreements which are not paid
on or prior to the date hereof shall be payable by Borrower to Agent or L/C
Issuer on demand.
71
<PAGE>
12M. RELEASE. Borrower releases each Lender, L/C Issuer and Agent from
any and all causes of action, claims or rights which Borrower may now or
hereafter have for, or which may arise from, any loss or damage caused by or
resulting from any other act or omission to act on the part of any Lender,
L/C Issuer or Agent, its officers, agents or employees, except in each
instance for willful misconduct and gross negligence.
12N. GOVERNING LAW. This Agreement and the Other Agreements are
submitted by Borrower to Agent (for the Lenders' and Agent's acceptance or
rejection thereof) at Agent's principal place of business as an offer by
Borrower to borrow monies from the Lenders now and from time to time
hereafter and shall not be binding upon the Lenders or become effective until
and unless accepted by the Lenders, in writing, at Agent's place of business.
If so accepted by the Lenders, this Agreement and the Other Agreements shall
be deemed to have been made at Agent's principal place of business. This
Agreement and the Other Agreements shall be governed and controlled by the
laws of the State of Illinois as to interpretation, enforcement, validity,
construction, effect, choice of law, and in all other respects including, but
not limited to, the legality of the interest rate and other charges.
12O. NOTICES. All notices, consents, requests, demands and other
communications hereunder shall be in writing and shall be deemed duly given
to any party or parties (a) upon delivery to the address of the party or
parties as specified in the "Address for Notices" below such party or
parties' name on the signature pages hereof if delivered in person or by
courier or if sent by certified or registered mail (return receipt
requested), or (b) upon dispatch if transmitted by telecopy or other means of
facsimile transmission, in any case to the party or parties at the telecopy
numbers specified on the same, or to such other address or telecopy number as
any party may hereafter designate by written notice in the aforesaid manner.
12P. FORUM; AGENT; VENUE; JURY TRIAL WAIVER. TO INDUCE THE LENDERS TO
ACCEPT THIS AGREEMENT AND THE OTHER AGREEMENTS, BORROWER, IRREVOCABLY AGREES
THAT, SUBJECT TO AGENT'S SOLE AND ABSOLUTE ELECTION, ALL ACTIONS OR
PROCEEDINGS IN ANY WAY, MANNER, OR RESPECT, ARISING OUT OF OR FROM OR RELATED
TO THIS AGREEMENT OR THE OTHER AGREEMENTS SHALL BE LITIGATED ONLY IN COURTS
HAVING SITUS WITHIN CHICAGO, ILLINOIS. BORROWER HEREBY CONSENTS AND SUBMITS
TO THE JURISDICTION OF ANY LOCAL, STATE, OR FEDERAL COURT LOCATED WITHIN SAID
CITY AND STATE. BORROWER HEREBY IRREVOCABLY APPOINTS AND DESIGNATES NATIONAL
REGISTERED AGENTS INC. AS BORROWER'S DULY AUTHORIZED AGENT FOR ACCEPTANCE OF
SERVICE OF LEGAL PROCESS. BORROWER AGREES THAT SERVICE OF SUCH PROCESS UPON
SUCH PERSON SHALL CONSTITUTE PERSONAL SERVICE OF SUCH PROCESS UPON BORROWER.
BORROWER HEREBY WAIVES ANY RIGHT IT MAY HAVE TO TRANSFER OR CHANGE THE VENUE
OF ANY LITIGATION BROUGHT AGAINST BORROWER BY ANY LENDER OR AGENT IN
ACCORDANCE WITH THIS PARAGRAPH. BORROWER HEREBY IRREVOCABLY WAIVES THE RIGHT
TO TRIAL BY JURY WITH RESPECT TO ANY ACTION IN WHICH BORROWER IS A PARTY.
72
<PAGE>
12Q. OTHER COSTS, FEES AND EXPENSES. If at any time or times hereafter
any Lender or Agent or L/C Issuer: (a) employs counsel for advice or other
representation (i) with respect to this Agreement or the Other Agreements,
(ii) to represent such Lender or Agent or L/C Issuer in any litigation,
contest, dispute, suit or proceeding or to commence, defend, or intervene or
to take any other action in or with respect to any litigation, contest,
dispute, suit or proceeding (whether instituted by such Lender, Agent, L/C
Issuer, Borrower or any other person) in any way relating to this Agreement,
the Other Agreements or Borrower's affairs, or (iii) to enforce any rights of
such Lender or Agent or L/C Issuer against Borrower or any other Person which
may be obligated to such Lender or Agent or L/C Issuer by virtue of this
Agreement or the Other Agreements; and/or (b) attempts to or enforces any of
such Lenders' or Agent's or L/C Issuer's rights or remedies under this
Agreement or the Other Agreements, the reasonable costs and expenses incurred
by Lender in any manner or way with respect to the foregoing, shall be part
of Borrower's Liabilities, payable by Borrower to such Lender or Agent or L/C
Issuer on demand. Without limiting the generality of the foregoing, such
expenses, costs, charges and fees include: (i) attorneys' fees, costs and
expenses; (ii) accountants' fees, costs and expenses; (iii) court costs and
expenses; (iv) court reporter fees, costs and expenses (v) long distance
telephone charges; (vi) telegram charges; or (vii) expenses for travel,
lodging and food.
12R. REVIVAL. To the extent that Agent or any Lender receives any
payment on account of Borrower's Liabilities and any such payment(s) are
subsequently invalidated, declared to be fraudulent or preferential, set
aside, subordinated and/or required to be repaid to a trustee, receiver or
any other party under any bankruptcy act, state or federal law, common law or
equitable cause, then, to the extent of such payment(s) and/or proceeds
received, Borrower's Liabilities or part thereof intended to be satisfied
shall be revived and continue in full force and effect, as if such payment(s)
and/or proceeds had not been received by Agent or any Lender and applied on
account of Borrower's Liabilities.
12S. ACKNOWLEDGMENTS. Borrower acknowledges that (i) it has been advised
by counsel of its choice with respect to this Agreement and the transactions
contemplated hereby, (ii) each of the waivers set forth herein was knowingly
and voluntarily made; and (iii) the obligations of the Lenders and Agent
hereunder, including the obligation to advance and lend funds to Borrower in
accordance herewith, shall be strictly construed and shall be expressly
subject to Borrower's compliance in all respects with the terms and
conditions herein set forth.
12T. HEADINGS. Article and Paragraph headings used in this Agreement are
for convenience only and shall not effect the construction or interpretation
of this Agreement.
12U. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original and all of which
taken together shall constitute one and the same instrument.
12V. EFFECTIVENESS. This Agreement shall become effective upon the
execution and deliver to Agent of counterparts of this Agreement by Borrower,
Lenders and Agent.
[SIGNATURE PAGES FOLLOW]
73
<PAGE>
IN WITNESS WHEREOF, this Agreement has been duly executed as of the day
and year specified at the beginning hereof.
REGIS CORPORATION
By: /s/ Randy L. Pearce
-------------------------------------
Name: Randy L. Pearce
-------------------------------
Title: Senior Vice President-Finance
and CFO
-----------------------------
Address for Notices:
7201 Metro Boulevard
Minneapolis, Minnesota 55439
Telecopier No.: (612) 947-7900
Attention: Paul Finkelstein, President
S-1
<PAGE>
REVOLVING CREDIT COMMITMENT: LASALLE NATIONAL BANK, as Lender and
$15,625,000 as Agent
By: /s/ Christine M. Williamson
TERM LOAN A COMMITMENT: ------------------------------------
$10,000,000 Name: Christine M. Williamson
------------------------------
Title: AVP
-----------------------------
Lending Office for all Loans:
TERM LOAN B COMMITMENT: 135 South LaSalle Street
$9,375,000 Chicago, Illinois 60603
Address for Notices:
135 South LaSalle Street
Chicago, Illinois 60603
Telecopier No.: (312) 904-6457
Attention: Ms. Pat L. Laughlin
Senior Vice President
REVOLVING CREDIT COMMITMENT: BANQUE PARIBAS, as Lender and as L/C
$9,375,000 Issuer
By: /s/ Karen E. Coons
TERM LOAN A COMMITMENT: -----------------------------------
- -0- Name: KAREN E. COONS
------------------------------
Title: VICE PRESIDENT
-----------------------------
By: /s/ Rowena P. Festin
-----------------------------------
TERM LOAN B COMMITMENT: Name: ROWENA P. FESTIN
$5,625,000 ------------------------------
Title: VICE-PRESIDENT
-----------------------------
227 West Monroe Street, Suite 3300
Chicago, Illinois 60606
Address for Notices:
227 West Monroe Street, Suite 3300
Chicago, Illinois 60606
Telecopier No.: (312) 853-6020
Attention: Ms. Karen E. Coons
Vice President
S-2
<PAGE>
EXHIBIT 1A(i)
- -------------------------------------------------------------------------------
REGIS CORPORATION
$55,000,000
11.52% SENIOR NOTES DUE JUNE 30, 1998
-------------------------------------------------------------------------
NOTE AGREEMENT
-------------------------------------------------------------------------
Dated as of June 21, 1991
- -------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
-----------------
Page
----
1. AUTHORIZATION OF ISSUE OF NOTES ...........................1
2. PURCHASE AND SALE OF NOTES; CLOSING .......................1
3. CONDITIONS OF CLOSING .....................................2
4. PREPAYMENTS ...............................................5
5. AFFIRMATIVE COVENANTS .....................................7
6. NEGATIVE COVENANTS .......................................15
7. EVENTS OF DEFAULT ........................................30
8. REPRESENTATIONS, COVENANTS AND WARRANTIES ................34
9. REPRESENTATIONS OF THE PURCHASERS ........................44
10. DEFINITIONS ..............................................45
11. MISCELLANEOUS ............................................58
PURCHASER SCHEDULE
EXHIBIT A - Form of Note
EXHIBIT B-1 - Opinion of Counsel to the Company
EXHIBIT B-2 - Opinion of Debevoise & Plimpton
EXHIBIT C - Schedule of Debt
EXHIBIT D - Schedule of Liens
EXHIBIT E - Schedule of Subsidiaries
EXHIBIT F - Transactions with Affiliates
EXHIBIT G - Schedule of Investments
EXHIBIT H - Offset Sharing Agreement
<PAGE>
REGIS CORPORATION
5000 Normandale Road
Edina, Minnesota 55436
As of June 21, 1991
To all of the Purchasers
listed in the attached
Purchaser Schedule
Gentlemen:
The undersigned, Regis Corporation, a Minnesota corporation (herein
called the "Company"), hereby agrees with all of you (herein collectively
called the "Purchasers") as follows:
1. AUTHORIZATION OF ISSUE OF NOTES. The Company will authorize
the issue and sale of its senior promissory notes (herein called the "NOTES")
in the aggregate principal amount of $55,000,000, to be dated the date of
issue thereof, to mature June 30, 1998, to bear interest on the unpaid
balance thereof from the date thereof until the principal thereof shall have
become due and payable at 11.52% per annum and on overdue principal, premium
and interest at the rate specified therein, and to be substantially in the
form of Exibit A attached hereto. The term "Notes" as used herein shall
include each Note delivered pursuant to any provision of this Agreement and
each Note delivered in substitution or exchange for any such Note pursuant to
any such provision.
2. PURCHASE AND SALE OF NOTES; CLOSING. The Company hereby
agrees to sell to each Purchaser and, subject to the terms and conditions
herein set forth, each Purchaser severally agrees to purchase from the Company
the aggregate principal amount of Notes set forth opposite such Purchaser's
name in the Purchaser Schedule attached hereto at 100% of such aggregate
principal amount. The purchase and sale of the Notes shall take place at the
offices of Debevoise & Plimpton, 875 Third Avenue, New York, New York 10022
at a closing (the "CLOSING" ) to be held on June 28, 1991 or on such other
date as all Purchasers and the Company may agree (the date of the Closing
being referred to herein as the "CLOSING DATE"). At the Closing, the Company
will deliver to each Purchaser one or more Notes registered in such
Purchaser's name, or in the name of its nominee specified in the Purchaser
Schedule,
<PAGE>
evidencing the aggregate principal amount of Notes to be purchased by it and
in the denomination or denominations specified in the Purchaser Schedule,
against payment of the purchase price therefor by transfer of immediately
available funds for credit to the Company's account at First Bank - St. Paul,
Acct. #801-21-05-244, ABA #091-0000-22. If at the Closing the Company shall
fail for any reason to tender to any Purchaser any of the Notes to be
purchased by it as provided above in this paragraph 2, or if any of the
conditions specified in paragraph 3 with respect to the Closing shall not
have been fulfilled to the satisfaction of any Purchaser or have been waived
by it, it shall, at its election, be relieved of all further obligations under
this Agreement, without thereby waiving any other rights it may have by reason
of such failure or such non-fulfillment. The sales to the respective
Purchasers are to be separate and several sales.
3. CONDITIONS OF CLOSING. The obligation of each Purchaser to
purchase and pay for the Notes to be purchased by it hereunder is subject to
the fulfillment to its satisfaction, on or before the Closing Date, of the
following conditions:
3A. OPINIONS OF COUNSEL. Such Purchaser shall have received a
favorable opinion, dated the Closing Date and addressed to it, (i) from
Phillips, Gross & Aaron, P.A., counsel to the Company, in substantially the
form set forth in Exhibit B-1 and covering such other matters incident to
such transactions as it may reasonably request; and (ii) from Debevoise &
Plimpton, special counsel for the Purchasers in connection with the
transactions contemplated by this Agreement, in substantially the form set
forth in Exhibit B-2. To the extent that any opinion referred to above in
this paragraph 3A is rendered in reliance upon the opinion of any other
counsel, such Purchaser shall have received a copy of such opinion of such
other counsel, dated the Closing Date and addressed to such Purchaser, or a
letter from such other counsel, dated the Closing Date and addressed to such
Purchaser, authorizing it to rely on such other counsel's opinion. The
Company hereby directs the counsel referred to in clause (i) of this
paragraph 3A to deliver to each Purchaser the opinions referred to in such
clauses and authorizes each Purchaser to rely thereon.
3B. REPRESENTATIONS AND WARRANTIES; COMPLIANCE; NO DEFAULT. The
representations and warranties contained
2
<PAGE>
in paragraph 8 shall be true on and as of the Closing Date, except to the
extent of changes caused by the transactions herein contemplated; there shall
exist on the Closing Date no Event of Default or Default; the Company shall
have performed and complied with all agreements and conditions contained in
this Agreement required to be performed or complied with by it at or prior to
the Closing; and the Company shall have delivered to such Purchaser an
Officer's Certificate, dated the Closing Date, certifying as to the matters
set forth in this paragraph 3B.
3C. REVOLVING CREDIT AGREEMENTS. The Revolving Credit Agreements
shall have been duly executed and delivered by all parties thereto, shall not
have been amended, and shall be in full force and effect; and such Purchaser
shall have received true and correct copies thereof. The aggregate principal
amount of the Revolving Credit Loans outstanding on the Closing Date (after
giving effect to Revolving Credit Loans made on the Closing Date) shall be
less than (i) $10,600,000 if the Company shall have made to Curtis Squire,
Inc. the payment in the amount of up to $1,500,000 for the estimate of the
final payment due pursuant to the tax sharing agreement between the Company
and Curtis Squire, Inc., or (ii) $9,100,000 if the Company shall not have
made such payment.
3D. INITIAL PUBLIC OFFERING. The underwriting agreements
providing for the issuance and sale by the Company and purchase by the
underwriters for distribution of an aggregate of not less than 3,200,000
shares (excluding shares issuable pursuant to the over-allotment option) of
Common Stock of the Company, for an aggregate purchase price of not less than
$35,000,000 (net of underwriting discounts and commissions) (herein called
the "Initial Public Offering"), shall have been duly executed and delivered
by the Company and such underwriters substantially simultaneously with or
prior to the execution and delivery of this Agreement; and substantially
simultaneously with the Closing the Company shall have sold to the
underwriters pursuant to such underwriting agreements all of such shares of
Common Stock and received a check representing such aggregate purchase price.
3E. RETIREMENT OF OUTSTANDING DEBT. The proceeds of the issue
and sale of the Notes and of the issue and sale of the Common Stock
distributed in the Initial Public Offering shall be applied, substantially
simultaneously with the Closing, to the retirement of outstand-
3
<PAGE>
ing Debt of the Company and its Subsidiaries listed under the heading "Paid
at Closing" in the Schedule of Debt attached hereto as Exhibit C, and upon
completion of the Closing, the Company and its Restricted Subsidiaries shall
have no Debt outstanding (on a consolidated basis) other than the Notes,
Revolving Credit Loans and Debt listed under the heading "Continuing
Obligations" in such Schedule of Debt.
3F. SALE OF NOTES TO PRUDENTIAL. If such Purchaser is a
Purchaser other than Prudential, the Company shall have sold to Prudential
the Notes to be purchased by it at the Closing and shall have received payment
in full therefor.
3G. ACCOUNTANTS' LETTER. Such Purchaser shall have received a
letter from Coopers & Lybrand, addressed to such Purchaser, stating that such
firm has reviewed the provisions for federal and state income taxes,
including applicable reserves, contained in the latest audited consolidated
financial statements of the Company for the fiscal year ended June 30, 1990
and that, in the opinion of such firm, such financial statements contain
adequate reserves for the payment of all federal and state income taxes for
the fiscal year then ended and all prior fiscal years, including taxes payable
by any other member of any affiliated group (as such term is defined in section
1504(a) of the Code) in the consolidated income tax return of which the
Company or any Subsidiary has been included.
3H. PURCHASE PERMITTED BY APPLICABLE LAWS. The offering,
issuance, purchase and sale of, and payment for, the Notes to be purchased by
such Purchaser on the Closing Date on the terms and conditions herein
provided (including the use of the proceeds of such Notes by the Company)
shall not violate any applicable law or governmental regulation (including,
without limitation, section 5 of the Securities Act or Regulation G, T or X
of the Board of Governors of the Federal Reserve System) and shall not
subject such Purchaser to any tax, penalty, liability or other onerous
condition under or pursuant to any applicable law or governmental regulation,
and such Purchaser shall have received such certificates or other evidence as
it may request to establish compliance with this condition.
3I. PROCEEDINGS. All corporate and other proceedings taken or to
be taken in connection with the
4
<PAGE>
transactions contemplated hereby and all documents incident thereto
shall be satisfactory in substance and form to such Purchaser, and such
Purchaser shall have received all such counterpart originals or
certified or other copies of such documents as it may reasonably
request.
3J. OFFSET SHARING AGREEMENT. Each of the Purchasers and
each of the banks which are parties to the Revolving Credit Agreements
shall have executed and delivered an Offset Sharing Agreement, in the
form attached hereto as Exhibit H (the "Offset Sharing Agreement"), and
the Offset Sharing Agreement shall be in full force and effect.
4. PREPAYMENTS. The Notes shall be subject to prepayment with
respect to the required prepayments specified in paragraph 4A and also
under the circumstances set forth in paragraphs 4B.
4A. REQUIRED PREPAYMENTS. Until the Notes shall be paid in full,
the Company shall apply to the prepayment of the Notes, without premium, the
sum of (i) $5,000,000 on June 30, 1993, (ii) $7,000,000 on June 30, 1994,
(iii) $9,000,000 on June 30, 1995, (iv) $10,000,000 on June 30, 1996, and (v)
$10,000,000 on June 30, 1997, and such principal amounts of the Notes,
together with interest thereon to the prepayment dates, shall become due on
such prepayment dates. No prepayment made by the Company pursuant to any
other provision of this paragraph 4 shall reduce or otherwise affect the
obligation of the Company to make any prepayment required by this paragraph
4A. The remaining principal amount of the Notes, together with interest
accrued thereon, shall become due on the maturity date of the Notes.
4B. OPTIONAL PREPAYMENT WITH YIELD-MAINTENANCE PREMIUM. The
Notes shall be subject to prepayment, in whole at any time or from time
to time in part (in integral multiples of $1,000,000), at the option of
the Company, at 100% of the principal amount so prepaid plus interest
accrued thereon to the prepayment date and the Yield-Maintenance
Premium, if any, with respect to each Note prepaid. The principal of
the Notes prepaid pursuant to this paragraph 4B shall be applied to
mandatory payments and prepayments of principal of the Notes in inverse
order of maturity.
5
<PAGE>
4C. NOTICE OF OPTIONAL PREPAYMENT. The Company shall give
the holder of each Note to be prepaid in whole or in part pursuant to
paragraph 4B irrevocable written notice of any such prepayment at least
30 days prior to the prepayment date, specifying (i) the date of such
prepayment and (ii) the principal amount of the Notes, and the Notes
held by each such holder, being prepaid, and stating that such
prepayment is to be made pursuant to paragraph 4B. Notice of
prepayment having been given as aforesaid, the principal amount of the
Notes specified in such notice, together with interest thereon to the
prepayment date and the Yield-Maintenance Premium, if any, shall become
due and payable on such prepayment date. So long as any Purchaser shall
hold any Note, the Company shall, on or before the day on which it
gives written notice of any prepayment pursuant to paragraph 4B,
advise the officer of such Purchaser's organization designated for such
purpose in the Purchaser Schedule by telephone of the principal amount
of the Notes to be prepaid and the prepayment date.
4D. PARTIAL PAYMENTS PRO RATA. Upon any partial prepayment
of the Notes, the principal amount so prepaid shall be allocated to all
Notes at the time outstanding (including, for the purpose of this
paragraph 4D only, all Notes prepaid, retired or purchased or otherwise
acquired by the Company or any of its Subsidiaries or Affiliates other
than by prepayment pursuant to paragraph 4A or 4B of this Agreement or
the Other Note Agreement) in proportion to the respective outstanding
principal amounts thereof.
4E. RETIREMENT OF NOTES. The Company shall not, and shall
not permit any of its Subsidiaries or Affiliates to, prepay or
otherwise retire in whole or in part prior to their stated final
maturity (other than by prepayment pursuant to paragraph 4A or 4B or
upon acceleration of such final maturity pursuant to paragraph 7A), or
purchase or otherwise acquire, directly or indirectly, Notes held by
any holder unless the Company or such Subsidiary or Affiliate shall have
offered to prepay or otherwise retire or purchase or otherwise
acquire, as the case may be, the same proportion of the aggregate
principal amount of Notes held by each other holder of Notes at the
time outstanding upon the same terms and conditions. Any Notes prepaid
or otherwise retired or purchased or otherwise acquired by the Company
or any of its Subsidiaries or Affiliates shall not be deemed to be
6
<PAGE>
outstanding for any purpose under this Agreement, except as provided in
Paragraph 4D.
5. AFFIRMATIVE COVENANTS.
5A. FINANCIAL STATEMENTS. The Company covenants that it will
deliver to each Significant Holder in duplicate:
7
<PAGE>
7. EVENTS OF DEFAULT.
7A. ACCELERATION. If any of the following events shall occur and be
continuing for any reason whatsoever (and whether such occurrence shall be
voluntary or involuntary or come about or be effected by operation of law or
otherwise):
(i) the Company defaults in the payment of any principal of or
premium on any Note when the same shall become due, either by the terms
thereof or otherwise as herein provided; or
(ii) the Company defaults in the payment of any interest on any Note
for more than 5 days after the date due; or
(iii) the Company or any Restricted Subsidiary defaults beyond any
period of grace provided with respect thereto in any payment of
principal of or premium or interest on any other obligation for money
borrowed (or any Capitalized Lease Obligation, any obligation under a
conditional sale or other title retention agreement, any obligation
issued or assumed as full or partial payment for property whether or not
secured by a purchase money mortgage or any obligation under notes
payable or drafts accepted representing extensions of credit), or the
Company or any Restricted Subsidiary fails to perform or observe any
other agreement, term or condition contained in any agreement under
which any such obligation is created (or if any other event thereunder
or under any such agreement shall occur and be continuing) and the effect
of such failure or other event is to cause, or to permit the holder or
holders of such obligation (or a trustee on behalf of such holder or
holders) to cause, such obligation to become due prior to any stated
maturity, PROVIDED that the aggregate amount of all obligations as to
which such a payment default shall occur and be continuing or such a
failure or other event causing or permitting acceleration shall occur and
be continuing exceeds $500,000; or
8
<PAGE>
(iv) any representation or warranty made by the Company herein or in
any writing furnished in connection with or pursuant to this Agreement
shall be false in any material respect on the date as of which made; or
(v) the Company fails to perform or observe any agreement contained
in paragraph 5c or 6; or
(vi) the Company fails to perform or observe any other agreement,
term or condition contained herein and such failure shall not be
remedied within 30 days after any Responsible Officer obtains actual
knowledge thereof; or
(vii) the Company or any Restricted Subsidiary makes an assignment
for the benefit of creators or is generally not paying its debts as such
debts become due; or
(viii) any decree or order for relief in respect of the Company or any
Restricted Subsidiary is entered under any bankruptcy, reorganization,
compromise, arrangement, insolvency, readjustment of debt, dissolution
or liquidation or similar law, whether now or hereafter in effect
(herein called the "Bankruptcy Law"), of any jurisdiction; or
(ix) the Company or any Restricted Subsidiary petitions or applies
to any tribunal for, or consents to, the appointment of, or taking
possession by, a trustee, receiver, custodian, liquidator or similar
official of the Company or any Restricted Subsidiary, or of any
substantial part of the assets of the Company or any Restricted
Subsidiary, or commences a voluntary case under the Bankruptcy Law of
the United States or any proceedings (other than proceedings for the
voluntary liquidation and dissolution of a Restricted Subsidiary)
relating to the Company or any Restricted Subsidiary under the
Bankruptcy Law of any other jurisdiction; or
(x) any such petition or application is filed, or any such
proceedings are commenced, against the Company or any Restricted
Subsidiary and the Company or such Restricted Subsidiary by any act
indicates its approval thereof, consent thereto or acquiescence therein,
or an order, judgment or decree is entered
9
<PAGE>
appointing any such trustee, receiver, custodian, liquidator or similar
official, or approving the petition in any such proceedings, and such
order, judgment or decree remains unstayed and in effect for more than
30 days; or
(xi) any order, judgment or decree is entered in any proceedings
against the Company decreeing the dissolution of the Company and such
order, judgment or decree remains unstayed and in effect for more than
30 days; or
(xii) any order, judgment or decree is entered in any proceedings
against the Company or any Restricted Subsidiary decreeing a split-up of
the Company or such Restricted Subsidiary which requires the divestiture
of assets representing a substantial part, or the divestiture of the
stock of a Restricted Subsidiary whose assets represent a substantial
part, of the consolidated assets of the Company and its Restricted
Subsidiaries (determined in accordance with generally accepted
accounting principles) or which requires the divestiture of assets, or
stock of a Restricted Subsidiary, which shall have contributed a
substantial part of Operating Cash Flow for any of the three fiscal
years then most recently ended, and such order, judgment or decree
remains unstayed and in effect for more than 30 days; or
(xiii) a final judgment in an amount in excess of $500,000 is rendered
against the Company or any Restricted Subsidiary and, within 30 days
after entry thereof, such judgment is not discharged or execution
thereof stayed pending appeal, or within 30 days after the expiration of
any such stay, such judgment is not discharged;
then (a) if such event is an Event of Default specified in clause (viii),
(ix) or (x) of this paragraph 7A with respect to the Company, all of the
Notes at the time outstanding shall automatically become immediately due and
payable at par together with interest accrued thereon, without presentment,
demand, protest or notice of any kind, all of which are hereby waived by the
Company, (b) if such event is an Event of Default specified in clause (i) or
(ii) of this paragraph 7A, any Significant Holder may, by notice in writing
to the Company, declare all of the Notes held by such Significant Holder to
be, and each
10
<PAGE>
such Note and the outstanding principal thereof shall thereupon be and
become, immediately due and payable together with interest accrued thereon
and together with the Yield-Maintenance Premium, if any, with respect to each
such Note, without presentment, demand, protest or notice of any kind, all of
which are hereby waived by the Company and (c) if such event is any other
Event of Default, the Required Holder(s) may at its or their option, by
notice in writing to the Company, declare all of the Notes to be, and all of
the Notes shall thereupon be and become, immediately due and payable together
with interest accrued thereon and together with the Yield-Maintenance
Premium, if any, with respect to each Note, without presentment, demand,
protest or other notice of any kind, all of which are hereby waived by the
Company, PROVIDED that the Yield-Maintenance Premium, if any, with respect
to each Note shall be due and payable upon any such declaration only if (x)
such event is an Event of Default specified in any of clauses (i) to (vi),
inclusive, of this paragraph 7A, (y) the Required Holder(s) shall have given
to the Company, at least 10 Business Days before such declaration, written
notice stating its or their intention so to declare Notes to be immediately
due and payable and identifying one or more such Events of Default whose
occurrence on or before the date of such notice permits such declaration and
(z) one or more of the Events of Default so identified shall be continuing at
the time of such declaration.
At any time after the principal of, premium, if any, and interest
accrued on, any or all of the Notes are declared due and payable, the Required
Holder(s), by written notice to the Company may waive all Defaults or Events
of Default and rescind and annul any such declaration and its consequences if
(x) the Company has paid all overdue interest on the Notes, the principal of
and premium, if any, on any Notes which have become due otherwise than by
reason of such declaration, and interest on such overdue principal and
premium and (to the extent permitted by applicable law) any overdue interest
in respect of the Notes at the rate of interest on overdue amounts stated in
the respective Notes, (y) all Events of Default, other than non-payment of
amounts which have become due solely be reason of such declaration, and all
conditions and events which constitute Events of Default or Defaults have
been cured or waived pursuant to paragraph 11C, and (z) no judgment or decree
has been entered for the payment of any moneys due pursuant to the Notes or
this Agreement; but,
11
<PAGE>
unless otherwise expressly provided in such waiver or rescission, no such
waiver or rescission and annulment shall extend to or affect any subsequent
Event of Default or Default or impair any right consequent thereon.
7B. OTHER REMEDIES. If any Default or Event of Default shall occur
and be continuing, the holder of any Note may proceed to protect and enforce
its rights under this Agreement and such Note by exercising such remedies as
are available to such holder in respect thereof under applicable law, either
by suit in equity or by action at law, or both, whether for specific
performance of any covenant or other agreement contained in this Agreement or
in aid of the exercise of any power granted in this Agreement. No remedy
conferred in this Agreement upon the holder of any Note is intended to be
exclusive of any other remedy, and each and every such remedy shall be
cumulative and shall be in addition to every other remedy conferred herein or
now or hereafter existing at law or in equity or by statute or otherwise.
8. REPRESENTATIONS, COVENANTS AND WARRANTIES. The Company
represents, covenants and warrants:
8A. ORGANIZATION; SUBSIDIARIES. The Company is a corporation duly
organized and existing in good standing under the laws of the State of
Minnesota, each Restricted Subsidiary is duly organized and existing in good
standing under the laws of the jurisdiction in which it is incorporated, the
Company is and each Restricted Subsidiary is duly qualified to do business in
any jurisdiction where the failure to do so would have a material adverse
effect on the business, condition (financial or other), assets, properties,
prospects or operations of the Company or the Company and its Restricted
Subsidiaries taken as a whole, and the Company has and each Restricted
Subsidiary has the corporate power to own its respective property and to
carry on its respective business as now being conducted, and, in the case of
the Company, to issue and sell the Notes and otherwise carry out the
transactions contemplated by this Agreement. This Agreement and the Notes
have been duly authorized by all necessary corporate action on the part of
the Company and, when executed and delivered by the Company, will constitute
legal, valid and binding obligations of the Company. Exhibit E attached
hereto lists all Restricted Subsidiaries and all Unrestricted Subsidiaries.
All of the outstanding stock of each Restricted Subsidiary is owned by the
Company or a
12
<PAGE>
Restricted Subsidiary, except as otherwise disclosed in Exhibit E.
8B. BUSINESS; FINANCIAL STATEMENTS. The Company has delivered to
each Purchaser complete and correct copies of a memorandum, dated May 13,
1991, supplied by Prudential Assets Sales & Syndication (the "MEMORANDUM")
for use in connection with the Company's private placement of the Notes,
which includes, among other things, (i) the Form S-1 Registration Statement
with respect to the Initial Public Offering filed by the Company with the
Securities and Exchange Commission on April 24, 1991, which has been
subsequently amended by Amendment No. 1 thereto, filed with such Commission
on June 3, 1991, and Amendment No. 2 thereto, filed with such Commission on
June 20, 1991, complete and correct copies of which amendments (without
exhibits) have been delivered to each Purchaser by the Company (such
Registration Statement, as so amended, being herein called the "REGISTRATION
STATEMENT"), (ii) the historical consolidated statements of operations of the
Company and its consolidated subsidiaries for the fiscal years ended June 30,
1986 to June 30, 1990, inclusive, adjusted to eliminate Essanelle Salon Co.,
including discussion and analysis of historical financials (the "HISTORICAL
FINANCIAL DATA AND ANALYSIS"), and (iii) the financial projections for years
through the fiscal year ending June 30, 1999, including explanation and
assumptions to such projections, which have been subsequently revised and
restated by revised projections dated June 7, 1991, which have been delivered
to each Purchaser (such projections, as so revised and restated, including
the original explanations and assumptions, being herein called the "FINANCIAL
PROJECTIONS"). The Registration Statement includes (iv) the consolidated
balance sheets of the Company as of June 30, 1989 and 1990, and the related
consolidated statements of operations, changes in shareholders' deficit and
cash flows for the years ended June 30, 1988, 1989 and 1990, audited by
Coopers & Lybrand (the "AUDITED FINANCIAL STATEMENTS"), and (v) the
consolidated balance sheet of the Company as of March 31, 1991 (unaudited),
and the consolidated statements of operations and cash flows of the Company
for the nine months ended March 31, 1990 and 1991 (unaudited) (the "INTERIM
FINANCIAL STATEMENTS", and, together with the Audited Financial Statements,
the "FINANCIAL STATEMENTS"). The Memorandum correctly describes, as of the
date prepared and as of the Closing Date, the business conducted by and
proposed to be conducted by the Company and its Subsidiaries. The His-
13
<PAGE>
torical Financial Data and Analysis and the Financial Statements have been
prepared in accordance with generally accepted accounting principles applied
on a consistent basis throughout the periods specified and present fairly in
all material respects the consolidated financial position of the Company as
of the respective dates of the consolidated balance sheets included in the
Financial Statements, the consolidated results of its operations and cash
flows for the respective periods covered by the Financial Statements (subject
to normal year-end adjustments, in the case of the Interim Financial
Statements), and the consolidated results of its operations (giving effect on
a pro forma basis to the adjustments described therein) for the fiscal years
covered by the Historical Financial Data and Analysis. The Financial
Projections have been prepared in good faith by the Company and, except as
disclosed therein, on a basis consistent in all material respects with the
Company's past practices, and the assumptions made in preparing the Financial
Projections are reasonable as of the date thereof and as of the Closing Date.
The Financial Projections provide, as of the date of such projections and as
of the Closing Date, reasonable estimations of future performance, subject to
the uncertainty and approximation inherent in any projections. Except as
disclosed in the Registration Statement, there has been no material adverse
change in the business, condition (financial or other), assets, properties,
operations or prospects of the Company or the Company and its Restricted
Subsidiaries taken as a whole since March 31, 1991.
8C. ACTIONS PENDING. There is no action, suit, investigation or
proceeding pending or, to the knowledge of the Company, threatened against
the Company or any of its Restricted Subsidiaries, or any properties or
rights of the Company or any of its Restricted Subsidiaries, by or before any
court, arbitrator or administrative or governmental body which might result
in any material adverse change in the business, condition (financial or
other), assets, properties, operations or prospects of the Company or the
Company and its Restricted Subsidiaries taken as a whole. The Company has
delivered to each Purchaser a copy of a letter agreement, dated May 22, 1991,
between MEI-Regis Salon Corp., the Company and Myron Kunin (herein called the
"SETTLEMENT LETTER"). The Settlement Letter settles all claims against the
Company with respect to the transactions by which MEI-Regis Salon Corp.
acquired the stock of Essanelle Salon Co. and the
14
<PAGE>
stock of Maxim's Beauty Salons, Inc. (such settled claims being herein called
the "SETTLED CLAIMS") other than the claims referred to in paragraph five of
the Settlement Letter (such unsettled claims being herein called the
"UNSETTLED CLAIMS"). The Company will perform all obligations under the
Settlement Letter which are a condition to the settlement of the Settled
Claims and will have no liability with respect to the Settled Claims other
than making the cash payments of the sums referred to in paragraphs one, two
and three of the Settlement Letter and the execution and delivery of the
amendments referred to in paragraph two of the Settlement Letter. The Company
believes that it will have no liability with respect to the Unsettled Claims,
other than liabilities not in the aggregate exceeding the amounts reserved
therefor in the consolidated balance sheet of the Company as of March 31,
1991 referred to in paragraph 8B.
8D. OUTSTANDING DEBT. Neither the Company nor any of its
Restricted Subsidiaries has outstanding any Debt except Debt of any
Restricted Subsidiary to the Company or any Wholly-Owned Restricted
Subsidiary and Debt listed in the Schedule of Debt attached hereto as
Exhibit C. There exists no default under the provisions of any instrument
evidencing such Debt or of any agreement relating thereto.
8E. TITLE TO PROPERTIES. Each of the Company and its Restricted
Subsidiaries has good and indefeasible title to its respective real
properties (other than properties which it leases) and good title to all of
its other respective properties and assets, including the properties and
assets reflected in the balance sheets included in the Financial Statements
as at March 31, 1991 (other than properties and assets disposed of in the
ordinary course of business), subject to no Lien of any kind except Liens
permitted by paragraph 6C(1), and Liens securing Debt to be retired on the
Closing Date which will be released on the Closing Date, PROVIDED that
filings and recordings necessary or advisable to effect releases of record of
such Liens will be filed promptly (and in any event within 45 days) after the
Closing Date. All leases necessary in any material respect for the conduct of
the respective businesses of the Company and its Restricted Subsidiaries are
valid and subsisting and are in full force and effect; neither the Company
nor any of its Restricted Subsidiaries has assigned or created any Lien on
its leasehold interest under any such lease; the Company and its Restricted
15
<PAGE>
Subsidiaries have performed all of their material obligations under all of
such leases and no material default by the Company or any of its Restricted
Subsidiaries, or by the lessor thereunder, exists with respect to any such
lease; the Company and its Restricted Subsidiaries enjoy undisturbed
possession of the leased property under all of such leases; and, to the
knowledge of any Responsible Officer, no claim has been made by any lessor
under any such lease or by any other Person having an interest in the leased
property which would have any material probability of interfering with such
undisturbed possession under any such lease prior to the scheduled
termination thereof. All of the outstanding capital stock of each Restricted
Subsidiary is validly issued, fully paid and non-assessable, and all such
capital stock owned by the Company or any Restricted Subsidiary is owned
free and clear of any Lien of any kind, except Liens securing Debt to be
retired on the Closing Date which will be released on the Closing Date,
PROVIDED that filings of any termination statements under the Uniform
Commercial Code necessary or advisable to terminate financing statements filed
with respect to such Liens will be filed promptly (and in any event within 45
days) after the Closing Date.
8F. TAXES. The Company has and each of its Subsidiaries has filed
(or caused to be filed) all Federal, State and other income tax returns which
are required to be filed, and each has paid all taxes as shown on such
returns and on all assessments received by it to the extent that such taxes
have become due, except such taxes as are being contested in good faith by
appropriate proceedings and for which adequate reserves have been established
in accordance with generally accepted accounting principles. The charges,
accruals and reserves on the books of the Company, and reflected in the
Financial Statements, are adequate under generally accepted accounting
principles consistently applied. The Company and its Subsidiaries have been
and will be included in the consolidated Federal and certain state income tax
returns of Curtis Squire, Inc. and its subsidiaries for the income tax
periods included in the period from October 14, 1988 to the Closing Date when
Curtis Squire, Inc. owned approximately 91.5% of the Common Stock of the
Company. There are no Federal or state income taxes payable by any member of
the affiliated group (as such term is defined in section 1504(a) of the Code)
included or to be included in such consolidated income tax returns for any
such income tax period, and neither the Company nor any of its Sub-
16
<PAGE>
sidiaries will have any liability for the payment of any such Federal or
state income taxes for any such income tax period (other than payments to
Curtis Squire, Inc. pursuant to tax sharing arrangements described in note 8
to the Financial Statements) or for any Federal or state income taxes for any
other tax period payable by any other member of any affiliated group (as so
defined) other than the Company and its Subsidiaries.
8G. CONFLICTING AGREEMENTS AND OTHER MATTERS. Neither the Company
nor any of its Restricted Subsidiaries is a party to any contract or
agreement or subject to any charter or other corporate restriction which
materially and adversely affects its business, condition (financial or other),
assets, properties, operations or prospects, other than Debt which is to
be retired on the Closing Date. Neither the execution nor delivery of this
Agreement or the Notes, nor the offering, issuance and sale of the Notes,
nor fulfillment of nor compliance with the terms and provisions hereof and of
the Notes will conflict with, or result in a breach of the terms, conditions
or provisions of, or constitute a default under, or result in any violation
of, or result in the creation of any Lien upon any of the properties or
assets of the Company or any of its Subsidiaries pursuant to, the charter or
by-laws of the Company or any of its Subsidiaries, any award of any
arbitrator or any agreement (including any agreement with stockholders),
instrument, order, judgment, decree, statute, law, rule or regulation to
which the Company or any of its Subsidiaries is subject, other than the Debt
which is to be retired on the Closing Date. Neither the Company nor any of
its Subsidiaries is a party to, or otherwise subject to any provision
contained in, any instrument evidencing Debt of the Company or such
Subsidiary, any agreement relating thereto or any other contract or agreement
(including its charter) which limits the amount of, or otherwise imposes
restrictions on the incurring of, Funded Debt of the Company of the type to
be evidenced by the Notes, other than the Debt which is to be retired on the
Closing Date.
8H. OFFERING OF NOTES. Neither the Company nor any agent acting
on its behalf has, directly or indirectly, offered the Notes or any similar
security of the Company for sale to, or solicited any offers to buy the Notes
or any similar security of the Company from, or otherwise approached or
negotiated with respect thereto with, any Person other than institutional
investors, and
17
<PAGE>
neither the Company nor any agent acting on its behalf has taken or will take
any action which would subject the issuance or sale of the Notes to the
provisions of section 5 of the Securities Act of 1933 or to the provisions of
any securities or Blue Sky law of any applicable jurisdiction.
8I. REGULATION G, ETC. Neither the Company nor any Subsidiary owns or
has any present intention of acquiring any "margin stock" as defined in
Regulation G (12 CFR Part 207) of the Board of Governors of the Federal
Reserve System (herein called "margin stock"). The proceeds of sale of the
Notes will be used by the Company to retire its Debt as contemplated by the
provisions of paragraph 3E. None of such proceeds will be used, directly or
indirectly, for the purpose, whether immediate, incidental or ultimate, of
purchasing or carrying any margin stock or for the purpose of maintaining,
reducing or retiring any indebtedness which was originally incurred to
purchase or carry any stock that is currently a margin stock or for any other
purpose which might constitute this transaction a "purpose credit" within the
meaning of such Regulation G. Neither the Company nor any agent acting on its
behalf has taken or will take any action which might cause this Agreement or
the Notes to violate Regulation G, Regulation T, Regulation X or any other
regulation of the Board of Governors of the Federal Reserve System or to
violate the Securities Exchange Act of 1934, as amended, in each case as in
effect now or as the same may hereafter be in effect.
8J. ERISA (a) Neither the Company, any Restricted Subsidiary nor any
Related Person has breached the fiduciary rules of ERISA or engaged in any
transaction in connection with which the Company, any Restricted Subsidiary
or any Related Person could be subjected to a suit for damages, a civil
penalty assessed pursuant to section 502(i) of ERISA or a tax imposed by
section 4975 of the Code, in any such case which would be materially adverse
to the Company and its Restricted Subsidiaries taken as a whole.
(b) No Plan nor any trust created under any Plan has been terminated
within the meaning of Title IV of ERISA since September 2, 1974 under
circumstances that could result in liability which could be materially
adverse to the Company and its Restricted Subsidiaries taken as a whole.
Other than premiums due and owing in
18
<PAGE>
the normal course, no liability to the PBGC has been incurred and remains
unsatisfied or is expected by the Company to be incurred with respect to any
Plan by the Company or any Related Person which is or would be materially
adverse to the Company and its Restricted Subsidiaries taken as a whole.
There has been no reportable event (within the meaning of section 4043(b) of
ERISA) or any other event or condition with respect to any Plan which
presents a risk of termination of any such Plan by the PBGC under
circumstances which in any case could result in liability which would be
materially adverse to the Company and its Restricted Subsidiaries taken as a
whole.
(c) Neither the Company nor any Related Person has within the past six
years contributed, or had any obligation to contribute, to a single employer
plan that has at least two contributing sponsors not under common control or
ceased operations at a facility under circumstances which could result in
liability under section 4068(f) of ERISA.
(d) There are no Multiemployer Plans to which the Company or any
Related Person is or has ever been obligated to contributed under Title IV of
ERISA.
(e) No accumulated funding deficiency (as defined in section 302 of
ERISA and section 412 of the Code), whether or not waived, exists with
respect to any Plan (other than a Multiemployer Plan). Full payment has been
made within the time required under section 412 of the Code of all amounts
that the Company or any of its Related Persons is required under the terms of
each Plan and applicable law to have paid as contributions to such Plan as of
the date hereof. Each Plan satisfies the minimum funding standard of section
412 of the Code.
(f) The present value of the benefit liabilities (within the meaning
of Title IV of ERISA) under all Plans (other than Multiemployer Plans)
determined as of the Company's most recently ended fiscal year and on the
basis of PBGC assumptions required under Title IV of ERISA did not exceed the
current value of the assets of all such Plans determined as of such date.
(g) Neither the Company nor any Related Person has engaged in any
transaction that could result in the incurrence of any liabilities under
section 4069 or section 4212 of ERISA.
19
<PAGE>
(h) The Company is not a party in interest with respect to any
employee benefit plan, except for the Regis Corporation Employee Profit
Sharing Plan and the Regis Sure-Care Medical Plan, and securities of the
Company are not employer securities with respect to any such plan other than
the above-listed plans. For such purpose, the term "employee benefit plan"
shall have the meaning assigned to such term in section 3 of ERISA and the
term "employer security" shall have the meaning as signed to such term in
Section 407(d)(1) of ERISA. The execution and delivery of this Agreement and
the issuance and sale of the Notes will not involve any transaction which is
subject to the prohibitions of section 406 of ERISA or in connection with
which a tax could be imposed pursuant to section 4975 of the Code. The
representation by the Company in the next preceding sentence is made in
reliance upon and subject to the accuracy of the representation of each
Purchaser in paragraph 9 as to the source of the funds to be used to pay the
purchase price of the Notes to be purchased by such Purchaser.
8K. GOVERNMENTAL CONSENT. No consent, approval or authorization of, or
declaration or filing with, any governmental authority is required in
connection with the execution or delivery of this Agreement, the consummation
of the transactions contemplated hereby or the offer, issue, sale and
delivery of the Notes, or the fulfillment of and compliance with the terms
and provisions hereof and of the Notes.
8L. STATUS UNDER CERTAIN FEDERAL STATUTES. (I) The Company is not (A)
an "investment company" or accompany "controlled" by an "investment company",
within the meaning of the Investment Company Act of 1940 as amended, (B) a
"holding company" or a "subsidiary company" of a "holding company", or an
"affiliate" of a "holding company" or of a "subsidiary company" of a "holding
company", as such terms are defined in the Public Utility Holding Company Act
of 1935, as amended, or (C) a "public utility" as such term is defined in the
Federal Power Act, as amended; and (II) neither the Company nor any of its
Subsidiaries is a "rail carrier or a person controlled by or affiliated with
a rail carrier", within the meaning of Title 49, U.S.C., and the Company is
not a "carrier to which 49 U.S.C. Section 11301(b)(1) is applicable.
20
<PAGE>
8M. FOREIGN ASSETS CONTROL REGULATIONS, ETC. Neither the issue and
sale of the Notes by the Company nor its use of the proceeds thereof as
contemplated by this Agreement will violate the Foreign Assets Control
Regulations, the Transaction Control Regulations, the Cuban Assets Control
Regulations, the Foreign Funds Control Regulations, the Iranian Assets
Control Regulations, the Nicaraguan Assets Control Regulations, the South
African Transactions Regulations, the Libyan Sanctions Regulations, of the
United States Treasury Department (31 C.F.R., Chapter V, as amended) or the
restrictions set forth in Executive Orders No. 8389, 9193, 12544 (Libya),
12543 (Libya), 12722 (Iraq), 12723 (Kuwait), 12724 (Iraq) or 12725 (Kuwait),
as amended, of the President of the United States of America or of any rules
or regulations issued thereunder.
8N. PATENTS, ETC. The Company and its Restricted Subsidiaries own or
possess licenses for the use of all patents, trademarks, service-marks, trade
names, copyrights, licenses and other rights, free from burdensome
restrictions, that are necessary for the operation of their respective
businesses as presently conducted and as proposed to be conducted.
8O. ENVIRONMENTAL MATTERS. The Company and each of its Restricted
Subsidiaries has obtained and is in compliance with all permits, licenses,
and other authorizations that are required under all Environmental Laws,
including laws relating to emissions, discharges, releases, or threatened
releases of contaminants into the environment (including, without limitation,
ambient air, surface water, ground water, or land) or otherwise relating to
the manufacture, processing, distribution, use, treatment, storage, disposal,
transport, or handling of contaminants, except to the extent that failure to
have any such permit, license, or other authorization does not have a
material adverse effect on business, condition (financial or other), assets,
properties, operations or prospects of the Company or the Company and its
Restricted Subsidiaries, taken as a whole.
8P. TRANSACTIONS WITH AFFILIATES. Exhibit F attached hereto correctly
describes the nature and terms (including contracts and corporate policies)
of all continuing transactions between the Company or any Restricted
Subsidiary and any Affiliate other than a Subsidiary. There exists no default
under provisions of any con-
21
<PAGE>
tract or violation of any corporate policy with respect to any such
transactions.
8Q. DISCLOSURE. Neither this Agreement, the Memorandum (other than the
Financial Projections) nor any other document, certificate or statement
furnished to any Purchaser by or on behalf of the Company in connection
herewith contains any untrue statement of a material fact or omits to state a
material fact necessary in order to make the statements contained herein and
therein not misleading. There is no fact peculiar to the Company or any of
its Restricted Subsidiaries which materially adversely affects or in the
future may (so far as the Company can now foresee) materially adversely
affect the business, condition (financial or other), assets, properties,
operations or prospects of the Company or the Company and its Restricted
Subsidiaries, taken as a whole, and which has not been set forth in this
Agreement, the Memorandum or in the other documents, certificates and
statements furnished to each Purchaser by or on behalf of the Company prior to
the date hereof in connection with the transactions contemplated hereby.
9. REPRESENTATIONS OF THE PURCHASERS. Each Purchaser severally
represents, and in making this sale to such Purchaser it is specifically
understood and agreed, that such Purchaser is not acquiring the Notes to be
purchased by it hereunder with a view to or for sale in connection with any
distribution thereof within the meaning of the Securities Act, PROVIDED that
the disposition of its property shall at all times be and remain within its
control. Each Purchaser also severally represents (I) if it is an insurance
company, that either (A) no part of the funds being used by it to pay the
purchase price of the Notes being purchased by it hereunder constitutes
assets allocated to any separate account maintained by it, or (B) to the
extent that any part of such funds constitutes assets allocated to any
separate account maintained by it, such account is not on account which may
be deemed under ERISA directly or indirectly to constitute and contain the
assets of any employee benefit plan referred to in the first sentence of
paragraph 8J(h), or (II) if it is not an insurance company, no part of the
funds being used by it to pay the purchase price of the Notes being purchased
by it hereunder constitutes assets of an employee benefit plan. For the
purpose of this paragraph 9, the terms "separate account" and "employee
22
<PAGE>
benefit plan" shall have the respective meanings specified in section 3 of
ERISA.
10. DEFINITIONS. For the purpose of this Agreement, the terms
defined in paragraphs 1 and 2 shall have the respective meanings specified
therein and the following terms shall have the meanings specified with respect
thereto below:
10A. YIELD-MAINTENANCE TERMS.
"BUSINESS DAY" shall mean any day other than a Saturday, a Sunday
or a day on which commercial banks in New York City are required or
authorized to be closed.
"CALLED PRINCIPAL" shall mean, with respect to any Note, the
principal of such Note that is to be prepaid pursuant to paragraph 4 B (any
partial prepayment pursuant to paragraph 4 B being applied in satisfaction of
required payments of principal in inverse order of their scheduled due dates)
or is declared to be immediately due and payable pursuant to paragraph 7A, as
the context requires.
"DISCOUNTED VALUE" shall mean, with respect to the Called Principal
of any Note, the amount obtained by discounting all Remaining Scheduled
Payments with respect to such Called Principal from their respective
scheduled due dates to the Settlement Date with respect to such Called
Principal, in accordance with accepted financial practice and at a discount
factor (applied on a semiannual basis) equal to the Reinvestment Yield with
respect to such Called Principal.
"REINVESTMENT YIELD" shall mean, with respect to the Called
Principal of any Note, the yield to maturity implied by (i) the yields
reported, as of 10:00 A.M. (New York City time) on the Business Day next
preceding the Settlement Date with respect to such Called Principal, on the
display designated as "Page 678" on the Telerate Service (or such other
display as may replace Page 678 on the Telerate Service) for actively traded
U.S. Treasury securities having a maturity equal to the Remaining Average
Life of such Called Principal as of such Settlement Date, or if such yields
shall not be reported as of such time or the yields reported as of such time
shall not be ascertainable, (ii) the Treasury Constant Maturity Series yields
reported, for the latest day for which such yields
23
<PAGE>
shall have been so reported as of the Business Day next preceding the
Settlement Date with respect to such Called Principal, in Federal Reserve
Statistical Release H.15 (519) (or any comparable successor publication) for
actively traded U.S. Treasury securities having a constant maturity equal to
the Remaining Average Life of such Called Principal as of such Settlement
Date. Such implied yield shall be determine, if necessary, by (a) converting
U.S. Treasury bill quotations to bond-equivalent yields in accordance with
accepted financial practice and (b) interpolating linearly between reported
yields.
"REMAINING AVERAGE LIFE" shall mean, with respect to the Called
Principal of any Note, the number of years (calculated to the nearest
one-twelfth year) obtained by dividing (i) such Called Principal into
(ii) the sum of the products obtained by multiplying (a) each Remaining
Scheduled Payment of such Called Principal (but not of interest thereon) by
(b) the number of years (calculated to the nearest one-twelfth year) which
will elapse between the Settlement Date with respect to such Called Principal
and the scheduled due date of such Remaining Scheduled Payment.
"REMAINING SCHEDULED PAYMENTS" shall mean, with respect to the
Called Principal of any Note, all payments of such Called Principal and
interest thereon that would be due on or after the Settlement Date with
respect to such Called Principal if no payment of such Called Principal were
made prior to its scheduled due date.
"SETTLEMENT DATE" shall mean, with respect to the Called Principal
of any Note, the date on which such Called Principal is to be prepaid
pursuant to paragraph 4 B or is declared to be immediately due and payable
pursuant to paragraph 7A, as the context requires.
"YIELD-MAINTENANCE PREMIUM" shall mean, with respect to any Note,
a premium equal to the excess, if any, of the Discounted Value of the Called
Principal of such Note over the sum of (i) such Called Principal plus (ii)
interest accrued thereon as of (including interest due on) the Settlement
Date with respect to such Called Principal. The Yield-Maintenance Premium
shall in no event be less than zero.
24
<PAGE>
10 B. Other Terms.
"AUDITED FINANCIAL STATEMENTS" shall have the meaning specified in
paragraph 8 B.
"AFFILIATE" shall mean (i) any Responsible Officer or member of the
Board of Directors of the Company, (ii) any holder of at least 10% of the
total combined voting power of all classes of Voting Stock (or the
equivalent) of the Company or of any corporation or other entity which
directly or indirectly controls the Company, (iii) the spouse, any sibling
(by blood or adoption), or any descendant (by blood or adoption) of any
individual referred to in clause (i) or (ii) above, or any spouse of any such
sibling or descendant or any descendant of any such sibling, (iv) any trust
in which any Person referred to in clause (i), (ii) or (iii) above has a
substantial beneficial interest, (v) any corporation or other entity (a) of
which the Company or any Person referred to in clause (i), (ii), (iii) or
(iv) above holds at least 10% of the total combined economic interest of all
classes of Common Stock (or the equivalent) or at least 10% of the total
combined voting power of all classes of Voting Stock (or the equivalent) or
(b) directly or indirectly controlled by any Person referred to in clause
(i), (ii), (iii) or (iv) above, and (vi) any Person directly or indirectly
controlling, controlled by, or under direct or indirect common control with,
the Company, PROVIDED that a Restricted Subsidiary shall not be an Affiliate.
A Person shall be deemed to control a corporation or other entity if such
Person possesses, directly or indirectly, the power to direct or cause the
direction of the management and policies of such corporation or other entity,
whether through the ownership of voting securities, by contract or otherwise.
"BANKRUPTCY LAW" shall have the meaning specified in clause (viii)
of paragraph 7A.
"CAPITAL EXPENDITURES" shall mean, for any period, the aggregate of
all expenditures including incurrence of Capitalized Lease Obligations of the
Company and its Restricted Subsidiaries during such period that, in
conformity with generally accepted accounting principles, are required to be
capitalized and reflected in the property, plant and equipment or similar
fixed asset
25
<PAGE>
accounts in the consolidated balance sheet of the Company and its Restricted
Subsidiaries.
"CAPITALIZED LEASE" shall mean, as applied to any Person, any lease
of any property (whether real, personal or mixed) by such Person as lessee
which would, in accordance with generally accepted accounting principles, be
required to be classified and accounted for as a capitalized lease on a
balance sheet of such Person, other than, in the case of the Company or a
Restricted Subsidiary, any such lease under which the Company or a
Wholly-Owned Restricted Subsidiary is the lessor.
"CAPITALIZED LEASE OBLIGATION" shall mean any rental obligation
under a Capitalized Lease taken at the amount therof accounted for as
indebtedness (net of interest expense) in accordance with generally accepted
accounting principles.
"CODE" shall mean the Internal Revenue Code of 1986, as amended
from time to time.
"COMMON STOCK" shall mean, as applied to any corporation, shares of
such corporation which shall not be entitled to preference or priority over
any other shares of such corporation in respect of either the payment of
dividends or the distribution of assets upon liquidation.
"COMPUTATION PARAGRAPHS" shall have the meaning specified in
paragraph 5 A (iii).
"CONSOLIDATED DEBT" shall mean, at any date, the sum of (i) all
Debt of the Company and its Restricted Subsidiaries (other than Debt
permitted by clauses (ii) and (iv) of paragraph 6 C (2)), and (ii) the
greater of (a) the Revolving Credit Commitment on such date or (b) the
aggregate principal amount of Debt permitted by clause (ii) of paragraph 6 C
(2) outstanding on such date.
"CONSOLIDATED INTEREST EXPENSE" shall mean, with respect to any
period, the total consolidated interest expense of the Company and its
Restricted Subsidiaries for such period determined in accordance with
generally accepted accounting principles (calculated (i) to include imputed
interest on Capitalized Lease Obligations and the deferred commitment fee
payable under paragraph 5 I allocable to such period pursuant to generally
accepted
26
<PAGE>
accounting principles, and (ii) to exclude amortization of debt discount to
the extent not actually paid in cash).
"CONSOLIDATED NET INCOME" shall mean, with respect to any period,
the net income (or deficit) of the Company and its Restricted Subsidiaries
for such period (taken as a cumulative whole), after deducting all operating
expenses, provisions for all taxes and reserves (including reserves for
deferred income taxes) and all other proper deductions, all determined in
accordance with generally accepted accounting principles on a consolidated
basis and after deducting portions of income properly attributable to
minority interests, if any, in the stock and surplus of Restricted
Subsidiaries, (i) MINUS any aggregate net gain and PLUS 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) or from any write-up of any asset, (ii) MINUS any
income and PLUS any loss included in such net income (or deficit) which
constitute extraordinary items of income or loss, (iii) MINUS any income or
gain arising from any write-up of any asset, and (iv) MINUS any equity of the
Company or any Restricted Subsidiary in the unremitted earnings of any
corporation (including any Unrestricted Subsidiary) which is not a Restricted
Subsidiary. For the purpose of paragraph 6 B only, but not for any other
purpose of this Agreement (including, without limitation, the definitions of
EBIT and Operating Cash flow), there shall be included in Consolidated Net
Income with respect to any period cash distributions (to the extent exceeding
the amount on account of such cash distributions included under the preceding
sentence) made to the Company and its Restricted Subsidiaries during such
period which represent earnings of any corporation (including any
Unrestricted Subsidiary) which is not a Restricted Subsidiary.
"CONSOLIDATED NET TANGIBLE ASSETS" shall mean, at any date, the
aggregate amount of the assets of the Company and its Restricted
Subsidiaries, as the same would be shown on a consolidated balance sheet of
the Company and its Restricted Subsidiaries at such date prepared in
accordance with generally accepted accounting principles, PROVIDED that the
aggregate amount of the following items so shown on such balance sheet shall
be deducted or excluded (without duplication):
27
<PAGE>
(i) all items included on the liability side of such balance
sheet, except capital stock of any class, surplus, Debt and deferred
taxes and minority interests;
(ii) all licenses, patents, copyrights, trade names or trade
marks, experimental or organizational expense, unamortized debt discount
and expense, good will and all other assets which under generally
accepted accounting principles are deemed intangible;
(iii) all Investments (other than Permitted Investments) included
on the asset side of such balance sheet; and
(iv) any write-up of assets made after the date of this Agreement
(other than the write-up of the book value of assets made in accordance
with generally accepted accounting principles in connection with the
purchase by the Company or a Restricted Subsidiary of such assets,
including acquisitions accounted for under the purchase method of
accounting).
"CONSOLIDATED NET WORTH" shall mean, at any date, the shareholders'
equity (or deficit) of the Company and its Restricted Subsidiaries, as the
same would be shown on a consolidated balance sheet of the Company and its
Restricted Subsidiaries at such date prepared in accordance with generally
accepted accounting principles, MINUS the aggregate amount (without
duplication) of Investments (other than Permitted Investments) which would be
shown as assets on such balance sheet.
"EBIT" shall mean, with respect to any period, Consolidated Net
Income for such period (i) PLUS Consolidated Interest Expense for such
period, (ii) PLUS or MINUS (as appropriate) any provision for income taxes
for such period.
"ENVIRONMENTAL LAWS" shall mean any and all federal, state, local,
and foreign statutes, laws, regulations, ordinances, rules, judgments,
orders, decrees, permits, concessions, grants, franchises, licenses,
agreements, or governmental restrictions relating to the environment or the
release of any materials into the environment, including but not limited to
those related to haz-
28
<PAGE>
ardous substances or wastes, air emissions and discharges to waste or public
systems.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended.
"EVENT OF DEFAULT" shall mean any of the events specified in
paragraph 7A, provided that there has been satisfied any requirement in
connection with such event for the giving of notice, or the lapse of time, or
the happening of any further condition, event or act, and "DEFAULT" shall
mean any such events, whether or not any such requirement has been satisfied.
"EXCESS CASH" shall have the meaning specified in paragraph 6C(10).
"FINANCIAL PROJECTIONS" shall have the meaning specified in
paragraph 8B.
"FINANCIAL STATEMENTS" shall have the meaning specified in
paragraph 8B.
"FUNDED DEBT" shall mean (i) any obligation payable more than one
year from the date of the creation thereof, which under generally accepted
accounting principles is shown on the balance sheet as a liability (including
without limitation Capitalized Lease Obligations and excluding reserves for
deferred income taxes and other reserves to the extent that such reserves do
not constitute an obligation) and (ii) guarantees, endorsements (other than
endorsements of negotiable instruments for collection in the ordinary course
of business) and other contingent liabilities (whether direct or indirect) in
connection with the obligations, stock or dividends of any Person, taken at
the amount of the obligations, stock or dividends guaranteed or with respect
to which there is a contingent liability. "CURRENT DEBT" shall mean any
obligation for borrowed money (and any notes payable and drafts accepted
representing extensions of credit whether or not representing obligations for
borrowed money) payable on demand or within a period of one year from the
date of the creation thereof, PROVIDED that any such obligation shall be
treated as Funded Debt, regardless of its term, if such obligation is
renewable pursuant to the terms thereof or of a revolving credit or similar
agreement effective for more than one year after the date of the creation of
such obligation, or may be payable out of
29
<PAGE>
the proceeds of a similar obligation pursuant to the terms of such obligation
or of any such agreement. Any obligation secured by a Lien on, or payable out
of the proceeds of production from , property of the Company or any
Restricted Subsidiary shall be deemed to be Funded or Current Debt, as the
case may be, of the Company or such Restricted Subsidiary even though such
obligation shall not be assumed by the Company or such Restricted
Subsidiary. "DEBT" shall mean Funded Debt and/or Current Debt, as the case
may be.
"HISTORICAL FINANCIAL DATA AND ANALYSIS" shall have the meaning
specified in paragraph 8B.
"HOLDER AFFILIATE" of any Significant Holder shall mean any other
holder of Notes which directly or indirectly controls, is controlled by, or
is under direct or indirect common control with, such Significant Holder.
"INITIAL PUBLIC OFFERING" shall have the meaning specified in
paragraph 3D.
"INSTITUTIONAL INVESTOR" shall mean any insurance company, pension
fund, mutual fund, investment company, bank, savings bank, savings and loan
association, investment banking company, trust company, or any finance or
credit company, any portfolio or any investment fund managed by any of the
foregoing, or any other institutional investor, and any nominee of the
foregoing.
"INTEREST COVERAGE RATIO" shall mean, with respect to any period,
the ratio of (i) EBIT for such period to (ii) Consolidated Interest Expense
for such period.
"INTERIM FINANCIAL STATEMENTS" shall have the meaning specified in
paragraph 8B.
"INVESTMENT" shall have the meaning specified in paragraph 6c(3).
"LIEN" shall mean any mortgage, pledge, security interest,
encumbrance, lien or charge of any kind (including any agreement to give any
of the foregoing, any conditional sale or other title retention agreement,
any lease in the nature thereof, and the filing of or agreement to give any
financing statement under the Uniform Commercial Code of any jurisdiction).
30
<PAGE>
"MEMORANDUM" shall have the meaning specified in paragraph 8B.
"MULTIEMPLOYER PLAN" shall mean any Plan which is a "multiemployer
plan" as such term is defined in section 4001(a)(3) of ERISA.
"NASDAQ" shall mean the National Association of Securities Dealers
Automated Quotation System.
"OFFICER'S CERTIFICATE" shall mean a certificate signed in the name
of the Company by a Responsible Officer.
"OFFSET SHARING AGREEMENT" shall have the meaning specified in
paragraph 3J.
"OPERATING CASH FLOW" shall mean, with respect to any period,
Consolidated Net Income for such (i) MINUS all deferred credits to income and
other non-cash income items credited in computing such Consolidated Net
Income, (ii) PLUS Consolidated Interest Expense for such period, (iii) PLUS
the net amount credited to or MINUS the net amount debited to reserves for
deferred income taxes of the Company and its Restricted Subsidiaries during
such period, (iv) PLUS all depreciation, amortization and other non-cash
charges deducted in computing such Consolidated Net Income.
"PBGC" shall mean the Pension Benefit Guaranty Corporation or any
other governmental authority succeeding to any of its functions.
"PERMITTED INVESTMENTS" shall mean Investments permitted by clauses
(i) to (vii), inclusive, of paragraph 6C(3).
"PERSON" shall mean and include an individual, a partnership, a
joint venture, a corporation, a trust, an unincorporated organization and a
government or any department or agency thereof.
"PLAN" shall mean an "employee pension benefit plan" (as defined in
section 3(2) of ERISA) which is or has been established or maintained, or to
which contributions are or have been made, by the Company or any of its
Related Persons or with respect to which the Company or
31
<PAGE>
any of its Related Persons is or has been obligated to contribute.
"PROJECTED CONSOLIDATED INTEREST EXPENSE" shall have the meaning
specified in paragraph 6C(10).
"REGISTRATION STATEMENT" shall have the meaning specified in
paragraph 8B.
"RELATED PERSON" shall mean any trade or business, whether or not
incorporated, which, together with the Company, would be treated as a single
employer under section 414 of the Code.
"REQUIRED PRINCIPAL PAYMENTS" shall mean, with respect to any
period, for the Company and its Restricted Subsidiaries on a consolidated
basis, the sum of (i) all scheduled payments of principal (including all
payments in respect of Capitalized Lease Obligations attributable to
principal) on, or mandatory redemptions or repurchases of or sinking fund
payments with respect to, all Debt (other than Debt permitted by clause (ii)
of paragraph 6C(2)), and (ii) the Revolving Credit Reduction with respect to
such period.
"REQUIRED HOLDER(S)" shall mean the holder or holders of at least
66-2/3% in aggregate principal amount of all the Notes at the time
outstanding, PROVIDED that if any holder of less than 10% in aggregate
principal amount of the Notes at the time outstanding is a Holder Affiliate
of a Significant Holder, such Significant Holder and all of its Holder
Affiliates shall be deemed to be a single holder of Notes for the purpose of
this definition and any consent or notice executed by such Significant Holder
or any of its Holder Affiliates shall be deemed to have been executed by such
Significant Holder and all of its Holder Affiliates for the purpose of
determining whether the Required Holder(s) have given such consent or notice.
"RESPONSIBLE OFFICER" shall mean the Company's chief executive
officer, chief operating officer, chief financial officer or chief accounting
officer.
"RESTRICTED INVESTMENTS" shall mean Investments made by the Company
or any Restricted Subsidiary other than Investments permitted by clauses (i)
to (ix), inclusive, of paragraph 6C(3).
32
<PAGE>
"RESTRICTED PAYMENT" shall have the meaning specified in paragraph 6B.
"RESTRICTED SUBSIDIARY" shall mean any Subsidiary organized under the
laws of any state of the United States of America, Puerto Rico, Canada, or
any province of Canada, which conducts substantially all of its business in
the United States of America, Puerto Rico or Canada, and at least 80% of the
total combined voting power of all classes of Voting Stock of which shall, at
the time as of which any determination is being made, be owned by the Company
either directly or through Restricted Subsidiaries, PROVIDED that no such
Subsidiary shall be a Restricted Subsidiary unless (i) it is listed as a
Restricted Subsidiary in Exhibit E attached hereto or (ii)(a) the Board of
Directors of the Company hereafter designates such Subsidiary a Restricted
Subsidiary, (b) notice of such designation is given by the Company to the
holders of the Notes with the next succeeding delivery of financial
statements pursuant to paragraph 5A, and (c) on the date of and immediately
after giving effect to such designation, no Event of Default shall have
occurred and be continuing.
"REVOLVING CREDIT AGREEMENTS" shall mean the Senior Revolving Credit
Agreement, to be dated as of June 21, 1991, between the Company and Barclays
Bank PLC, providing for revolving Credit Loans in aggregate principal amount
not in excess of $15,000,000, substantially in the form of the final draft
thereof dated June 21, 1991, and the Senior Revolving Credit Agreement, to be
dated as of June 21, 1991, between the Company and First Bank National
Association, providing for Revolving Credit Loans in aggregate principal
amount not in excess of $5,000,000, substantially in the form of the the
final draft thereof dated June 21, 1991.
"REVOLVING CREDIT COMMITMENT" shall mean, at any time, the maximum
aggregate principal amount of the Revolving Credit Loans (or of other
revolving credit loans from banks) which may be outstanding under the
Revolving Credit Agreements (or any other revolving credit agreement with
banks) at such time, PROVIDED that the Revolving Credit Commitment shall not
at any time exceed the greater of (i) $10,000,000 or (ii) the maximum
aggregate principal amount of Revolving Credit Loans which may be outstanding
at such time under the revolving Credit Agreements as originally in effect,
without giving effect to any subse-
33
<PAGE>
quent termination or amendment thereof or reduction of commitment thereunder
which is solely at the Company's option.
"REVOLVING CREDIT LOANS" shall mean loans made under the Revolving
Credit Agreements.
"REVOLVING CREDIT REDUCTION" shall mean, with respect to any period, (i)
the greater of (a) the aggregate principal amount of the Revolving Credit
Loans (or other revolving credit loans from banks) outstanding at the
beginning of such period or (b) the average daily aggregate principal amount
of the Revolving Credit Loans (and other revolving credit loans from banks)
outstanding during the fiscal year immediately preceding the beginning of
such period, MINUS (ii) the Revolving Credit Commitment at the end of such
period. The Revolving Credit Reduction with respect to any period shall in no
event be less than zero.
"SECTION 170 PAYMENT" shall have the meaning specified in paragraph 6B.
"SECURITIES ACT" shall mean the Securities Act of 1933, as amended.
"SIGNIFICANT HOLDER" shall mean (i) each Purchaser, so long as it shall
hold (or be committed under this Agreement to purchase) any Note and shall
not have previously sold or disposed of all Notes held by it, (ii) any other
Institutional Investor which shall have acquired all of the Notes held by a
Significant Holder and by all Holder Affiliates of such Significant Holder,
shall at the time hold any Note, and shall not have previously sold or
disposed of all Notes held by it, and (iii) any other Institutional Investor
which is at the time a holder of at least 10% in aggregate principal amount
of the Notes at the time outstanding, PROVIDED that no Purchaser or other
Institutional Investor which at the time holds less than 10% in aggregate
principal amount of the Notes at the time outstanding shall be a Significant
Holder for the purpose of declaring Notes to be due and payable pursuant to
clause (b) of paragraph 7A unless all Holder Affiliates of such Significant
Holder join in such declaration.
"SUBSIDIARY" shall mean any corporation, association or other business
entity which is required to be consolidated in the financial statements of
the Company in
34
<PAGE>
accordance with generally accepted accounting principles as in effect from
time to time.
"SUBSTANTIAL ASSETS" shall mean, as of the date of any determination
thereof, assets (other than Excluded Assets as of such date) which, together
with all other assets sold, leased or otherwise disposed of by the Company
and its Restricted Subsidiaries (other than pursuant to clause (ii), (iii),
(iv), (v) or (vi) of paragraph 6C(5) and other than Excluded Assets as of such
date) during either applicable period referred to below and the assets of all
Restricted Subsidiaries all shares of the stock of which shall have been sold
by the Company and its Restricted Subsidiaries during such applicable period
as permitted by paragraph 6C(4) constitute (taken at the amount described
below) more than the applicable percentage for such applicable period of
Consolidated Net Tangible Assets computed as at the end of the fiscal quarter
most recently ended prior to such date. For the purpose of the preceding
sentence there shall be two applicable periods with respect to any date of
determination: one such period shall be the period of twelve months preceding
such date, for which the applicable percentage shall be 5%, and the other
period shall be the period from and including the Closing Date to such date,
for which the applicable percentage shall be 20%. Assets sold or otherwise
disposed of shall in each case be taken at the book value thereof as shown on
the books of the Company and its Restricted Subsidiaries on the date of the
sale or disposition thereof net of any depreciation or other assets reserves
allocable to such asset less the amount (not greater than such net book
value) of any liability or Debt of the Company or any Restricted Subsidiary
assumed by the Person acquiring such asset. "EXCLUDED ASSETS" shall mean, as
of the date of any determination thereof, assets the proceeds of the sale or
other disposition of which shall have been used or shall, within six months
after the date of the closing of such sale or other disposition be used, to
acquire assets to be used in the same business of the Company or any
Restricted Subsidiary as the assets sold or disposed of, or, within twelve
months after the date of such closing, be applied to the construction and
related costs of newly constructed facilities to be used in the same business
of the Company or any Restricted Subsidiary as the assets sold or disposed
of, PROVIDED that (i) the assets which are Excluded Assets sold or disposed
of on such date and during the period of twelve months preceding such date
shall not in
35
<PAGE>
the aggregate constitute (taken at the amount described above) 5% or more of
Consolidated Net Tangible Assets computed as at the end of the fiscal quarter
most recently ended prior to such date, and (ii) the assets which are
Excluded Assets sold or disposed of on such date and during the period from
and including the Closing Date to such date shall not in the aggregate
constitute (taken at the amount described above) 10% or more of Consolidated
Net Tangible Assets computed as at the end of the fiscal quarter most
recently ended prior to such date.
"TRANSFEREE" shall mean any direct or indirect transferee of all or any
part of any Note purchased by any Purchaser under this Agreement.
"UNRESTRICTED SUBSIDIARY" shall mean any Subsidiary other than a
Restricted Subsidiary. No Subsidiary which is or becomes a Restricted
Subsidiary shall at any time thereafter become or be an Unrestricted
Subsidiary.
"UNUSED $1,000,000 BASKET AMOUNT" shall have the meaning specified in
paragraph 6C(10).
"VOTING STOCK" shall mean any shares of stock (or equivalent interests)
of the Company or any Subsidiary whose holders are entitled under ordinary
circumstances to vote for the election of directors (or persons performing
similar functions) of the Company or such Subsidiary (irrespective of whether
at the time stock of any other class or classes (or equivalent interests)
shall have or might have voting power by reason of the happening of any
contingency).
"WHOLLY-OWNED RESTRICTED SUBSIDIARY" shall mean a Restricted Subsidiary
all the outstanding shares (other than directors' qualifying shares, if
required by law) of every class of stock of which are at the time owned by
the Company or by one or more Wholly-Owned Restricted Subsidiaries.
11. MISCELLANEOUS
11A. NOTE PAYMENTS. The Company agrees that, so long as any
Purchaser shall hold any Note, it will make payments of principal of the
Notes and premium, if any, and interest thereon, which comply with the terms
of this Agreement, by wire transfer of immediately available funds for credit
to such Purchaser's account or accounts as
36
<PAGE>
specified in the Purchaser Schedule attached hereto, or such other account or
accounts in the United States as such Purchaser may designate in writing,
notwithstanding any contrary provision herein or in any Note with respect to
the place of payment. Each Purchaser agrees that, before disposing of any
Note, it will make a notation thereon (or on a schedule attached thereto) of
all principal payments previously made thereon and of the date to which
interest thereon has been paid. The Company agrees to afford the benefits of
this paragraph 11A to any Transferee which shall have made the same agreement
in writing as each Purchaser has made in this paragraph 11A.
11B. EXPENSES. The Company agrees, whether or not the transactions
contemplated hereby shall be consummated, to pay, and save each Purchaser and
any Transferee harmless against liability for the payment of, all
out-of-pocket expenses arising in connection with such transactions,
including (i) all document production and duplication charges and the fees
and expenses of any special counsel engaged by the Purchasers or any
Transferee in connection with this Agreement, the transactions contemplated
hereby and any subsequent proposed modification of, or proposed consent
under, this Agreement, whether or not such proposed modification shall be
effected or proposed consent granted, and (ii) the costs and expenses,
including attorneys' fees, incurred by such Purchaser or any Transferee in
enforcing any rights under this Agreement or the Notes or in responding to
any subpoena or other legal process issued in connection with this Agreement
or the transactions contemplated hereby or by reason of such Purchaser's or
any Transferee's having acquired any Note, including without limitation costs
and expenses incurred in any bankruptcy case. The Company shall indemnify
each Purchaser, each Transferee and the officers, directors, employees,
representatives and agents of each Purchaser and each Transferee from and
hold each of them harmless against any and all liabilities, obligations,
losses, damages, penalties, claims, actions, judgments, suits, costs,
expenses and disbursements incurred by any of them as a result of, or arising
out of, or in any way related to, or by reason of, any investigation,
litigation or other proceeding (whether or not such Purchaser or Transferee
is a party thereto) related to the entering into and/or performance of this
Agreement or any Note or the use of the proceeds of the Notes or the
consummation of any transactions contemplated herein or in any Note,
including, without limitation, the reasonable fees and
37
<PAGE>
disbursements of counsel incurred in connection with any such investigation,
litigation or other proceeding (but excluding any such liabilities,
obligations, losses, damages, penalties, claims, actions, judgments, suits,
costs, expenses or disbursements to the extent incurred by reason of the
gross negligence or willful misconduct of the Person to be indemnified). The
obligations of the Company under this paragraph 11B shall survive the
transfer of any Note or portion thereof or interest therein by any Purchaser
or any Transferee, the payment of any Note and the redemption, repurchase or
other acquisition by the Company of the Notes.
11C. CONSENT TO AMENDMENTS. This Agreement may be amended, and the
Company may take any action herein prohibited, or omit to perform any act
herein required to be performed by it, if the Company shall obtain the
written consent to such amendment, action or omission to act, of the Required
Holder(s), except that no such amendment or waiver shall change the maturity
of any Note, or change the principal of any Note, or decrease the rate of
interest or the amount of any premium payable with respect to any Note, or
change the time of payment of interest or any premium payable with respect to
any Note, or affect the time, amount or allocation of any required
prepayments of the Notes, or reduce the proportion of the principal amount of
the Notes required with respect to any consent, or change or affect any of
the provisions of paragraph 5C or 6C(1), without the written consent of the
holder or holders of all Notes at the time outstanding. Each holder of any
Note at the time or thereafter outstanding shall be bound by any consent
authorized by this paragraph 11C, whether or not such Note shall have been
marked to indicate such consent, but any Notes issued thereafter may bear a
notation referring to any such consent. No course of dealing between the
Company and the holder of any Note nor any delay in exercising any rights
hereunder or under any Note shall operate as a waiver of any rights of any
holder of such Note. As used herein and in the Notes, the term "this
Agreement" and references thereto shall mean this Agreement as it may from
time to time be amended or supplemented.
11D. FORM, REGISTRATION, TRANSFER AND EXCHANGE OF NOTES; LOST NOTES.
The Notes are issuable and transferable as registered notes without coupons
in denominations of at least $100,000, except as may be necessary to reflect
any principal amount not evenly divisible by
38
<PAGE>
$100,000. The Company shall keep at its principal office a register in which
the Company shall provide for the registration of Notes and of transfers of
Notes. Upon surrender for registration of transfer of any Note at the
principal office of the Company, the Company shall, at its expense, execute
and deliver one or more new Notes of like tenor and of a like aggregate
principal amount, registered in the name of such transferee or transferees.
At the option of the holder of any Note, such Note may be exchanged for other
Notes of like tenor and of any authorized denominations, of a like aggregate
principal amount, upon surrender of the Note to be exchanged at the principal
office of the Company. Whenever any Notes are so surrendered for exchange,
the Company shall, at its expense, execute and deliver the Notes which the
holder making the exchange is entitled to receive. Every Note surrendered for
registration of transfer or exchange shall be duly endorsed, or be
accompanied by a written instrument of transfer duly executed, by the holder
of such Note or such holder's attorney duly authorized in writing. Any Note
or Notes issued in exchange for any Note or upon transfer thereof shall carry
the rights to unpaid interest and interest to accrue which were carried by
the Note so exchanged or transferred, so that neither gain nor loss of
interest shall result from any such transfer or exchange. Upon receipt of
written notice from the holder of any Note of the loss, theft, destruction or
mutilation of such Note and, in the case of any such loss, theft or
destruction, upon receipt of such holder's unsecured indemnity agreement, or
in the case of any such mutilation upon surrender and cancellation of such
Note, the Company will make and deliver a new Note, of like tenor, in lieu of
the lost, stolen, destroyed or mutilated Note.
11E. PERSONS DEEMED OWNERS; PARTICIPATIONS. Prior to due presentment
for registration of transfer, the Company may treat the Person in whose name
any Note is registered as the owner and holder of such Note for the purpose
of receiving payment of principal of and premium, if any, and interest on
such Note and for all other purposes whatsoever, whether or not such Note
shall be overdue, and the Company shall not be affected by notice to the
contrary. Subject to the preceding sentence, the holder of any Note may from
time to time grant participations in all or any part of such Note to any
Person on such terms and conditions as may be determined by such holder in
its sole and absolute discretion.
39
<PAGE>
11F. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ENTIRE AGREEMENT. All
representations and warranties contained herein or made in writing by or on
behalf of the Company in connection herewith shall survive the execution and
delivery of this Agreement and the Notes, the transfer by any Purchaser of
any Note or portion thereof or interest therein and the payment of any Note,
and may be relied upon by any Transferee, regardless of any investigation
made at any time by or on behalf of any Purchaser or any Transferee. Subject
to the preceding sentence, this Agreement and the Notes embody the entire
agreement and understanding between each Purchaser and the Company and
supersede all prior agreements and understandings relating to the subject
matter hereof. This Agreement does not supersede any agreements, and
understandings between the Company and Prudential Asset Sales & Syndications,
Inc., and does not supersede obligations incurred in the event the Closing
does not occur under any letter executed on the date of this Agreement or on
the Business Day prior to the date of this Agreement.
11G. SUCCESSORS AND ASSIGNS. All covenants and other agreements in
this Agreement contained by or on behalf of any of the parties hereto shall
bind and inure to the benefit of the respective successors and assigns of the
parties hereto (including, without limitation, any Transferee) whether so
expressed or not.
11H. DISCLOSURE TO OTHER PERSONS. The Company acknowledges that the
holder of any Note may deliver copies of any financial statements and other
documents delivered to such holder, and disclose any other information
disclosed to such holder, by or on behalf of the Company or any Subsidiary
in connection with or pursuant to this Agreement to (i) such holder's
directors, officers, employees, agents and professional consultants, (ii) any
other holder of any Note, (iii) any Person which is an Institutional Investor
to which such holder offers to sell such Note or any part thereof, (iv) any
Person which is an Institutional Investor to which such holder sells or
offers to sell a participation in all or any part of such Note, (v) any
federal or state regulatory authority having jurisdiction over such holder,
(vi) the National Association of Insurance Commissioners or any similar
organization or (vii) any other Person to which such delivery or disclosure
may be necessary or appropriate (a) in compliance with any law, rule,
regulation or order applicable to such holder, (b) in response to any subpoena
40
<PAGE>
or other legal process, (c) in connection with any litigation to which such
holder is a party or (d) in order to protect such holder's investment in such
Note.
11I. NOTICES. All written communications provided for hereunder shall
be sent by first class mail or nationwide overnight delivery service (with
charges prepaid) and (i) if to any Purchaser, addressed to it at the address
specified for such communications in the Purchaser Schedule attached hereto,
or at such other address as it shall have specified to the Company in
writing, (ii) if to any other holder of any Note, addressed to such other
holder at such address as such other holder shall have specified to the
Company in writing or, if any such other holder shall not have so specified
an address to the Company, then addressed to such other holder in care of the
last holder of such Note which shall have so specified an address to the
Company, and (iii) if to the Company, addressed to it at 5000 Normandale
Road, Edina, Minnesota 55436, Attention: Senior Vice President, Finance, or
at such other address as the Company shall have specified to the holder of
each Note in writing; PROVIDED that any such communication to the Company may
also, at the option of the holder of any Note, be delivered by any other
means either to the Company at its address specified above or to any
Responsible Officer. Any notice sent or delivered to the Company in
accordance with this paragraph 11I shall be deemed given when received at the
address specified above or received by any Responsible Officer.
11J. DESCRIPTIVE HEADINGS. The descriptive headings of the several
paragraphs of this Agreement are inserted for convenience only and do not
constitute a part of this Agreement.
11K. SATISFACTION REQUIREMENT. If any agreement, certificate or other
writing, or any action taken or to be taken, is by the terms of this Agreement
required to be satisfactory to any Purchaser or to the Required Holder(s),
the determination of such satisfaction shall be made by such Purchaser or the
Required Holder(s), as the case may be, in the sole and exclusive judgment
(exercised in good faith) of the Person or Persons making such determination.
11L. GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED AND ENFORCED IN
ACCORDANCE WITH, AND THE RIGHTS
41
<PAGE>
OF THE PARTIES SHALL BE GOVERNED BY, THE LAW OF THE STATE OF NEW YORK.
11M. COUNTERPARTS. This Agreement may be executed simultaneously in two
or more counterparts, each of which shall be deemed an original, and it shall
not be necessary in making proof of this Agreement to produce or account for
more than one such counterpart.
42
<PAGE>
If all of you are in agreement with the foregoing, please sign the form
of acceptance on the enclosed counterpart of this letter and return the same
to the Company, and upon the signing and return of this letter by all of you,
this letter shall become a binding agreement between all of you and the
Company.
Very truly yours,
REGIS CORPORATION
By [ILLEGIBLE]
-------------------------------------
Title: [ILLEGIBLE]
The foregoing Agreement is hereby
accepted as of the date first
above written.
THE PRUDENTIAL INSURANCE
COMPANY OF AMERICA
By [ILLEGIBLE]
----------------------------------
Vice President
LIFE INSURANCE COMPANY OF GEORGIA
By THE INVESTMENT CENTRE, INC., its Agent
By [ILLEGIBLE]
----------------------------------
Title: Senior Vice President
SOUTHLAND LIFE INSURANCE COMPANY
By THE INVESTMENT CENTRE, INC., its Agent
By [ILLEGIBLE]
----------------------------------
Title: Senior Vice President
<PAGE>
WISCONSIN NATIONAL LIFE INSURANCE COMPANY
By THE INVESTMENT CENTRE, INC., its Agent
By [ILLEGIBLE]
----------------------------------
Title: Senior Vice President
ASSOCIATED DOCTORS HEALTH AND
LIFE INSURANCE COMPANY
By THE INVESTMENT CENTRE, INC., its Agent
By [ILLEGIBLE]
----------------------------------
Title: Senior Vice President
THE OHIO NATIONAL LIFE INSURANCE COMPANY
By /s/ Michael A. Boedeker
----------------------------------
Title: Michael A. Boedeker
Vice President, Fixed Income Securities
<PAGE>
PRUCO LIFE INSURANCE COMPANY
By /s/ David J. Koester
----------------------------------
Title: VICE PRESIDENT
<PAGE>
PURCHASER SCHEDULE
<TABLE>
<CAPTION>
Aggregate
Principal
Amount of Denomination(s)
Notes to Be of Note(s) To
Purchaser Purchased Be Purchased
- --------- ----------- ---------------
<S> <C> <C>
THE PRUDENTIAL INSURANCE COMPANY $33,684,000 $29,484,000
OF AMERICA $ 4,200,000
(1) All payments on account of Notes held
by such purchaser shall be made by
wire transfer of immediately available
funds for credit to:
Account No. 050-54-460 (in the case of
payments on account of the Note
originally issued in the principal
amount of $29,484,000)
Account No. 000-01-159 (in the case of
payments on account of the Note
originally issued in the principal
amount of $4,200,000)
Morgan Guaranty Trust Company of
New York
23 Wall Street
New York, New York 10015
Each such wire transfer shall set
forth the name of the Company, the
full title (including the coupon rate,
issuance date and final maturity date)
of the Notes, a reference to the
Standard & Poor's private placement
number of the Notes (or any other
identifying number specified in
writing to the Company), and the due
date and application (as among
principal, premium and interest) of
the payment being made.
<PAGE>
(2) Address for all notices relating to
payments:
The Prudential Insurance Company of
America
c/o The Prudential Corporate Finance Group
Four Gateway Center
100 Mulberry Street
Newark, New Jersey 07102-4007
Attention: Manager, Investment
Information Services
(3) Address for all other communications
and notices:
The Prudential Insurance Company of
America
c/o The Prudential Corporate Finance Group
Four Gateway Center
100 Mulberry Street
Newark, New Jersey 07102-4007
Attention: Senior Managing Director
(4) Tax Identification No.: 22-1211670
(5) Name and telephone number of officer
to receive telephone advice of
optional prepayment:
Peter Sherman
Senior Associate
201-802-9187
(6) Payments made under paragraph 5I to
PASS and Prudential shall be made by
wire transfer of immediately available
funds (i) in the case of PASS, for
credit to the account of PruSupply, Inc.
to Account No. 050-54-042 at Morgan
Guaranty Trust Company of New York,
23 Wall Street, New York, New York
10015, or such other account as shall
have been designated to the Company
for such purpose by PASS and (ii) in
the case of Prudential, for credit to
the accounts of Prudential specified
above for payments of principal
2
<PAGE>
and interest to Prudential ratably in
the same proportion as the payments of
the Notes originally issued to
Prudential are to be credited to such
accounts, or to such other account or
accounts as shall have been designated
to the Company for such purpose by
Prudential. Each such wire transfer
shall set forth the information with
respect to the Company and the Notes
to be set forth in wire transfers of
interest on the Notes, and shall state
the due date of such payment and that
it is a payment of deferred commitment
fee.
</TABLE>
3
<PAGE>
PURCHASER SCHEDULE
Aggregate
Principal
Amount of Denomination(s)
Notes To Be of Note(s) To
Purchaser Purchased Be Purchased
- --------- ----------- ---------------
PRUCO LIFE INSURANCE COMPANY $ 8,316,000 $ 8,316,000
(1) All payments on account of Notes held by
such purchaser shall be made by wire
transfer of immediately available funds
for credit to:
Account No. 050-52-502
Morgan Guaranty Trust Company of
New York
23 Wall Street
New York, New York 10015
Each such wire transfer shall set forth
the name of the Company, the full title
(including the coupon rate, issuance date
and final maturity date) of the Notes, a
reference to the Standard & Poor's private
placement number of the Notes (or any
other identifying number specified in
writing to the Company), and the due date
and application (as among principal,
premium and interest) of the payment being
made.
(2) Address for all notices relating to payments:
Pruco Life Insurance Company
c/o The Prudential Corporate Finance Group
Four Gateway Center
100 Mulberry Street
Newark, New Jersey 07102-4007
Attention: Manager, Investment
Information Services
4
<PAGE>
(3) Address for all other communications and
notices:
Pruco Life Insurance Company
c/o The Prudential Corporate Finance Group
Four Gateway Center
100 Mulberry Street
Newark, New Jersey 07102-4007
Attention: Senior Managing Director
(4) Tax Identification No.: 22-1944557
(5) Name and telephone number of officer to
receive telephone advice of optional
prepayment:
Peter Sherman
Senior Associate
201-802-9187
(6) Payments made under paragraph 5I to Pruco
shall be made by wire transfer of
immediately available for credit to the
account of Pruco specified above for
payments of principal and interest to
Pruco, or to such other account or
accounts as shall have been designated to
the Company for such purpose by Pruco.
Each such wire transfer shall set forth
the information with respect to the
Company and the Notes to be set forth in
wire transfers of interest on the Notes,
and shall state the due date of such
payment and that it is a payment of
deferred commitment fee.
5
<PAGE>
PURCHASER SCHEDULE
Aggregate
Principal
Amount of Denomination(s)
Notes To Be of Note(s) To
Purchaser Purchased Be Purchased
- --------- ----------- ---------------
LIFE INSURANCE COMPANY OF GEORGIA $5,000,000 $5,000,000
(1) All payments on account of Note held by
such purchaser shall be made by wire
transfer of immediately available funds
for credit to:
Account No. 58-16680-20
First Wachovia National Bank
Winston Salem, North Carolina
Each such wire transfer shall set forth
the name of the Company, the full title
(including the coupon rate, issuance date
and final maturity date) of the Notes,
a reference to the Standard & Poor's private
placement number of the Notes (or any
other identifying number specified in
writing to the Company), and the due date
and application (as among principal,
premium and interest) of the payment being
made.
(2) Address for all notices relating to
payments:
The Investment Centre, Inc.
P.O. Box 105242
300 Galleria Parkway
Suite 1200
Atlanta, Georgia 30339
Telephone: (404) 850-4800
Facsimile: (404) 850-4801
Attention: Securities Accounting
6
<PAGE>
(3) Address for all other communications and
notices (except as otherwise provided in
the Agreement):
The Investment Centre, Inc.
P.O. Box 105242
300 Galleria Parkway
Suite 1200
Atlanta, Georgia 30339
Attention: Private Placements
with copy to:
Life Insurance Company of Georgia
P.O. Box 105006
Atlanta, Georgia 30348-5006
5780 Powers Ferry Road, N.W.
Atlanta, Georgia 30327-4390
Attention: Treasurer
(4) Tax Identification No.: 22-1211670
(5) Name and telephone number of officer to
receive telephone advice of optional
prepayment:
Fred C. Smith
404-850-4821
7
<PAGE>
PURCHASER SCHEDULE
Aggregate
Principal
Amount of Denomination(s)
Notes To Be of Note(s) To
Purchaser Purchased Be Purchased
- --------- ----------- ---------------
SOUTHLAND LIFE INSURANCE COMPANY $3,000,000 $3,000,000
(1) All payments on account of Note held by
such purchaser shall be made by wire
transfer of immediately available funds
for credit to:
Account No. 581667920
First Wachovia National Bank
Winston Salem, North Carolina
Each such wire transfer shall set forth
the name of the Company, the full title
(including the coupon rate, issuance date
and final maturity date) of the Notes, a
reference to the Standard & Poor's private
placement number of the Notes (or any
other identifying number specified in
writing to the Company), and the due date
and application (as among principal,
premium and interest) of the payment being
made.
(2) Address for all notices relating to
payments:
The Investment Centre, Inc.
P.O. Box 105242
300 Galleria Parkway
Suite 1200
Atlanta, Georgia 30339
Telephone: (404) 850-4800
Facsimile: (404) 850-4801
Attention: Securities Accounting
8
<PAGE>
(3) Address for all other communications and
notices (except as otherwise provided in
the Agreement):
The Investment Centre, Inc.
P.O. Box 105242
300 Galleria Parkway
Suite 1200
Atlanta, Georgia 30339
Attention: Private Placements
with copy to:
Southland Life Insurance Company
P.O. Box 105006
Atlanta, Georgia 30348-5006
5780 Powers Ferry Road, N.W.
Atlanta, Georgia 30327-4390
Attention: Treasurer
(4) Tax Identification No.: 75-0572420
(5) Name and telephone number of officer to
receive telephone advice of optional
prepayment:
Fred C. Smith
404-850-4821
9
<PAGE>
PURCHASER SCHEDULE
Aggregate
Principal
Amount of Denomination(s)
Notes To Be of Note(s) To
Purchaser Purchased Be Purchased
- --------- ----------- ---------------
WISCONSIN NATIONAL LIFE INSURANCE COMPANY $500,000 $500,000
(1) All payments on account of Note held by
such purchaser shall be made by wire
transfer of immediately available funds
for credit to:
Account No. 512012-857
First Wisconsin National Bank of Oshkosh
Oshkosh, Wisconsin
Each such wire transfer shall set forth
the name of the Company, the full title
(including the coupon rate, issuance date
and final maturity date) of the Notes, a
reference to the Standard & Poor's private
placement number of the Notes (or any
other identifying number specified in
writing to the Company), and the due date
and application (as among principal,
premium and interest) of the payment being
made.
(2) Address for all notices relating to payments:
The Investment Centre, Inc.
P.O. Box 105242
300 Galleria Parkway
Suite 1200
Atlanta, Georgia 30339
Telephone: (404) 850-4800
Facsimile: (404) 850-4801
Attention: Securities Accounting
10
<PAGE>
(3) Address for all other communications and
notices (except as otherwise provided in
the Agreement):
The Investment Centre, Inc.
P.O. Box 105242
300 Galleria Parkway
Suite 1200
Atlanta, Georgia 30339
Attention: Private Placements
with copy to:
Wisconsin National Life Insurance Company
Investment Department
220 Washington Avenue
P.O. Box 748
Oshkosh, Wisconsin 54902
Attention: Betty Parker
(4) Tax Identification No.: 3900714280
(5) Name and telephone number of officer to
receive telephone advice of optional
prepayment:
Fred C. Smith
404-850-4821
11
<PAGE>
PURCHASER SCHEDULE
Aggregate
Principal
Amount of Denomination(s)
Notes To Be of Note(s) To
Purchaser Purchased Be Purchased
- --------- ----------- ---------------
ASSOCIATED DOCTORS HEALTH AND
LIFE INSURANCE COMPANY $500,000 $500,000
(1) All payments on account of Note held by
such purchaser shall be made by wire
transfer of immediately available funds
for credit to:
Account No. 192019008
SouthTrust Bank of Alabama N.A.
420 North 20th Street
Birmingham, Alabama 35203
P.O. Box 2554
Birmingham, Alabama 35290
Attention: Mary Joe Lee
Trust Department
Each such wire transfer shall set forth
the name of the Company, the full title
(including the coupon rate, issuance date
and final maturity date) of the Notes, a
reference to the Standard & Poor's private
placement number of the Notes (or any
other identifying number specified in
writing to the Company), and the due date
and application (as among principal,
premium and interest) of the payment being
made.
12
<PAGE>
(2) Address for all notices relating to payments:
The Investment Centre, Inc.
P.O. Box 105242
300 Galleria Parkway
Suite 1200
Atlanta, Georgia 30339
Telephone: (404) 850-4800
Facsimile: (404) 850-4801
Attention: Securities Accounting
(3) Address for all other communications and
notices (except as otherwise provided in
the Agreement):
The Investment Centre, Inc.
P.O. Box 105242
300 Galleria Parkway
Suite 1200
Atlanta, Georgia 30339
Attention: Private Placements
with copy to:
Associated Doctors Health and Life
Insurance Company
500 Beacon Parkway, West
Birmingham, Alabama 35209
Attention: Controller
(4) Tax Identification No.: 63-0337180
(5) Name and telephone number of officer to
receive telephone advice of optional
prepayment:
Fred C. Smith
404-850-4821
13
<PAGE>
PURCHASER SCHEDULE
Aggregate
Principal
Amount of Denominations(s)
Notes To Be of Note(s) To
Purchaser Purchased Be Purchased
- --------- ------------ ----------------
THE OHIO NATIONAL LIFE $4,000,000 $4,000,000
INSURANCE COMPANY
(1) All payments on account of Note held by
such purchaser shall be made by wire
transfer of immediately available funds
for credit to:
Account No. 910-275-7
Star Bank, N.A.
5th & Walnut Streets
Cincinnati, Ohio 45202
Each such wire transfer shall set forth
the name of the Company, the full title
(including the coupon rate, issuance date
and final maturity date) of the Notes, a
reference to the Standard & Poor's private
placement number of the Notes (or any
other identifying number specified in
writing to the Company), and the due date
and application (as among principal,
premium and interest) of the payment being
made.
14
<PAGE>
(2) Address for all notices relating to payments:
The Ohio National Life Insurance Company
Post Office Box 237
Cincinnati, Ohio 45201
Attention: Investment Department
(3) Address for all other communications and
notices (except as otherwise provided in
the Agreement):
The Ohio National Life Insurance Company
Post Office Box 237
Cincinnati, Ohio 45201
Attention: Investment Department
(4) Tax Identification No.: 31-0397080
(5) Name and telephone number of officer to
receive telephone advice of optional
prepayment:
Mary Beth Cadle
513-559-6450
15
<PAGE>
EXHIBIT A
REGIS CORPORATION
11.52% Senior Note due June 30, 1998
No. R-___ New York, New York
$____________ _______________, 19__
FOR VALUE RECEIVED, THE UNDERSIGNED, REGIS CORPORATION (herein called the
"Company"), a corporation organized and existing under the laws of the State
of Minnesota, hereby promises to pay to ________________________________, or
registered assigns, the principal sum of ___________________________ DOLLARS
on June 30, 1998, with interest (computed on the basis of a 360-day year --
30-day month) (a) on the unpaid balance thereof at the rate of 11.52% per
annum from the date hereof, payable quarterly on the thirtieth day of March,
June, September and December in each year, commencing with the March 30, June
30 (other than June 30, 1991), September 30 or December 30 next succeeding the
date hereof, until the principal hereof shall have become due and payable,
and (b) on any overdue payment (including any overdue prepayment) of
principal, any overdue payment of premium and, to the extent permitted by
applicable law, any overdue payment of interest, payable quarterly as
aforesaid (or, at the option of the registered holder hereof, on demand),
at a rate per annum from time to time equal to the greater of (i) 2% plus the
interest rate per annum stated above or (ii) the rate of interest publicly
announced by Morgan Guaranty Trust Company of New York from time to time in
New York City as its Prime Rate.
Payments of principal, premium, if any, and interest are to be made at the
main office of Morgan Guaranty Trust Company of New York in New York City or
at such other place as the holder hereof shall designate to the Company
in writing, in lawful money of the United States of America.
This Note is one of a series of Senior Notes (herein called the "Notes")
issued pursuant to a Note Agreement, dated as of June 21, 1991 (herein called
the "Agreement"), between the Company and the original purchasers of the
Notes named in the Purchaser Schedule attached thereto and is entitled to the
benefits thereof.
<PAGE>
-2-
As provided in the Agreement, this Note is subject to prepayment, in whole
or from time to time in part, in certain cases without premium and in other
cases with a premium as specified in the Agreement.
This Note is a registered Note and, as provided in the Agreement, upon
surrender of this Note for registration of transfer, duly endorsed, or
accompanied by a written instrument of transfer duly executed, by the
registered holder hereof or such holder's attorney duly authorized in
writing, a new Note for a like principal amount will be issued to, and
registered in the name of, the transferee. Prior to due presentment for
registration of transfer, the Company may treat the person in whose name this
Note is registered as the owner hereof for the purpose of receiving payment
and for all other purposes, and the Company shall not be affected by any
notice to the contrary.
The Company agrees to make prepayments of principal on the dates and in
the amounts specified in the Agreement.
In case an Event of Default, as defined in the Agreement, shall occur and
be continuing, the principal of this Note may be declared or otherwise become
due and payable in the manner and with the effect provided in the Agreement.
THIS NOTE IS INTENDED TO BE PERFORMED IN THE STATE OF NEW YORK AND SHALL
BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAW OF SUCH STATE.
REGIS CORPORATION
By
----------------------------
President
By
----------------------------
Secretary
<PAGE>
EXHIBIT B-1
[LETTERHEAD OF PHILLIPS, GROSS & AARON, P.A.]
June , 1991
--
To each of the Purchasers
listed in the attached Purchaser Schedule
Ladies and Gentlemen:
We have acted as counsel for Regis Corporation (the "Company") in
connection with the Note Agreement, dated as of June 21, 1991, between the
Company and you and the other purchasers listed in the attached Purchaser
Schedule (the "Note Agreement"), pursuant to which the Company has issued to
you and such other purchasers today 11.52% Senior Notes due June 30, 1998 of
the Company in the aggregate principal amount of $55,000,000 (the "Notes").
All terms used herein that are defined in the Note Agreement have the
respective meanings specified in the Note Agreement.
In this connection, we have examined such certificates of public
officials, certificates of officers of the Company and copies certified to
our satisfaction of corporate documents and records of the Company and of
other papers, and have made such other investigations, as we have deemed
relevant and necessary as a basis for our opinion hereinafter set forth. We
have relied upon such certificates of public officials and of officers of the
Company with respect to the accuracy of material factual matters contained
therein which were not independently established. With respect to the opinion
expressed in paragraph 3 below, we have also relied upon the representation
made by each of you in the first sentence of paragraph 9 of the Note
Agreement.
Based on the foregoing, it is our opinion that:
1. The Company is a corporation duly incorporated, validly existing and
in good standing under the laws of the State of Minnesota and has all
requisite corporate power and authority to enter into the Note Agreement, to
issue and sell the Notes and to carry out the terms of the Note Agreement and
the Notes. Each Restricted Subsidiary is a corporation duly incorporated,
<PAGE>
-2-
validly existing and in good standing under the laws of its jurisdiction of
incorporation. The Company and its Restricted Subsidiaries have all requisite
corporate power and authority to carry on their respective businesses as now
being conducted.
2. The Note Agreement and the Notes have been duly authorized by all
necessary corporate action on the part of the Company, do not require any
shareholder approval, have been duly executed and delivered by the Company,
and are valid obligations of the Company, legally binding upon and
enforceable against the Company in accordance with their respective terms,
except as such enforceability may be limited by (a) bankruptcy, insolvency,
reorganization or other similar laws affecting the enforcement of creditors'
rights generally, (b) general principles of equity (regardless of whether
such enforceability is considered in a proceeding in equity or at law), and
(c) we express no opinion as to the enforceability of the indemnification
provisions contained in paragraph 11B of the Note Agreement, and the Notes
are entitled to the benefits of the Note Agreement.
3. It is not necessary in connection with the offering, issuance, sale
and delivery of the Notes under the circumstances contemplated by the Note
Agreement to register the Notes under the Securities Act or to qualify an
indenture in respect of the Notes under the Trust Indenture Act of 1939, as
amended.
4. The extension, arranging and obtaining of the credit represented by
the Notes do not result in any violation of Regulation G, T or X of the Board
of Governors of the Federal Reserve System.
5. The execution and delivery of the Note Agreement and the Notes, the
offering, issuance and sale of the Notes and compliance with the respective
terms and provisions of the Note Agreement and the Notes do not conflict
with, or result in a breach of the terms, conditions or provisions of, or
constitute a default under, or result in any violation of, or result in the
creation of any Lien upon any of the properties or assets of the Company or
any of its Restricted Subsidiaries pursuant to, the charter or by-laws of the
Company or any of its Restricted Subsidiaries, any statute, law, rule or
regula-
<PAGE>
-3-
tion to which the Company or any of its restricted Subsidiaries is
subject or (insofar as is known to us after having made due inquiry with
respect thereto) any agreement (including any agreement with stockholders),
instrument, order, judgment or decree to which the Company or any of its
Restricted Subsidiaries is a part or otherwise subject, other than the Debt
which is being retired on the date hereof.
6. No consent, approval or authorization of, or declaration or filing
with, any governmental authority is required in connection with the execution
or delivery of the Note Agreement, the consummation of the transactions
contemplated thereby or the offer, issue, sale and delivery of the Notes, or
the fulfillment of and compliance with the terms and provisions of the Note
Agreement and of the Notes.
7. To the best of our knowledge after having made due inquiry with
respect thereto, there is no action, suit, investigation or proceeding
pending or threatened against the Company or any of its Restricted
Subsidiaries, or any properties or rights of the Company or any of its
Restricted Subsidiaries, by or before any court, arbitrator or administrative
or governmental body which might result in any material adverse change in the
business, condition (financial or other), assets, properties, operations or
prospects of the Company or the Company and its Restricted Subsidiaries as a
whole.
Your special counsel, Debevoise & Plimpton, in rendering their opinion
pursuant to paragraph 3A of the Note Agreement, are authorized to rely on
this opinion as to matters of Minnesota law.
Very truly yours,
<PAGE>
EXHIBIT B-2
[Letterhead of Debevoise & Plimpton]
June , 1991
--
To each of the Purchasers
listed in the attached
Purchaser Schedule
REGIS CORPORATION
11.52% SENIOR NOTES DUE JUNE 30, 1998
Ladies and Gentlemen:
We have acted as special counsel to you and the other purchasers listed
in the attached Purchaser Schedule in connection with the issue and sale to
you and such other purchasers today by Regis Corporation, a Minnesota
corporation (the "Company"), of $55,000,000 aggregate principal amount of its
11.52% Senior Notes due June 30, 1998 (the "Notes"), pursuant to the Note
Agreement (the "Note Agreement"), dated as of June 21, 1991, between the
Company and you and such other purchasers.
In so acting, we have participated in the preparation of the Note
Agreement and Notes. We have also examined and relied upon the
representations and warranties as to factual matters contained in or made
pursuant to the Note Agreement and examined and relied upon the originals, or
copies certified or otherwise identified to our satisfaction, of such
records, documents, certificates and other instruments, and have made such
other investigations, as in our judgment are necessary or appropriate to
enable us to render the opinion expressed below.
We are of the following opinion:
1. INCORPORATION, STANDING, ETC. The Company is a corporation duly
incorporated, validly existing and in good standing under the laws of the
State of Minnesota and has all requisite corporate power and authority to
enter into the Note Agreement, to issue and sell the Notes and to carry out
the terms of the Note Agreement and the Notes.
<PAGE>
-2-
2. COMPLIANCE WITH CHARTER AND BY-LAWS. The execution, delivery and
performance of the Note Agreement and the Notes will not result in any
violation of or be in conflict with or constitute a default under any term of
the charter or by-laws of the Company.
3. GOVERNMENTAL CONSENT. The consent, approval or authorization of, or
declaration or filing with, any governmental authority on the part of the
Company is required under Federal or New York law for the valid execution and
delivery of the Note Agreement or the valid offer, issue, sale and delivery
of the Notes pursuant to the Note Agreement.
4. NOTE AGREEMENT AND NOTES. The Note Agreement and the Notes have been
duly authorized by all necessary corporate action on the part of the Company
and do not require any shareholder approval. The Note Agreement and the Notes
purchased by you today have been duly executed and delivered by the Company
and constitute legal, valid and binding obligations of the Company,
enforceable against the Company in accordance with their respective terms,
except that (a) such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium and similar laws of general
application relating to or affecting the rights and remedies of creditors,
(b) such enforceability may be limited by general principles of equity
(regardless of whether such enforceability is considered in a proceeding in
equity or at law), and (c) we express no opinion as to the enforceability of
the indemnification provisions contained in paragraph 11B of the Note
Agreement. The Notes are entitled to the benefits of the Note Agreement.
5. SECURITIES ACT AND TRUST INDENTURE ACT. The offer, issue, sale and
delivery of the Notes under the circumstances contemplated by the Note
Agreement constitute exempted transactions under the registration provisions
of the Securities Act of 1933, as amended, and neither the registration of
the Notes thereunder nor the qualification of an indenture in respect of the
Notes under the Trust Indenture Act of 1939, as amended, is required in
connection with such offer, issue, sale and delivery.
We have reviewed, and insofar as our opinion involves matters governed
by Minnesota law, have relied upon, the opinion, dated today and addressed to
you, of
<PAGE>
-3-
Phillips, Gross & Aaron, P.A., counsel for the Company, and on the basis of
such review, it is our opinion that you and we are justified in relying on
such opinion. Our review of such opinion included such investigations and
procedures as in our judgment were necessary or appropriate in order to
enable us to reach the conclusion that your and our reliance thereon is
reasonable under the circumstances.
Very truly yours,
<PAGE>
EXHIBIT C
REGIS CORPORATION
SCHEDULE OF DEBT
-----------------
<TABLE>
<CAPTION>
Balance Paid Continuing
at 6/28/91 at Closing Obligations
---------- ---------- -----------
(In Thousands)
<S> <C> <C> <C>
FBS - Revolver 23,095 23,095 0
First Bank Term Loan 68,974 68,974 0
FBS Lease (Dated 12/30/86) 1,486 0 1,486
FBS Lease (Dated 6/30/87) 596 0 596
Norwest Lease (Dated 12/14/88) 1,922 0 1,922
MEI-Regis (Inventory) 2,000 0 2,000
MEI-Regis (Management Fee) 467 0 467
MEI-Regis (Essanelle Settlement) 1,940 1,940 0
MEI-Regis (BHI Note) 531 0 531
Kunin Family (Maxims Shareholders) 619 0 619
Kunin Family (Maxims Shareholders Settlement) 777 0 777
Kunin Family (Maxims Royalties) 515 0 515
Kunin Family (Maxims Consulting) 249 0 249
Kunin Family (Maxims Consulting Settlement) 693 0 693
Vendors (Sebastian, Kerologie & Zotos) 547 0 547
------ ------ ------
$104,411 $94,009 $10,402
-------- ------- -------
</TABLE>
<PAGE>
EXHIBIT D
REGIS CORPORATION
SCHEDULE OF LIENS
-----------------
SECURED PARTY SECURITY DESCRIPTION COMMENTS
- ------------- -------------------- --------
First Bank and current Lien on capital stock To be released at
bank group - Term Note and all assets of Regis closing
First Bank and current Lien on capital stock To be released at
bank group - Revolver and all assets of Regis closing
FBS Business Finance Lien on various salon Continuing secu-
Lease dated 12/30/86 furniture and fixtures rity interest
FBS Business Finance Lien on various salon Continuing secu-
Lease dated 6/30/87 furniture and fixtures rity interest
Norwest Leasing Lien on various salon Continuing secu-
Lease dated 12/14/88 furniture and fixtures rity interest
<PAGE>
EXHIBIT E
REGIS CORPORATION
SCHEDULE OF SUBSIDIARIES
------------------------
LEGAL NAME TYPE OWNERSHIP
---------- ---- ---------
Regis Salon Services, Inc. Restricted 100%
Hair Programming, Inc. Restricted 100%
Regis Hairstylists, Ltd. Restricted 100%
Selatz de Mexico, S.A. de C.V. Unrestricted 100%
Seligman & Latz de Mexico, S.A. de C.V. Unrestricted 100%
S & L de Polanco, S.A. de C.V. Unrestricted 100%
Glemby Europe, Ltd. Unrestricted 99%*
- ------------------
* The company owns 9,998 shares of the 10,000 shares which are outstanding.
The Two shares not controlled by the company are owned by two employees of
Glemby Europe, Ltd.
<PAGE>
EXHIBIT F
REGIS CORPORATION
TRANSACTIONS WITH AFFILIATES
----------------------------
AFFILIATE NAME DESCRIPTION
- -------------- -----------
Curtis Squire, Inc. ARTWORK RENTAL: The company annually rents
artwork from Curtis Squire, Inc. which is housed
and displayed in the corporate home office. The
annual rental charge is approximately $250,000
which is believed to be a fair market rental.
The proceeds from the rental charge have been
used to pay for the accounting service fee
charged by Regis (see discussion below).
ACCOUNTING SERVICE FEE: The company annually
charges Curtis Squire, Inc. a fee for the
performance of certain accounting services
provided by Regis Corporation employees. The fee
of approximately $250,000 is believed to be a
fair market charge. As discussed above, the
charge is usually offset by the artwork rental
fee.
<PAGE>
EXHIBIT G
REGIS CORPORATION
SCHEDULE OF INVESTMENTS
-----------------------
INVESTMENT CARRYING VALUE
- ---------- --------------
Shareholder Notes:
Paul Finkelstein $1,612,500
Frank Evangelist 483,750
Chris Fox 483,750
Bill Sipkins 161,250
MEI-Regis, Inc. (stock investment) 1,600,000
MEI Diversified Inc. (800,000 warrants) 0
Glemby Europe, Ltd. 1,724,883
Seligman & Latz de Mexico, S.A. de C.V. 110,000
----------
$6,176,133
----------
<PAGE>
EXHIBIT H
OFFSET SHARING AGREEMENT
AGREEMENT, dated as of June __, 1991, among Barclays Bank PLC
("Barclays"), First Bank National Association ("First Bank"), The Prudential
Insurance Company of America, Pruco Life Insurance Company, Life Insurance
Company of Georgia, Southland Life Insurance Company, Wisconsin National Life
Insurance Company, Associated Doctors Health and Life Insurance Company and
The Ohio Life Insurance Company (the "Institutional Investors", and together
with Barclays and First Bank, the "Lenders").
WHEREAS, Regis Corporation, a Minnesota Corporation (the
"Company"), has entered into (i) a Senior Revolving Credit Agreement, dated
as of the date hereof, with Barclays (the "Barclays Credit Agreement"),
providing for loans in the aggregate principal amount of up to $15,000,000,
which loans shall be evidenced by a promissory note in the form of Exhibit B
to the Barclays Credit Agreement (the "Barclays Note"), (ii) a Senior
Revolving Credit Agreement, dated as of the date hereof, with First Bank (the
"First Bank Credit Agreement"), providing for loans in the aggregate
principal amount of up to $5,000,000, which loans shall be evidenced by a
promissory note in the form of Exhibit B to the First Bank Credit Agreement
(the "First Bank Note") and (iii) a Note Agreement with the Institutional
Investors, dated as of the date hereof (the "Institutional Investors
Agreement"; the Institutional Investors Agreement, the Barclays Credit
Agreement and the First Bank Credit Agreement being herein collectively
called the "Loan Agreements") providing for the issuance and sale to the
Institutional Investors of Senior Notes due June 30, 1998 of the Company and
in the aggregate principal amount of $55,000,000, which Notes shall be in the
form of Exhibit A to the Institutional Investors Agreement (the
"Institutional Investors Notes"; the Institutional Investors Notes, the
Barclays Note and the First Bank Note being herein collectively called the
"Lender Notes");
NOW, THEREFORE, in consideration of the mutual covenants herein
contained, it is hereby agreed as follows:
1. The Lenders agree among themselves that if any Lender shall
obtain payment on the indebtedness under the Lender Notes held by it through
the exercise of a right of set-off or banker's lien, or through the exercise
<PAGE>
of any similar rights, such Lender will promptly purchase from the other
Lenders participations in (or, if and to the extent specified by such Lender,
direct interests in) the Lender Notes held by each of the other Lenders in
such amounts, and make such other adjustments from time to time as shall be
equitable, to the end that each Lender shall share the benefit of such
payment (net of any expenses which may be incurred by such Lender in
obtaining or preserving such benefit) pro rata in accordance with the unpaid
principal, interest and premium, if any, on the Lender Notes held by each
Lender, PROVIDED that if all or any portion of such payment is thereafter
rescinded or must otherwise be restored (including, without limitation, by
reason of the insolvency, bankruptcy or reorganization of the Company), the
Lenders shall make appropriate adjustments among themselves (by the resale of
participations sold or otherwise) so that the Lender which shall have shared
the benefit of such rescinded or restored payment (or portion of payment)
shall not suffer a loss by reason of sharing such benefit. The treatment as
secured claims, in a bankruptcy, reorganization or similar proceeding of the
Company, of the indebtedness under any Lender Notes because (i) any funds of
the Company shall have been on deposit in any of the Lenders or (ii) other
amounts shall have been payable to the Company by any of the Lenders or (iii)
other assets of the Company shall have been in the possession of any of the
Lenders, which treatment results in payments or distributions to any of such
Lenders on account of such indebtedness in amount or value proportionately
greater than payments or distributions on account of unsecured claims, shall
be deemed for purposes of this Agreement to be the obtaining of payment on
such indebtedness held by such Lenders through the exercise of a right of
set-off or banker's lien or through the exercise of similar rights, to the
extent of the extra amount or value received by such Lenders. Nothing in this
Agreement shall be deemed to apply to any payment, funds or other amounts
obtained by First Bank as reimbursement for indebtedness owed to First Bank
as a result of its functioning as a depositary bank for the Company, PROVIDED
that if the amount so obtained at any time exceeds $100,000 or is applied to
indebtedness which has been outstanding for more than five days, the Company
will promptly notify each of the Lenders other than First Bank of such
reimbursement and, if not later than ten days after receiving such
notification any Lender shall request First Bank in writing to share such
amount under this Agreement, the amount of such
2
<PAGE>
reimbursement so obtained shall be deemed for purposes of Section 1 of this
Agreement to be a payment obtained by First Bank on the indebtedness under
the First Bank Note through the exercise of a right of set-off.
2. THIS AGREEMENT SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE
WITH, AND THE RIGHTS OF THE PARTIES SHALL BE GOVERNED BY, THE LAW OF THE
STATE OF NEW YORK. This Agreement may not be changed orally, but only by an
instrument in writing signed by the party against whom enforcement of any
waiver, change, modification or discharge is sought.
3. This Agreement may be executed in several counterparts, each of
which shall be deemed an original but all of which shall constitute one
agreement, and will constitute a binding agreement when executed by each of
the parties hereto. It shall not be necessary that each counterpart hereof be
signed by all the parties hereto, and in making proof of this Agreement it
shall not be necessary to produce or account for more than sufficient
counterparts hereof to evidence execution by all the parties hereto.
4. This Agreement shall be binding upon and inure to the benefit
of the successors and assigns of the parties hereto, including any
transferees of the Lender Notes, PROVIDED that any transferee of Lender Notes
shall be entitled to the benefits of this Agreement only if it or the Company
shall have given notice to any other Lender obligated hereunder that such
transferee has become a holder of Lender Notes, such notice to be given in
accordance with the notice provisions of the respective Loan Agreements.
3
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be duly executed by their respective duly authorized officers as of the
date first above written.
BARCLAYS BANK PLC
By:
---------------------------------
Title:
------------------------------
FIRST BANK NATIONAL ASSOCIATION
By:
---------------------------------
Title:
------------------------------
THE PRUDENTIAL INSURANCE COMPANY
OF AMERICA
By:
---------------------------------
Title:
------------------------------
PRUCO LIFE INSURANCE COMPANY
By:
---------------------------------
Title:
------------------------------
LIFE INSURANCE COMPANY OF GEORGIA
By THE INVESTMENT CENTRE, INC., its
Agent
By:
---------------------------------
Title:
------------------------------
4
<PAGE>
SOUTHLAND LIFE INSURANCE COMPANY
By THE INVESTMENT CENTRE, INC., its
Agent
By:
---------------------------------
Title:
------------------------------
WISCONSIN NATIONAL LIFE INSURANCE COMPANY
By THE INVESTMENT CENTRE, INC., its
Agent
By:
---------------------------------
Title:
------------------------------
ASSOCIATED DOCTORS HEALTH AND LIFE
INSURANCE COMPANY
By THE INVESTMENT CENTRE, INC., its
Agent
By:
---------------------------------
Title:
------------------------------
THE OHIO NATIONAL LIFE INSURANCE COMPANY
By:
---------------------------------
Title:
------------------------------
The undersigned hereby acknowledges and consents to the terms of
the Offset Sharing Agreement; agrees that by executing this acknowledgment
and consent, the undersigned is bound by the terms of the Offset Sharing
Agreement as they effect and determine the relative rights of the Lenders;
and the undersigned further agrees that the terms of the Offset Sharing
Agreement and the performance of such terms by the parties thereto shall not
give the undersigned any additional rights vis-a-vis any of the Lenders. The
undersigned agrees to give the
5
<PAGE>
notifications referred to in the proviso to the last sentence of Section 1 of
the Offset Sharing Agreement.
REGIS CORPORATION
By:
---------------------------------
Title:
------------------------------
6
<PAGE>
[LOGO]
July 20, 1992
Regis Corporation
5000 Normandale Road
Minneapolis, Minnesota 55436
Attention: Frank E. Evangelist
Senior Vice President - Finance
Gentlemen:
Reference is made to each of (1) that certain Note Agreement dated as of
June 21, 1991 between Regis Corporation (the "Company") and The Prudential
Insurance Company of America ("Prudential"), pursuant to which the Company
issued, and Prudential purchased, an aggregate of $33,684,000 principal
amount of 11.52% Senior Notes due June 30, 1998 (the "Notes") and (2) that
certain Note Agreement dated as of June 21, 1991 between the Company and
Pruco Life Insurance Company ("Pruco"), pursuant to which the Company issued,
and Pruco purchased, $8,316,000 principal amount of Notes. Each such Note
Agreement shall hereinafter be referred to as an "Agreement" or collectively,
the "Agreements" and terms used herein but not otherwise defined shall have
the meanings assigned to them in the Agreements.
Prudential and Pruco hereby agree with the Company as follows:
1. The definition of "Revolving Credit Loans" set forth in Section 10B
of each Agreement shall be amended and restated as follows:
"Revolving Credit Loans" shall mean any revolving credit loans made
and any letters of credit issued under the Revolving Credit
Agreements.
2. The definition of "Revolving Credit Agreements" set forth in
Section 10B of each Agreement shall be amended and restated as follows:
"Revolving Credit Agreements" shall mean (i) the Senior Revolving
Credit Agreement, dated as of June 21, 1991, as heretofore amended
(and including an amendment, if any, solely to provide for the letter
of credit facility referred to in the definition of "Revolving Credit
Loans"), between the Company and Barclays Bank PLC, providing for
Revolving Credit Loans in aggregate principal amount
<PAGE>
not in excess of $15,000,000, and (ii) the Senior Revolving Credit
Agreement, dated as of June 21, 1991, as heretofore amended (and
including an amendment, if any, solely to provide for the letter of
credit facility referred to in the definition of "Revolving Credit
Loans") between the Company and First Bank National Association,
providing for Revolving Credit Loans in aggregate principal amount
not in excess of $5,000,000.
3. Section 6C(10) of each Agreement shall be amended by (i) the insertion
of "(a)" immediately preceding the text in the first line thereof and (ii) the
addition of the following language as a new paragraph (b) at the end thereof:
"(b) Notwithstanding the foregoing paragraph (a) of this Section
6C(10), (1) Capital Expenditures in the fiscal year ended June 30,
1993 made in connection with the Company's purchase, and
preparation for use as the Company's headquarters, of that certain
real estate located at 7201 Metro Boulevard, in the City of Edina,
Hennepin County, Minnesota, commonly known as the Century Corporate
Plaza (the "Century Plaza Expenditures") in an aggregate amount of
up to $1,000,000 shall not be deemed to be Capital Expenditures for
purposes of Section 6C(10)(a); (2) Century Plaza Expenditures made
in the fiscal year ended June 30, 1993 in an aggregate amount
(including those made under clause (1) of this subparagraph (b))
exceeding $1,000,000 but less than $2,200,000 shall not be deemed
to be Capital Expenditures for purposes of Section 6C(10)(a) to the
extent, but only to the extent, that such Century Plaza
Expenditures are offset by Allocated Sale Proceeds and (3) Century
Plaza Expenditures in an aggregate amount (including those made
under clauses (1) and (2) of this subparagraph (b)) exceeding
$2,200,000 but less than $3,400,000, made on or prior to June 30,
1993, shall not be deemed to be Capital Expenditures for purposes
of clause (a)(ii) of Section 6C(10), but rather shall be deemed to
be Capital Expenditures made during the Company's fiscal year ended
June 30, 1994 (such expenditures, together with all Century Plaza
Expenditures actually made in the fiscal year ended June 30, 1994,
"1994 Capital Expenditures"); PROVIDED, FURTHER, however, that any
such Century Plaza Expenditures, up to an aggregate maximum of
$3,400,000 (including Century Plaza Expenditures made under clauses
(1) and (2) of this subparagraph (b)), which would be deemed to be
1994 Capital Expenditures pursuant to this clause (3) shall not be
deemed to be 1994 Capital Expenditures to the extent, but only to
the extent, that such Century Plaza Expenditures are offset by
Allocated Sale Proceeds. For the purposes of this Section
6C(10)(b), Allocated Sale Proceeds shall be the net cash proceeds
actually received by the Company as consideration for the sale
2
<PAGE>
referred to in Section 6C(5)(iv) hereof and designated, at the time
of receipt, as a credit against the Century Plaza Expenditures
referred to in clauses (2) and (3) of this subparagraph (b) without
duplication up to the actual amount of such expenditures.
If you are in agreement with the foregoing, please sign the duplicate
copy of the letter enclosed herewith in the space provided and return the
same to Deborah G. Shulevitz, Assistant General Counsel, The Prudential
Insurance Company of America, at the address set forth above.
Very truly yours,
THE PRUDENTIAL INSURANCE
COMPANY OF AMERICA
By: /s/ Deborah J. Hall
---------------------------
Vice President
PRUCO LIFE INSURANCE COMPANY
By: /s/ Deborah J. Hall
---------------------------
Assistant Vice President
Accepted and agreed:
REGIS CORPORATION
BY: [Illegible]
--------------------
Title: Pres.
3
<PAGE>
[LETTERHEAD]
December 22, 1992
Regis Corporation
5000 Normandale Road
Edina, Minnesota 55436
Attention: Senior Vice President, Finance
Gentlemen:
Reference is made to the note agreement (the "Agreement") dated as of June
21, 1991 between Regis Corporation (the "Company") and the purchasers listed
in the purchaser schedule attached thereto (the "Purchasers") pursuant to
which the Company issued its 11.52% senior notes due June 30, 1998, in the
aggregate principal amount of $55,000,000. The undersigned, The Prudential
Insurance Company of America ("Prudential") and Pruco Life Insurance Company
("Pruco"), purchased and presently hold notes in the original principal
amount of $33,684,000 and $8,316,000, respectively.
Pursuant to the request of the Company and the provisions of paragraph 11C of
the Agreement, Prudential and Pruco hereby agree to the amendment of the
Agreement as provided below, subject to the satisfaction of the conditions
expressed below:
1. Paragraph 6B shall be amended by deleting the first ten lines of text
thereof and substituting therefor the following:
"6B. RESTRICTED PAYMENTS AND INVESTMENTS. The Company covenants that
it will not, and will not permit any Restricted Subsidiary to, (a) pay or
declare any dividend on any class of the Company's stock now or hereafter
outstanding, or (b) make any other distribution on account of any class
of stock of the Company, or (c) redeem, purchase or otherwise acquire,
directly or indirectly, any shares of stock of the Company now or
hereafter outstanding, or (d) pay principal of or any premium on
Subordinated Notes, or (e) purchase or otherwise acquire, directly or
indirectly, any Subordinated Note (all of the foregoing being herein called
"RESTRICTED PAYMENTS"), or ...".
<PAGE>
Regis Corporation
December 22, 1992
Page 2
2. Paragraph 6C(2) shall be amended by inserting the phrase "and the
Subordinated Notes" immediately following the word "Notes" in clause (i)
thereof.
3. Paragraph 10B shall be amended by inserting immediately following the
definition of the term "Significant Holder" appearing therein, the following
defined term:
"'SUBORDINATED NOTES' shall mean the 7.25% subordinated notes of the
Company in the aggregate principal amount of $5,000,000, due December 31,
1998 and originally issued to T. Rowe Price Strategic Partners II, L.P.;
provided that there shall be no change in the rate of interest payable
thereon and that such subordinated notes are at all times subordinated to
the Notes pursuant to the terms set forth on Exhibit A hereto, except as
such terms may be amended with the written consent of the holders of the
Notes."
Pursuant to the request of the Company and the provisions of paragraph 11C of
the Agreement, Prudential and Pruco hereby consent as follows, subject to the
satisfaction of the conditions expressed below:
A. Notwithstanding the provisions of paragraph 6C(10) of the Agreement,
Prudential and Pruco consent to the acquisition by the Company of all of
the issued and outstanding capital stock of Consumer Beauty Supply of
Colorado, Inc., provided that for purposes of any calculation of
expenditures permitted or prohibited by paragraph 6C(10) for any fiscal
year ended subsequent to June 30, 1993, Operating Cash Flow for the
fiscal year ended June 30, 1993 shall in no event be deemed to have
exceeded the sum of (i) Capital Expenditures, (ii) Required Principal
Payments and (iii) Consolidated Interest Expense, in each case for the
fiscal year ended June 30, 1993.
B. Notwithstanding the prohibitions set forth in sub-clauses (x) and (z) of
clause (v) of paragraph 6C(2) of the Agreement, Prudential and Pruco
consent to the Company incurring $3,250,000 of Funded Debt evidenced by
a consulting and non-competition agreement with Michael Taylor and to the
Company's assumption of up to $1,000,000 of indebtedness of Consumer Beauty
Supply of Colorado, Inc., provided that such assumed indebtedness is
immediately repaid in its entirety with the proceeds of a Revolving Credit
Loan (as such term is defined in the Agreement).
The effectiveness of the foregoing amendments and consents is subject to (i)
consummation by the Company of its acquisition of all of the issued and
outstanding capital stock of Consumer
<PAGE>
Regis Corporation
December 22, 1992
Page 3
Beauty Supply of Colorado, Inc. for an aggregate purchase price (including
any debt assumption) of not more than $7,980,000 (not more than $7,000,000 of
which shall be paid in cash) pursuant to the terms of the Stock Purchase
Agreement dated as of December 4, 1992 between the Company and all of the
shareholders of Consumer Beauty Supply of Colorado, Inc., without waiver by
the Company of any material conditions set forth therein, (ii) the Company
incurring no other direct or contingent liabilities in connection with such
acquisition, other than (a) the Subordinated Notes, (b) customary fees and
expenses, (c) additional borrowings under its revolving credit facility not
in excess of $3,000,000 and (d) obligations under a consulting agreement with
Michael Taylor providing for payments of not more than $54,167 per month for a
period not to exceed five years and (iii) receipt by Prudential and Pruco
from counsel to the Company of an opinion in form and content satisfactory to
Prudential and Pruco.
If you are in agreement with the foregoing, please execute the enclosed
counterpart of this letter and return it to the undersigned, whereupon it
will become a binding agreement between the Company and Prudential and Pruco,
subject to the satisfaction of the conditions expressed above.
Very truly yours,
THE PRUDENTIAL INSURANCE
COMPANY OF AMERICA
By: /s/ [ILLEGIBLE]
---------------------------
Title: Managing Director
--------------------------
PRUCO LIFE INSURANCE COMPANY
By: /s/ [ILLEGIBLE]
---------------------------
Its: Vice President
--------------------------
Accepted and agreed to
effective as of the date
first appearing above.
REGIS CORPORATION
BY: /s/ [ILLEGIBLE]
--------------------
Its: Pres.
-------------------
<PAGE>
EXHIBIT A
2.02 SUBORDINATION OF THE NOTE. The Company, for itself and its
successors and assigns, covenants and agrees, and Purchaser and each
successor holder of any Note (by such holder's acceptance thereof), likewise
covenants and agrees, that the payment of the principal of and interest on
such Note shall be subordinated in right of payment, to the extent and in the
manner hereinafter set forth, to the prior payment in full of all Senior Debt
(as defined in Section 2.02(g)) at any time outstanding. The provisions of
this Section 2.02 are made for the benefit of the holders of the Senior Debt,
and such holders are made obligees hereunder the same as if their names were
written herein as such, and they, or any of them, may proceed to enforce such
provisions against the Company or against the holder of any Note without the
necessity of joining the Company as a party.
(a) PAYMENT OF SENIOR DEBT. In the event of any receivership,
insolvency, bankruptcy, reorganization, assignment for the benefit of
creditors or other similar proceedings in connection therewith relative to
the Company or to its property, or, in the event of any proceedings for the
liquidation, dissolution or other winding up of the Company or distribution
or marshaling of its assets or any composition with creditors of the Company,
whether or not involving insolvency or bankruptcy, then and in any such event
all Senior Debt (including any interest thereon accruing at the legal rate
after the commencement of any such proceedings and any additional interest
that would have accrued thereon but for the commencement of such proceedings)
shall be paid in full before any payment or distribution of any character,
whether in cash, securities or other property (except securities provided for
by a plan or reorganization or readjustment which are subordinated and junior
in right of payment to the payment of all Senior Debt then outstanding and to
any securities issued in respect of the Senior Debt under such plan of
reorganization on terms of substantially the same tenor as this Section 2.02)
shall be made on account of any Note; and any such payment or distribution,
which would, but for the provisions hereof, be payable or deliverable in
respect of any Note shall be paid or delivered directly to the holders of
Senior Debt (or their duly authorized representatives), in the proportions in
which they hold the same, until all Senior Debt shall have been paid in full.
Each holder of any Note, by becoming a holder thereof, hereby designates and
appoints the holder or holders of Senior Debt (and their duly authorized
representatives) as such holder's agent and attorney-in-fact to demand, sue
for, collect and receive such Senior Debt holder's ratable share of all such
payments and distributions with respect to such Note and agrees at the
request of the holders of the Senior Debt to file, and
<PAGE>
hereby designates and appoints the holder or holders of Senior Debt (and
their duly authorized representatives) as such holder's agent and attorney-in-
fact to file, any necessary proof of claim therefor and to take all such
other action in the name of the holder of any Note or otherwise, as such
Senior Debt holders (or their authorized representatives) may determine to be
necessary or appropriate for the enforcement of this Section 2.02. Purchaser
and each successor holder of any Note by such holder's acceptance thereof
agrees to execute, at the request of a holder of the Senior Debt, a separate
agreement with such holder of Senior Debt on the terms set forth in this
Section 2.02, and to take all such other action in connection therewith as
such Senior Debt holder may request in order to enable such holder to enforce
its claims upon or in respect of such holder's ratable share of any such
payments and distributions on account of such Note.
(b) NO PAYMENT ON NOTES UNDER CERTAIN CONDITIONS. In the
event that (i) any default or event of default (as such terms are defined in
any instrument evidencing or relating to the Senior Debt) occurs with respect
to any Senior Debt or (ii) the making of any payment with respect to the Note
would immediately cause any such default or event of default to occur, then,
unless and until such default or event of default (or in the case of clause
(ii), such prospective default or event of default) has been cured or waived
in writing by such holder of Senior Debt, no payment of principal or interest
on the Note shall be made by the Company or accepted by any holder of any
Note.
(c) PAYMENTS HELD IN TRUST. In case any payment or
distribution shall be paid or delivered to any holder of the Note before all
Senior Debt shall have been paid in full despite or in violation or
contravention of the terms of Section 2.02(b), such payment or distribution
shall be held in trust by such holder for and promptly paid and delivered
ratably to the holders of Senior Debt (or their duly authorized
representatives).
(d) SUBROGATION. Subject to the payment in full of all Senior
Debt and until the Note shall be paid in full, the holder of any Note shall
be subrogated to the rights of the holders of Senior Debt (to the extent of
payments or distributions previously made to such holders of Senior Debt
pursuant to the provisions of sections (a) or (c) of this Section 2.02) to
receive payments or distributions of assets of the Company applicable to the
Senior Debt. No such payments or distributions applicable to the Senior Debt
shall, as between the Company and its creditors (other than the holders of
Senior
2
<PAGE>
Debt and the holders of the Note), be deemed to be a payment by the Company
to or on account of the Note; and for the purposes of such subrogation, no
payments or distributions to the holders of Senior Debt to which the holders
of the Note would be entitled except for the provisions of this Section 2.02
shall, as between the Company and its creditors (other than the holders of
Senior Debt and the holders of the Note) be deemed to be a payment by the
Company to or on account of the Senior Debt.
(e) ACTIONS; LEGEND ON NOTE; SCOPE OF SECTION. The holder of
the Note will not commence any actions or proceeding against the Company to
recover all or any part of the indebtedness under the Note, or join with any
creditor, unless the holders of the Senior Debt shall also join, in bringing
any proceedings against the Company under any bankruptcy, reorganization,
readjustment of debt, receivership, liquidation or insolvency law or statute
of the Federal or any State government unless and until the Senior Debt shall
be paid in full; PROVIDED, HOWEVER, that if the holder of the Note shall have
given the holders of the Senior Debt not less than 30 days prior written
notice of such holder's intention to do so, such holder may bring action to
recover any payment on the Note to the extent not prohibited by Section
2.02(b) above. The Note shall bear a legend to the effect that it is subject
to the provisions of this Section 2.02. The provisions of this Section 2.02
are intended solely for the purpose of defining the relative rights of the
holder of any Note, on the one hand, and the holders of the Senior Debt, on
the other hand. Nothing contained in this Section 2.02 or elsewhere in this
Agreement or the Note is intended to or shall impair, as between the Company
and the holders of the Note the obligation of the Company, which is
unconditional and absolute, to pay to the holders of the Note the principal
of and interest on the Note as and when the same shall become due and payable
in accordance with the terms thereof, or to affect the relative rights of the
holders of the Note and creditors of the Company other than the holders of
the Senior Debt.
(f) SURVIVAL OF RIGHTS. The right of any present or future
holder of Senior Debt to enforce subordination of the Note pursuant to the
provisions of this Section 2.02 shall not at any time be prejudiced or
impaired by any act or failure to act on the part of the Company or any such
holder of Senior Debt, including, without limitation, any application of any
sums by whomsoever paid or however realized to the Senior Debt, or any
amendment of the amount, manner, place or terms of payment of the Senior
Debt, or any extension of the time of payment of or renewal of the Senior
Debt, or any
3
<PAGE>
forbearance, waiver, consent, compromise, amendment, extension, renewal, or
taking or release of security of or in respect of any Senior Debt or by
noncompliance by the Company with the terms of such subordination regardless
of any knowledge thereof such holder may have or otherwise be charged with.
(g) SENIOR DEBT DEFINED. The term "Senior Debt" shall mean
(i) the principal of, interest on and other amounts payable under the
Company's 11.52% Senior Notes due June 30, 1998 in the aggregate principal
amount of $55,000,000, issued to the Prudential Insurance Company of America
and Pruco Life Insurance Company, Life Insurance Company of Georgia,
Southland Life Insurance Company, Wisconsin National life Insurance Company,
Associated Doctors Health and Life Insurance Company and The Ohio National
Life Insurance Company, or any notes issued in substitution or exchange
therefor, or the Note Agreement dated as of June 21, 1991, as amended,
pursuant to which such notes are issued; (ii) the principal of, interest on
and other amounts payable under the Senior Revolving Credit Agreement, dated
as of June 21, 1991, as amended, between the Company and Barclays Bank PLC,
providing for revolving credit loans in an aggregate principal amount not in
excess of $15,000,000; (iii) the principal of, interest on and other amounts
payable under the Senior Revolving Credit Agreement, dated as of June 21,
1991, as amended, between the Company and First Bank National Association,
providing for revolving credit loans in an aggregate principal amount not in
excess of $5,000,000; and (iv) any indebtedness incurred by the Company in
connection with the extension, renewal, refunding or replacement of any
indebtedness described in subsections (i) through (iii) above, whether or not
the principal amount of the Senior Debt is thereby increased.
* * * * * * *
8.03 AMENDMENTS, WAIVER AND CONSENTS. No amendment, modification or
addition to this Agreement, and no waiver of or consent to noncompliance with
any covenant or other provision of this Agreement, the Note or the Warrant
shall be effective unless in writing and duly executed by the party against
whom enforcement of such amendment, modification, addition, waiver or consent
is sought, and in the case of Section 2.02 and this clause, unless in writing
and duly executed by each holder of Senior Debt. Any waiver or consent may be
given subject to satisfaction of conditions stated therein and any waiver or
consent shall be effective only in the specific instance and for the specific
purpose for which given.
4
<PAGE>
[LETTERHEAD]
September 6, 1993
Regis Corporation
7201 Metro Boulevard
Minneapolis, Minnesota 55439
Attention: Senior Vice President, Finance
Gentlemen:
Reference is made to the note agreement (the "Agreement") dated as of June
21, 1991 between Regis Corporation (the "Company") and the purchasers listed
in the purchase schedule attached thereto (the "Purchasers") pursuant to
which the Company issued its 11.52% senior notes due June 30, 1998, in the
aggregate principal amount of $55,000,000. The undersigned, The Prudential
Insurance Company of America ("Prudential") and Pruco Life Insurance Company
("Pruco"), purchased and presently hold notes in the original principal
amounts of $33,684,000 and $8,316,000, respectively.
Pursuant to the request of the Company and the provisions of paragraph 11C of
the Agreement, Prudential and Pruco hereby consent to the amendment of the
Agreement as provided below:
Clause (ii) of Paragraph 5G shall be deleted in its entirety and the
following shall be substituted therefore:
"(ii) life insurance, with the Company as the
owner and named beneficiary, on the life of Paul
Finkelstein in the amount of $2,400,000 and on the life
of Myron Kunin in the amount, net of any premium loans
thereon and interest due in connection therewith, of
not less than $2,700,000, which life insurance policies
shall be free of premium loans (except as specifically
provided herein) and other Liens on or offsets against
proceeds payable to the Company."
Prudential and Pruco hereby waive any Default or Event of Default under the
Agreement which resulted from the Company's failure to comply with clause (ii)
of paragraph 5G as in effect prior to the date hereof.
<PAGE>
Regis Corporation
September 6, 1993
Page Two
If you are in agreement with the foregoing, please execute the enclosed
counterpart of this letter and return it to the undersigned, whereupon it
will become a binding agreement between the Company and Prudential and Pruco.
Very truly yours,
THE PRUDENTIAL INSURANCE COMPANY
OF AMERICA
By: /s/ P. Scott von Fischer
------------------------------------
Title: Vice President
---------------------------------
PRUCO LIFE INSURANCE COMPANY
By: /s/ [illegible]
------------------------------------
Its: Vice President
---------------------------------
Accepted and agreed to
effective as of the date
first appearing above.
REGIS CORPORATION
By: /s/ [illegible]
----------------------------
Its: Pres
----------------------------
<PAGE>
[LETTERHEAD]
November 22, 1993
Regis Corporation
7201 Metro Boulevard
Minneapolis, Minnesota 55439
Attention: Senior Vice President, Finance
Gentlemen:
Reference is made to the note agreement (the "Agreement") dated as of June
21, 1991 between Regis Corporation (the "Company") and the purchasers listed
in the purchaser schedule attached thereto (the "Purchasers") pursuant to
which the Company issued its 11.52% senior notes due June 30, 1998, in the
aggregate principal amount of $55,000,000. The undersigned, The Prudential
Insurance Company of America ("Prudential") and Pruco Life Insurance Company
("Pruco"), purchased and presently hold notes in the original principal
amount of $33,684,000 and $8,316,000, respectively.
Pursuant to the request of the Company and the provisions of paragraph 11C of
the Agreement, Prudential and Pruco hereby consent as follows, subject to the
satisfaction of the conditions expressed below:
Notwithstanding paragraph 6C(2) of the Agreement, Prudential and Pruco
consent to the Company issuing $4,850,000 of Debt to the sellers of Trade
Secret Development Corp. and related corporations (or to the sellers of
its or their assets, as the case may be), to be evidenced by promissory
notes and non-competition agreements and to be issued in connection with
the acquisition of such corporations.
The effectiveness of the foregoing consent is subject to consummation by the
Company on or before February 1, 1994, of a public offering of its common
stock resulting in receipt by the Company of gross proceeds of at least
$8,000,000.
Very truly yours,
THE PRUDENTIAL INSURANCE COMPANY
OF AMERICA
By: /s/ P. Scott von Fischer
-----------------------------------
Title: Vice President
--------------------------------
PRUCO LIFE INSURANCE COMPANY
By: /s/ P. Scott von Fisher
-----------------------------------
Title: Asst. Vice President
--------------------------------
<PAGE>
[LETTERHEAD]
February 11, 1994
Regis Corporation
7201 Metro Boulevard
Minneapolis, Minnesota 55439
Attention: Senior Vice President, Finance
Gentlemen:
Reference is made to the Note Agreement, dated as of June 21, 1991 (the "Note
Agreement"), between Regis Corporation, a Minnesota corporation (the
"Company"), and the purchasers listed in the purchaser schedule attached
thereto (collectively, the "Purchasers"), pursuant to which the Company
issued its 11.52% senior notes due June 30, 1998, in the original aggregate
principal amount of $55,000,000. The undersigned, The Prudential Insurance
Company of America ("Prudential") and Pruco Life Insurance Company ("Pruco"),
purchased and presently hold notes in the original principal amount of
$33,684,000 and $8,316,000, respectively. Capitalized terms used herein and
not otherwise defined herein shall have the meanings assigned to such terms
in the Note Agreement.
Pursuant to the request of the Company and the provisions of paragraph 11C of
the Note Agreement, Prudential, Pruco and the Company hereby agree as follows:
SECTION 1. TRADE SECRET DEVELOPMENT CORP. ASSET ACQUISITION CONSENT.
Subject to the satisfaction of the condition precedent set forth in SECTION 4
below, and notwithstanding the provisions of paragraph 6C(10) of the Note
Agreement, Prudential and Pruco hereby consent to the acquisition by the
Company of the assets of Trade Secret Development Corp. during the Company's
1994 fiscal year for an aggregate purchase price not to exceed $13,000,000
and agree that such acquisition shall not constitute a Capital Expenditure
under paragraph 6C(10) of the Note Agreement.
SECTION 2. INVESTMENT IN MAGICUTS INC. Subject to the satisfaction of
the condition precedent set forth in SECTION 4 below and notwithstanding the
provisions of paragraph 6C(3) of the Note Agreement, Prudential and Pruco
hereby consent to the loan made by the Company to Magicuts Inc. evidenced by
the "Magicut Note" (as defined below); PROVIDED, HOWEVER, that in the event
the Magicut Note is not paid when due in accordance with its terms, then the
amount of Capital Expenditures that would otherwise be permitted under
paragraph 6C(10) of the Note Agreement for the two fiscal years of the
Company immediately following the occurrence of any payment default under the
Magicut Note shall be reduced by an amount equal to one-half of the amount of
the after tax loss which would be incurred by the Company as a result of
non-payment of the Magicut Note; PROVIDED, FURTHER, that in the event the
Company receives proceeds from its directors' and officers' liability
insurance policies for losses related to the MEI Diversified, Inc. ("MEI")
litigation or actually receives amounts payable under the Magicut Note, then
the after tax insurance proceeds from such policies or the amount of actual
recoveries under the Magicut Note, as the case may be, shall be deemed to
restore on a dollar for dollar basis the foregoing reduction to the amount of
Capital Expenditures permitted by paragraph 6C(10) not to
<PAGE>
Regis Corporation
February 11, 1994
Page Two
exceed however the amount of such reduction. The Magicut Note shall not
constitute Restricted Investments for purposes of paragraph 6B of the Note
Agreement. As used herein, the term "Magicut Note" shall mean that certain
promissory note in the original principal amount of $5,850,000, bearing
interest at a rate per annum equal to prime plus 2.5%, the principal balance
of which note is payable in two installments, the first in the amount of
$850,000 due in March, 1994 and the second in the amount of $5,000,000 due in
March, 1995.
SECTION 3. INTEREST COVERAGE RATIO. Subject to the satisfaction of the
condition precedent set forth in SECTION 4 below, Prudential and Pruco hereby
agree that for purposes of paragraph 6A of the Note Agreement, Consolidated
Net Income shall not be reduced by the non-cash charges in the aggregate
amount of approximately $12,125,000 incurred by the Company in connection
with its investment in and settlement with, MEI, which charges were expensed
by the Company as follows: $3.5 million during the fiscal quarter ended March
30, 1993, $1.5 million during the fiscal quarter ended June 30, 1993, and
$7.125 million during the fiscal quarter ended December 31, 1993.
SECTION 4. CONDITION PRECEDENT. This letter shall become effective as of
June 30, 1993 upon delivery by the Company to Prudential of a duly executed
counterpart of this letter signed by the Company.
If you are in agreement with the foregoing, please execute the enclosed
counterpart of this letter and return it to the undersigned.
Very truly yours,
THE PRUDENTIAL INSURANCE COMPANY
OF AMERICA
By: /s/ P. Scott von Fischer
-----------------------------------
Title: [illegible]
--------------------------------
PRUCO LIFE INSURANCE COMPANY
By: /s/ P. Scott von Fischer
-----------------------------------
Title: [illegible]
--------------------------------
Agreed and Accepted:
REGIS CORPORATION
By: /s/ [illegible]
------------------------------
Title: [illegible]
---------------------------
<PAGE>
[LOGO] [LETTERHEAD]
June 8, 1994
Regis Corporation
7201 Metro Boulevard
Minneapolis, Minnesota 55439
Attention: Senior Vice President, Finance
Gentlemen:
Reference is made to the note agreement (the "Agreement") dated as of June
21, 1991 between Regis Corporation (the "Company") and the purchasers listed
in the purchaser schedule attached thereto (the "Purchasers") pursuant to
which the Company issued its 11.52% senior notes due June 30, 1998, in the
aggregate principal amount of $55,000,000. The undersigned, The Prudential
Insurance Company of America ("Prudential") and Pruco Life Insurance Company
("Pruco"), purchased and presently hold notes in the original principal
amount of $33,684,000 and $8,316,000, respectively.
Pursuant to the request of the Company and the provisions of paragraph 11C of
the Agreement, Prudential and Pruco hereby agree to the amendment of the
Agreement as provided below subject to the satisfaction of the condition
expressed below:
1. Paragraph 6B is amended and restated in its entirety as follows:
6B. RESTRICTED PAYMENTS AND INVESTMENTS. The Company
covenants that it will not, and will not permit any Restricted
Subsidiary to, (a) pay or declare any dividend on any class of the
Company's stock now or hereafter outstanding, or (b) make any other
distribution on account of any class of stock of the Company, or
(c) redeem, purchase or otherwise acquire, directly or indirectly,
any shares of stock of the Company now or hereafter outstanding, or
(d) pay principal of or any premium on Subordinated Notes, or (e)
purchase or otherwise acquire, directly or indirectly, any
Subordinated Note (all of the foregoing being herein called
"RESTRICTED PAYMENTS"), or make, or permit any Restricted
Subsidiary to make, any Restricted Investment, or make, or permit
any Restricted Subsidiary to make, any payment which is
<PAGE>
Regis Corporation
June 8, 1994
Page 2
allowed as a deduction under section 170 of the Code or which could
be so allowed assuming sufficient taxable income and no limitations
on the total amount of such payments allowed as deductions (herein
called "SECTION 170 PAYMENTS") unless (i) on the date of any such
proposed Restricted Payment, Restricted Investment or Section 170
Payment and immediately after giving effect thereto, (a) no
condition or event shall exist which constitutes a Default or Event
of Default and (b) Consolidated Net Worth shall equal or exceed
$50,000,000 and (ii) if such Restricted Payment, Restricted
Investment, or Section 170 Payment is made (a) in the first quarter
of any fiscal year, the aggregate amount of all sums and property
included in all Restricted Payments, Restricted Investments and
Section 170 Payments (not including in Section 170 Payments for the
purpose of this clause (ii) Section 170 Payments made in any fiscal
year to the extent in the aggregate not in excess of 5% of
Consolidated Pre-Tax Income (if any) for the immediately preceding
fiscal year (herein called "Excluded Section 170 Payments")) from
and including the commencement of the second fiscal quarter of the
preceding fiscal year to and including the date on which such
Restricted Payment, Restricted Investment or Section 170 Payment is
made would not exceed 50% of Consolidated Net Income for such
preceding fiscal year, and (b) in any fiscal quarter other than the
first fiscal quarter of any fiscal year, the aggregate amount of
all sums and property included in all Restricted Payments,
Restricted Investments and Section 170 Payments (not including
Excluded Section 170 Payments) from and including the commencement
of the second fiscal quarter of the current fiscal year to and
including the date on which such Restricted Payment, Restricted
Investment or Section 170 Payment is made would not exceed 50% of
Consolidated Net Income for the period from the commencement of
such current fiscal year to the end of the fiscal quarter
immediately preceding the fiscal quarter in which such Restricted
Payment, Restricted Investment or Section 170 Payment is made.
There shall not be included in Restricted Payments, Restricted
Investments or Section 170 Payments amounts paid or delivered by
the Company and its Restricted Subsidiaries to the extent
consisting of stock of the Company. The term "stock" as used in
this paragraph 6B shall include warrants or options to purchase
stock.
2. Clause (viii) of paragraph 6C(1) is amended by deleting the reference to
"clause (vi) of" appearing in the last line of the text thereof.
<PAGE>
Regis Corporation
June 8, 1994
Page 3
3. Paragraph 6C(2) is amended and restated in its entirety as follows:
"6C(2) Debt -- Create, incur, assume or suffer to exist any Debt,
except
(i) Funded Debt of the Company represented by the Notes and
the Subordinated Notes;
(ii) Debt of the Company consisting of Revolving Credit
Loans or other revolving credit loans from banks, PROVIDED that (a)
the aggregate principal amount of Debt outstanding at any time
under this clause (ii) shall not exceed $20,000,000 during the
period July 1, 1994 through March 31, 1995 or $15,000,000 at any
other time, (b) the terms of any such loans (other than Revolving
Credit Loans) and the related credit agreement (including interest
rate and financial covenants) shall not be more favorable in any
material respect to the lenders than the terms of the Revolving
Credit Loans and the Revolving Credit Agreements as originally in
effect, and (c) the Company will not incur any such Debt to any
lender which has not become a party to the Offset Sharing Agreement;
(iii) Debt of the Company outstanding on the Closing Date and
listed under the heading "Continuing Obligations" in the Schedule
of Debt attached hereto as Exhibit C;
(iv) Debt of any Restricted Subsidiary to the Company or any
Wholly-Owned Restricted Subsidiary; and
(v) other Debt of the Company or any Restricted Subsidiary;
provided that (a) the ratio (expressed as a percentage) of (1)
Consolidated Debt to (2) the sum of Consolidated Debt and Consolidated
Net Worth shall not exceed 55% at any time through June 30, 1995 or 50%
at any time thereafter and (b) the ratio (expressed as a percentage) of
(1) Consolidated Debt at any time to (2) EBIT for the period of four
consecutive fiscal quarters most recently ended at such time, shall not
exceed 300% through June 30, 1995 or 250% thereafter."
<PAGE>
Regis Corporation
June 8, 1994
Page 4
4. Clause (ix) of paragraph 6C(3) is amended and restated in its entirety
as follows:
"(ix) make and own Investments in Unrestricted Subsidiaries,
PROVIDED that the aggregate amount of such Investments made in any
fiscal year (including, without limitation, the amount of
obligations of Unrestricted Subsidiaries guaranteed by the Company
or a Restricted Subsidiary or with respect to which the Company or
a Restricted Subsidiary has any contingent liability), beginning
with the fiscal year commencing July 1, 1994, shall not exceed 5%
of the amount of Capital Expenditures permitted to be made during
such fiscal year pursuant to paragraph 6C(10) hereof; and".
5. The defined term "Capital Expenditures" appearing in paragraph 10B is
amended by deleting the period appearing at the end thereof and
substituting the following therefor:
"plus, for periods commencing subsequent to June 20, 1994,
Investments in Unrestricted Subsidiaries made during such period
(including, without limitation, the amount of obligations of
Unrestricted Subsidiaries guaranteed by the Company or a Restricted
Subsidiary during such period or with respect to which the Company
or any Restricted Subsidiary incurs any contingent liability during
such period)."
6. Paragraph 10B is further amended by adding thereto a new defined term as
follows:
"'Consolidated Pre-Tax Income' shall mean, with respect to any
period, Consolidated Net Income for such period plus (i) any
amounts attributable to taxes deducted in the determination thereof
and (ii) for the fiscal year ended June 30, 1994 the amount of the
Company's non-recurring charge associated with MEI salons, which
amount shall in no event exceed $10,000,000."
The effectiveness of the foregoing amendments is subject to receipt by
Prudential from the Company of $5,000 in payment of the processing fee due in
connection herewith.
<PAGE>
Regis Corporation
June 8, 1994
Page 5
If you are in agreement with the foregoing, please execute the enclosed
counterpart of this letter and return the same to the undersigned at the
following address: Two Prudential Plaza, Suite 5600, Chicago, Illinois 60601,
Attention: James F. Evert, whereupon it will become a binding agreement
between the Company and Prudential and Pruco effective the date first
appearing above (with the exception of the amendments contemplated by
paragraphs 1, 4 and 5 above, which shall be effective July 1, 1994), subject
to the satisfaction of the condition expressed above.
Very truly yours,
THE PRUDENTIAL INSURANCE COMPANY
OF AMERICA
By: [ILLEGIBLE]
------------------------------------
Title: Vice President
---------------------------------
PRUCO LIFE INSURANCE COMPANY
By: [ILLEGIBLE]
------------------------------------
Title: Vice President
---------------------------------
Accepted and agreed to
effective as of the date
first appearing above.
REGIS CORPORATION
By:
--------------------------------
Its:
-------------------------------
<PAGE>
Dated as of July 21, 1995
Regis Corporation
7201 Metro Boulevard
Minneapolis, Minnesota 55439
Attention: Senior Vice President, Finance
Gentlemen:
Reference is made to the Note Agreement dated as of June 21, 1991, as
heretofore amended (the "Agreement"), between Regis Corporation (the
"Company") and the purchasers listed in the Purchaser Schedule attached
thereto pursuant to which the Company issued its 11.52% Senior Notes due June
30, 1998, in the aggregate original principal amount of $55,000,000 (the
"Notes"). Each of the undersigned represents and warrants that it is the
holder of that percentage of the aggregate outstanding principal amount of
the Notes set forth for such holder on the signature pages hereof.
Pursuant to the request of the Company and the provisions of paragraph
11C of the Agreement, the undersigned hereby agree to the amendment of the
Agreement as provided below:
1. Paragraphs 5 and 6 are amended and restated in their entirety as
follows:
5. AFFIRMATIVE COVENANTS.
5A. FINANCIAL STATEMENTS; NOTICE OF DEFAULTS. THE COMPANY COVENANTS
THAT IT WILL DELIVER TO EACH SIGNIFICANT HOLDER IN TRIPLICATE:
(i) AS SOON AS PRACTICABLE AND IN ANY EVENT WITHIN 45 DAYS AFTER
THE END OF EACH QUARTERLY PERIOD (OTHER THAN THE LAST QUARTERLY PERIOD)
IN EACH FISCAL YEAR, A CONSOLIDATED BALANCE SHEET OF THE COMPANY AND ITS
SUBSIDIARIES AND OF THE COMPANY AND ITS RESTRICTED SUBSIDIARIES AS AT
THE END OF SUCH QUARTERLY PERIOD AND THE RELATED CONSOLIDATED STATEMENTS
OF INCOME AND CASH FLOWS OF THE COMPANY AND ITS SUBSIDIARIES AND OF THE
COMPANY AND ITS RESTRICTED SUBSIDIARIES FOR SUCH PERIOD SETTING FORTH,
IN EACH CASE IN COMPARATIVE FORM, FIGURES FOR THE CORRESPONDING PERIOD
IN THE PRECEDING FISCAL YEAR, ALL IN REASONABLE DETAIL AND CERTIFIED BY
THE CHIEF FINANCIAL OFFICER OR CHIEF ACCOUNTING OFFICER OF THE COMPANY
AS FAIRLY PRESENTING THE
<PAGE>
CONSOLIDATED FINANCIAL POSITION OF THE COMPANY AND ITS SUBSIDIARIES AND
OF THE COMPANY AND ITS RESTRICTED SUBSIDIARIES AS AT THE DATES INDICATED
AND THE CONSOLIDATED RESULTS OF THEIR RESPECTIVE OPERATIONS AND CASH
FLOWS, IN EACH CASE FOR THE PERIODS INDICATED, IN CONFORMITY WITH
GENERALLY ACCEPTED ACCOUNTING PRINCIPLES APPLIED ON A BASIS CONSISTENT
WITH PRIOR PERIODS (EXCEPT AS DISCLOSED IN SUCH CERTIFICATE), SUBJECT TO
CHANGES RESULTING FROM YEAR-END ADJUSTMENTS;
(ii) AS SOON AS PRACTICABLE AND IN ANY EVENT WITHIN 90 DAYS AFTER
THE END OF EACH FISCAL YEAR, A CONSOLIDATED AND CONSOLIDATING BALANCE
SHEET OF THE COMPANY AND ITS SUBSIDIARIES AS AT THE END OF SUCH YEAR AND
THE RELATED CONSOLIDATED AND CONSOLIDATING STATEMENTS OF INCOME AND CASH
FLOWS OF THE COMPANY AND ITS SUBSIDIARIES FOR SUCH YEAR, ALL IN
REASONABLE DETAIL AND SATISFACTORY IN SCOPE TO THE REQUIRED HOLDER(S),
AND (a) IN THE CASE OF SUCH CONSOLIDATED FINANCIAL STATEMENTS, SETTING
FORTH IN EACH CASE IN COMPARATIVE FORM CORRESPONDING CONSOLIDATED
FIGURES FOR THE PRECEDING FISCAL YEAR, AND ACCOMPANIED BY A REPORT
THEREON OF INDEPENDENT PUBLIC ACCOUNTANTS OF RECOGNIZED NATIONAL
STANDING SELECTED BY THE COMPANY, WHICH REPORT SHALL STATE THAT, SUBJECT
ONLY TO STANDARD QUALIFICATIONS AND LIMITATIONS GENERALLY CONTAINED IN
AN UNQUALIFIED AUDIT REPORT, SUCH CONSOLIDATED FINANCIAL STATEMENTS
PRESENT FAIRLY THE CONSOLIDATED FINANCIAL POSITION OF THE COMPANY AND
ITS SUBSIDIARIES AS AT THE DATES INDICATED AND THE CONSOLIDATED RESULTS
OF THEIR OPERATIONS AND CASH FLOWS FOR THE PERIODS INDICATED IN
CONFORMITY WITH GENERALLY ACCEPTED ACCOUNTING PRINCIPLES APPLIED ON A
BASIS CONSISTENT WITH PRIOR YEARS (EXCEPT AS OTHERWISE SPECIFIED IN SUCH
REPORT) AND THAT THE AUDIT BY SUCH ACCOUNTANTS IN CONNECTION WITH SUCH
CONSOLIDATED FINANCIAL STATEMENTS HAS BEEN MADE IN ACCORDANCE WITH
GENERALLY ACCEPTED AUDITING STANDARDS, AND (b) IN THE CASE OF SUCH
CONSOLIDATING FINANCIAL STATEMENTS, (w) SETTING FORTH ON SUPPLEMENTAL
SCHEDULES, IN ONE COLUMN, THE TOTAL AMOUNTS FOR THE COMPANY AND ITS
RESTRICTED SUBSIDIARIES, AND, IN A SECOND COLUMN, THE TOTAL AMOUNTS FOR
THE COMPANY'S OTHER SUBSIDIARIES, AND SHOWING ALL ELIMINATIONS AND
ADJUSTMENTS MADE IN AGGREGATING THE AMOUNTS OF SUCH COLUMNS TO ARRIVE AT
THE COMPANY'S CONSOLIDATED FINANCIAL STATEMENTS, (x) SETTING FORTH IN
COMPARATIVE FORM THE CORRESPONDING CONSOLIDATED FIGURES FOR THE COMPANY
AND ITS RESTRICTED SUBSIDIARIES FOR THE PRECEDING FISCAL YEAR, (y)
CERTIFIED BY THE CHIEF FINANCIAL OFFICER OR CHIEF ACCOUNTING OFFICER OF
THE COMPANY AS FAIRLY PRESENTING THE RESPECTIVE FINANCIAL POSITIONS OF
THE SEPARATE ENTITIES REPORTED ON AS AT THE DATES INDICATED AND THE
RESULTS OF THEIR RESPECTIVE OPERATIONS AND CASH FLOWS FOR THE PERIOD
INDICATED, IN CONFORMITY WITH GENERALLY ACCEPTED ACCOUNTING PRINCIPLES
APPLIED ON A BASIS CONSISTENT WITH PRIOR PERIODS (EXCEPT AS OTHERWISE
SPECIFIED IN SUCH CERTIFICATE), AND (z) ACCOMPANIED BY A REPORT THEREON
OF THE INDEPENDENT PUBLIC ACCOUNTANTS REPORTING ON THE CONSOLIDATED
FINANCIAL STATEMENTS OF THE COMPANY AND ITS SUBSIDIARIES FOR SUCH FISCAL
YEAR, WHICH REPORT SHALL STATE THAT, SUBJECT TO THE QUALIFICATIONS AND
LIMITATIONS CONTAINED IN THEIR REPORT ON THE CONSOLIDATED FINANCIAL
STATEMENTS OF THE COMPANY AND ITS SUBSIDIARIES, AND TO THE FURTHER
QUALIFICATIONS THAT THE PRINCIPLES OF CONSOLIDATION FOLLOWED IN THE
PREPARATION OF SUCH CONSOLIDATED
2
<PAGE>
FIGURES FOR THE COMPANY AND ITS RESTRICTED SUBSIDIARIES CONFORM TO THE
PROVISIONS OF THIS AGREEMENT RATHER THAN TO GENERALLY ACCEPTED
ACCOUNTING PRINCIPLES, SUCH CONSOLIDATED FIGURES FOR THE COMPANY AND ITS
RESTRICTED SUBSIDIARIES PRESENT FAIRLY THE CONSOLIDATED FINANCIAL
POSITION OF THE COMPANY AND ITS RESTRICTED SUBSIDIARIES AS AT THE DATES
INDICATED AND THE CONSOLIDATED RESULTS OF THEIR OPERATIONS AND CASH
FLOWS FOR THE PERIODS INDICATED IN CONFORMITY WITH GENERALLY ACCEPTED
ACCOUNTING PRINCIPLES APPLIED ON A BASIS CONSISTENT WITH PRIOR PERIODS
(EXCEPT AS OTHERWISE SPECIFIED IN SUCH REPORT);
(iii) AS SOON A PRACTICABLE AND IN ANY EVENT WITHIN (a) 45 DAYS
AFTER THE END OF EACH QUARTERLY PERIOD (OTHER THAN THE LAST QUARTERLY
PERIOD) IN EACH FISCAL YEAR AND (b) 120 DAYS AFTER THE END OF EACH
FISCAL YEAR, BALANCE SHEETS (WHICH IN THE CASE OF THE FISCAL YEAR END
SHALL BE AUDITED) OF EACH UNRESTRICTED SUBSIDIARY AS AT THE END OF SUCH
PERIOD AND THE RELATED STATEMENTS OF INCOME AND CASH FLOWS OF EACH SUCH
UNRESTRICTED SUBSIDIARY FOR SUCH PERIOD (WHICH IN THE CASE OF ANNUAL
STATEMENTS SHALL BE AUDITED);
(iv) TOGETHER WITH EACH DELIVERY OF FINANCIAL STATEMENTS PURSUANT
TO CLAUSES (i) AND (ii) OF THIS PARAGRAPH 5A, AN OFFICER'S CERTIFICATE
(a) STATING THAT THE SIGNER HAS REVIEWED THE TERMS OF THIS AGREEMENT AND
THE NOTES AND HAS MADE, OR CAUSED TO BE MADE UNDER HIS OR HER
SUPERVISION, A REVIEW IN REASONABLE DETAIL OF THE TRANSACTIONS AND
CONDITION OF THE COMPANY AND ITS RESTRICTED SUBSIDIARIES DURING THE
FISCAL PERIOD COVERED BY SUCH FINANCIAL STATEMENTS AND THAT SUCH REVIEW
HAS NOT DISCLOSED THE EXISTENCE DURING OR AT THE END OF SUCH FISCAL
PERIOD, AND THAT THE SIGNER DOES NOT HAVE KNOWLEDGE OF THE EXISTENCE AS
AT THE DATE OF THE OFFICER'S CERTIFICATE, OF ANY CONDITION OR EVENT
WHICH CONSTITUTES A DEFAULT OR EVENT OF DEFAULT OR, IF ANY SUCH
CONDITION OR EVENT EXISTED OR EXISTS, SPECIFYING THE NATURE AND PERIOD
OF EXISTENCE THEREOF AND WHAT ACTION THE COMPANY HAS TAKEN OR IS TAKING
OR PROPOSES TO TAKE WITH RESPECT THERETO, AND (b) DEMONSTRATING (WITH
COMPUTATIONS IN REASONABLE DETAIL) COMPLIANCE BY THE COMPANY WITH THE
PROVISIONS OF PARAGRAPHS 6A, 6B, 6C(1), 6C(2), 6C(3), 6C(4), 6C(6) AND
6C(8) OF THIS AGREEMENT (HEREIN CALLED THE "COMPUTATION PARAGRAPHS");
(v) TOGETHER WITH EACH DELIVERY OF FINANCIAL STATEMENTS OF THE
COMPANY AND ITS SUBSIDIARIES PURSUANT TO CLAUSE (ii) OF THIS PARAGRAPH
5A, A CERTIFICATE BY THE COMPANY'S INDEPENDENT PUBLIC ACCOUNTANTS
STATING (a) THAT THEIR AUDIT EXAMINATION HAS INCLUDED A REVIEW OF THE
TERMS OF THIS AGREEMENT AND OF THE NOTES AS THEY RELATE TO ACCOUNTING
MATTERS AND THAT SUCH REVIEW IS SUFFICIENT TO ENABLE THEM TO MAKE THE
STATEMENT REFERRED TO IN SUBCLAUSE (c) OF THIS CLAUSE (v), (b) WHETHER
IN THE COURSE OF THEIR AUDIT EXAMINATION THERE HAS BEEN DISCLOSED THE
EXISTENCE DURING THE FISCAL YEAR COVERED BY SUCH FINANCIAL STATEMENTS
(AND WHETHER THEY HAVE KNOWLEDGE OF THE EXISTENCE AS OF THE DATE OF SUCH
ACCOUNTANTS' CERTIFICATE) OF ANY CONDITION OR EVENT WHICH CONSTITUTES A
DEFAULT OR EVENT OF DEFAULT AND IF DURING THEIR AUDIT EXAMINATION
3
<PAGE>
THERE HAS BEEN DISCLOSED (OR IF THEY HAVE KNOWLEDGE OF) SUCH A CONDITION
OR EVENT, SPECIFYING THE NATURE AND PERIOD OF EXISTENCE THEREOF (IT
BEING UNDERSTOOD, HOWEVER, THAT SUCH ACCOUNTANTS SHALL NOT BE LIABLE TO
ANY PERSON BY REASON OF THEIR FAILURE TO OBTAIN KNOWLEDGE OF ANY DEFAULT
OR EVENT OR DEFAULT WHICH WOULD NOT BE DISCLOSED IN THE COURSE OF AN AUDIT
CONDUCTED IN ACCORDANCE WITH GENERALLY ACCEPTED AUDITING STANDARDS), AND
(c) THAT BASED ON THEIR ANNUAL AUDIT EXAMINATION, INCLUDING A REVIEW OF THE
COMPUTATION PARAGRAPHS, NOTHING CAME TO THEIR ATTENTION WHICH CAUSES
THEM TO BELIEVE THAT THE INFORMATION RELATING TO THE COMPUTATION
PARAGRAPHS CONTAINED IN THE OFFICER'S CERTIFICATE DELIVERED THEREWITH
PURSUANT TO CLAUSE (iv) OF THIS PARAGRAPH 5A IS NOT CORRECT OR THAT THE
MATTERS SET FORTH IN SUCH OFFICER'S CERTIFICATE ARE NOT STATED IN
ACCORDANCE WITH THE TERMS OF THIS AGREEMENT;
(vi) PROMPTLY UPON THEIR BECOMING AVAILABLE, COPIES OF ALL
FINANCIAL STATEMENTS, REPORTS, NOTICES AND PROXY STATEMENTS SENT OR MADE
AVAILABLE GENERALLY BY THE COMPANY AND ITS RESTRICTED SUBSIDIARIES TO
ITS SECURITY HOLDERS (OTHER THAN THE COMPANY IN THE CASE OF RESTRICTED
SUBSIDIARIES), OF ALL REGULAR AND PERIODIC REPORTS AND ALL REGISTRATION
STATEMENTS AND PROSPECTUSES, IF ANY, FILED BY THE COMPANY OR ANY OF ITS
RESTRICTED SUBSIDIARIES WITH ANY SECURITIES EXCHANGE OR WITH THE
SECURITIES AND EXCHANGE COMMISSION OR WITH NASDAQ, AND OF ALL PRESS
RELEASES AND OTHER WRITTEN STATEMENTS MADE AVAILABLE GENERALLY BY THE
COMPANY OR ANY OF ITS RESTRICTED SUBSIDIARIES TO THE PUBLIC CONCERNING
MATERIAL DEVELOPMENTS IN THE BUSINESS OF THE COMPANY AND ITS RESTRICTED
SUBSIDIARIES;
(vii) PROMPTLY UPON RECEIPT THEREOF BY THE COMPANY, COPIES OF ALL
REPORTS SUBMITTED TO THE COMPANY BY INDEPENDENT PUBLIC ACCOUNTANTS IN
CONNECTION WITH EACH ANNUAL, INTERIM OR SPECIAL AUDIT OF THE BOOKS OF
THE COMPANY OR ANY OF ITS RESTRICTED SUBSIDIARIES MADE BY SUCH
ACCOUNTANTS;
(viii) PROMPTLY UPON ANY RESPONSIBLE OFFICER OBTAINING KNOWLEDGE (a)
THAT A CONDITION OR EVENT EXISTS THAT CONSTITUTES A DEFAULT OR EVENT OF
DEFAULT, (b) THAT THE HOLDER OF ANY NOTE HAS GIVEN ANY NOTICE OR TAKEN
ANY OTHER ACTION WITH RESPECT TO A CLAIMED DEFAULT OR EVENT OF DEFAULT
UNDER THIS AGREEMENT, (c) OF ANY CONDITION OR EVENT WHICH COULD
REASONABLY BE EXPECTED TO HAVE A MATERIAL ADVERSE EFFECT ON THE
BUSINESS, CONDITION (FINANCIAL OR OTHER), ASSETS, PROPERTIES, OPERATIONS
OR PROSPECTS OF THE COMPANY OR THE COMPANY AND ITS RESTRICTED
SUBSIDIARIES TAKEN AS A WHOLE (OTHER THAN MATTERS OF A GENERAL ECONOMIC
OR POLITICAL NATURE WHICH DO NOT AFFECT THE COMPANY OR ITS RESTRICTED
SUBSIDIARIES UNIQUELY), (d) THAT ANY PERSON HAS GIVEN ANY NOTICE TO THE
COMPANY OR ANY RESTRICTED SUBSIDIARY OR TAKEN ANY OTHER ACTION WITH
RESPECT TO A CLAIMED DEFAULT OR EVENT OR CONDITION OF THE TYPE REFERRED
TO IN CLAUSE (iii) OF PARAGRAPH 7A, (e) OF THE INSTITUTION OF ANY
LITIGATION INVOLVING CLAIMS AGAINST THE COMPANY OR ANY RESTRICTED
SUBSIDIARY IN EXCESS OF THE COVERAGE PROVIDED UNDER THE COMPANY'S OR SUCH
RESTRICTED SUBSIDIARY'S INSURANCE POLICIES (TREATING ANY PORTION OF SUCH
COVERAGE WHICH IS SUBJECT TO SELF-INSURANCE OR DEDUCTIBLES AS A PART
4
<PAGE>
OF SUCH EXCESS) IF THE AMOUNT OF THE EXCESS OF SUCH CLAIMS INDIVIDUALLY
EXCEEDS $500,000, OR, WHEN AGGREGATED WITH THE EXCESS OVER INSURANCE
COVERAGE OF ALL OTHER OUTSTANDING CLAIMS, EXCEEDS $1,000,000, (f) OF THE
INITIATION BY THE SECURITIES AND EXCHANGE COMMISSION OF ANY PROCEEDING
AGAINST THE COMPANY OR ANY RESTRICTED SUBSIDIARY OR OF ANY INVESTIGATION
OF THE COMPANY OR ANY RESTRICTED SUBSIDIARY OR (g) OF THE INITIATION BY
ANY OTHER GOVERNMENTAL AGENCY OF ANY PROCEEDING AGAINST THE COMPANY OR
ANY RESTRICTED SUBSIDIARY OR OF ANY INVESTIGATION OF THE COMPANY OR ANY
RESTRICTED SUBSIDIARY INVOLVING ALLEGATIONS (OR WHICH COULD REASONABLY
BE EXPECTED TO RESULT IN ALLEGATIONS) OF MATERIAL ILLEGAL ACTIVITIES OR
MISCONDUCT ON THE PART OF THE COMPANY OR ANY RESTRICTED SUBSIDIARY, AN
OFFICER'S CERTIFICATE SPECIFYING THE NATURE AND PERIOD OF EXISTENCE OF ANY
SUCH CONDITON OR EVENT, OR SPECIFYING THE NOTICE GIVEN OR ACTION TAKEN BY
SUCH HOLDER OR PERSON AND THE NATURE OF SUCH CLAIMED DEFAULT, EVENT OF
DEFAULT, EVENT OR CONDITION, OR SPECIFYING THE NATURE OF SUCH LITIGATION,
PROCEEDING OR INVESTIGATION, AND WHAT ACTION THE COMPANY HAS TAKEN, IS
TAKING OR PROPOSES TO TAKE WITH RESPECT THERETO; AND
(ix) WITH REASONABLE PROMPTNESS, SUCH OTHER INFORMATION AND DATA
WITH RESPECT TO THE COMPANY OR ANY OF ITS SUBSIDIARIES AS FROM TIME TO
TIME MAY BE REASONABLY REQUESTED BY SUCH SIGNIFICANT HOLDER.
5B. INFORMATION REQUIRED BY RULE 144A. THE COMPANY COVENANTS THAT IT
WILL, UPON THE REQUEST OF THE HOLDER OF ANY NOTE, PROVIDE SUCH HOLDER, AND
ANY QUALIFIED INSTITUTIONAL BUYER DESIGNATED BY SUCH HOLDER, SUCH FINANCIAL
AND OTHER INFORMATION AS SUCH HOLDER MAY REASONABLY DETERMINE TO BE NECESSARY
IN ORDER TO PERMIT COMPLIANCE WITH THE INFORMATION REQUIREMENTS OF RULE 144A
UNDER THE SECURITIES ACT IN CONNECTION WITH THE RESALE OF NOTES, EXCEPT AT
SUCH TIMES AS THE COMPANY IS SUBJECT TO AND IN COMPLIANCE WITH THE REPORTING
REQUIREMENTS OF SECTION 13 OR 15(d) OF THE EXCHANGE ACT. FOR THE PURPOSE OF
THIS PARAGRAPH 5B, THE TERM "QUALIFIED INSTITUTIONAL BUYER" SHALL HAVE THE
MEANING SPECIFIED IN RULE 144A UNDER THE SECURITIES ACT.
5C. INSPECTION OF PROPERTY. THE COMPANY COVENANTS THAT IT WILL PERMIT
ANY PERSON DESIGNATED BY ANY SIGNIFICANT HOLDER IN WRITING, AT SUCH SIGNIFICANT
HOLDER'S EXPENSE (UNLESS A DEFAULT OR EVENT OF DEFAULT SHALL HAVE OCCURRED
AND BE CONTINUING, IN WHICH CASE AT THE COMPANY'S EXPENSE), TO VISIT AND
INSPECT ANY OF THE PROPERTIES OF THE COMPANY AND ITS RESTRICTED SUBSIDIARIES,
TO EXAMINE THE CORPORATE BOOKS AND FINANCIAL RECORDS OF THE COMPANY AND ITS
RESTRICTED SUBSIDIARIES AND MAKE COPIES THEREOF OR EXTRACTS THEREFROM AND TO
DISCUSS THE AFFAIRS, FINANCES AND ACCOUNTS OF ANY SUCH CORPORATIONS WITH THE
PRINCIPAL OFFICERS OF THE COMPANY AND ITS INDEPENDENT PUBLIC ACCOUNTANTS, ALL
AT SUCH REASONABLE TIMES AND AS OFTEN AS SUCH SIGNIFICANT HOLDER MAY
REASONABLY REQUEST.
5D. COVENANT TO SECURE NOTES EQUALLY. THE COMPANY COVENANTS THAT, IF
IT OR ANY RESTRICTED SUBSIDIARY SHALL CREATE OR ASSUME ANY LIEN UPON ANY OF
ITS PROPERTY OR ASSETS, WHETHER NOW OWNED OR HEREAFTER ACQUIRED, OTHER THAN
LIENS PERMITTED BY THE PROVISIONS OF
5
<PAGE>
PARAGRAPH 6C(1) (UNLESS PRIOR WRITTEN CONSENT TO THE CREATION OR ASSUMPTION
THEREOF SHALL HAVE BEEN OBTAINED PURSUANT TO PARAGRAPH 11C), IT WILL MAKE OR
CAUSE TO BE MADE EFFECTIVE PROVISION WHEREBY THE NOTES WILL BE SECURED BY
SUCH LIEN EQUALLY AND RATABLY WITH ANY AND ALL OTHER OBLIGATIONS THEREBY
SECURED SO LONG AS ANY SUCH OTHER OBLIGATIONS SHALL BE SO SECURED.
5E. KEEPING OF BOOKS AND BANK ACCOUNTS. THE COMPANY COVENANTS THAT IT
WILL, AND WILL CAUSE EACH OF ITS RESTRICTED SUBSIDIARIES TO (i) KEEP SEPARATE
AND PROPER BOOKS OF RECORD AND ACCOUNT IN WHICH FULL AND CORRECT ENTRIES
SHALL BE MADE OF ALL TRANSACTIONS, INCLUDING ANY TRANSACTIONS BETWEEN THE
COMPANY OR ANY RESTRICTED SUBSIDIARY AND ANY AFFILIATE, ALL IN ACCORDANCE
WITH GENERALLY ACCEPTED ACCOUNTING PRINCIPLES, AND (ii) MAINTAIN BANK
ACCOUNTS WHICH ARE SEPARATE AND SEGREGATED FROM THE BANK ACCOUNTS OF ANY
UNRESTRICTED SUBSIDIARY OR AFFILIATE.
5F. INCORPORATION OF OTHER DEBT COVENANTS. THE COMPANY COVENANTS THAT
IF IT IS OR SHALL BECOME SUBJECT TO ANY OPERATIONAL OR FINANCIAL COVENANT IN
ANY DOCUMENT EVIDENCING OR PERTAINING TO DEBT OF THE COMPANY WHICH IS MORE
FAVORABLE TO A LENDER OR OTHER BENEFICIARY THAN THOSE SET FORTH IN PARAGRAPH
6 HEREOF, THEN (i) THIS AGREEMENT SHALL BE DEEMED TO BE AUTOMATICALLY AMENDED
TO INCLUDE SUCH MORE FAVORABLE COVENANT, (ii) THE COMPANY SHALL PROMPTLY GIVE
EACH HOLDER OF NOTES NOTICE THEREOF, AND (iii) IF REQUESTED BY PRUDENTIAL OR
THE REQUIRED HOLDER(S) OF THE NOTES, THE COMPANY SHALL PROMPTLY EXECUTE AND
DELIVER A WRITTEN AMENDMENT TO THIS AGREEMENT SPECIFICALLY INCORPORATING SUCH
COVENANT HEREIN. ONCE ANY SUCH COVENANT HAS BEEN INCLUDED IN THIS AGREEMENT
(WHETHER OR NOT PURSUANT TO A WRITTEN AMENDMENT), IT MAY ONLY BE MODIFIED OR
ELIMINATED BY AN AMENDMENT HERETO ENTERED INTO AS CONTEMPLATED BY PARAGRAPH
11C HEREOF.
5G. CORPORATE EXISTENCE, ETC. THE COMPANY COVENANTS THAT IT WILL AT
ALL TIMES PRESERVE AND KEEP IN FULL FORCE AND EFFECT ITS CORPORATE EXISTENCE,
AND RIGHTS AND FRANCHISES MATERIAL TO ITS BUSINESS, AND THOSE OF EACH OF ITS
RESTRICTED SUBSIDIARIES, EXCEPT AS OTHERWISE SPECIFICALLY PERMITTED BY
PARAGRAPHS 6C(4) AND 6C(5), AND WILL QUALIFY, AND CAUSE EACH OF ITS
RESTRICTED SUBSIDIARIES TO QUALIFY, TO DO BUSINESS IN ANY JURISDICTION WHERE
THE FAILURE TO DO SO WOULD HAVE A MATERIAL ADVERSE EFFECT ON THE BUSINESS,
CONDITION (FINANCIAL OR OTHER), ASSETS, PROPERTIES, PROSPECTS OR OPERATIONS
OF THE COMPANY OR THE COMPANY AND ITS RESTRICTED SUBSIDIARIES TAKEN AS A
WHOLE, PROVIDED THAT THE CORPORATE EXISTENCE OF ANY RESTRICTED SUBSIDIARY
MAY BE TERMINATED IF, IN THE GOOD FAITH JUDGEMENT OF THE BOARD OF DIRECTORS
OF THE COMPANY, SUCH TERMINATION IS IN THE BEST INTERESTS OF THE COMPANY.
5H. PAYMENT OF TAXES AND CLAIMS. THE COMPANY COVENANTS THAT IT WILL,
AND WILL CAUSE EACH OF ITS SUBSIDIARIES TO, PAY ALL INCOME TAXES BEFORE THE
SAME SHALL BECOME DELINQUENT, EXCEPT WHERE SUCH INCOME TAXES ARE BEING
CONTESTED IN GOOD FAITH BY APPROPRIATE PROCEEDINGS PROMPTLY INSTITUTED AND
DILIGENTLY CONDUCTED, IF ADEQUATE RESERVES THEREFOR HAVE BEEN ESTABLISHED ON
THE BOOKS OF THE COMPANY OR ITS SUBSIDIARIES IN ACCORDANCE WITH GENERALLY
ACCEPTED ACCOUNTING PRINCIPLES. THE COMPANY COVENANTS THAT IT WILL, AND WILL
CAUSE
6
<PAGE>
EACH OF ITS SUBSIDIARIES TO, PAY ALL OTHER TAXES, ASSESSMENTS AND OTHER
GOVERNMENTAL CHARGES IMPOSED UPON IT OR ANY OF ITS PROPERTIES OR ASSETS OR IN
RESPECT OF ANY OF ITS FRANCHISES, BUSINESS, INCOME OR PROFITS BEFORE ANY
PENALTY ACCRUES THEREON, AND ALL CLAIMS (INCLUDING, WITHOUT LIMITATION,
CLAIMS FOR LABOR, SERVICES, MATERIALS AND SUPPLIES) FOR SUMS WHICH HAVE
BECOME DUE AND PAYABLE AND WHICH BY LAW HAVE OR MAY BECOME A LIEN UPON ANY OF
ITS PROPERTIES OR ASSETS, PROVIDED THAT NO SUCH TAX, ASSESSMENT, CHARGE OR
CLAIM NEED BE PAID IF IT IS BEING CONTESTED IN GOOD FAITH BY APPROPRIATE
PROCEEDINGS PROMPTLY INSTITUTED AND DILIGENTLY CONDUCTED AND IF SUCH ACCRUAL
OF OTHER APPROPRIATE PROVISION, IF ANY, AS SHALL BE REQUIRED BY GENERALLY
ACCEPTED ACCOUNTING PRINCIPLES SHALL HAVE BEEN MADE THEREFOR.
5I. COMPLIANCE WITH LAWS, ETC. THE COMPANY COVENANTS THAT IT WILL, AND
WILL CAUSE EACH OF ITS RESTRICTED SUBSIDIARIES TO, COMPLY WITH THE
REQUIREMENTS OF ALL APPLICABLE LAWS, RULES, REGULATIONS AND ORDERS OF ANY
GOVERNMENTAL AUTHORITY, THE NONCOMPLIANCE WITH WHICH WOULD MATERIALLY
ADVERSELY AFFECT THE BUSINESS, CONDITION (FINANCIAL OR OTHER), ASSETS,
PROPERTIES, OPERATIONS OR PROSPECTS OF THE COMPANY OR THE COMPANY AND ITS
RESTRICTED SUBSIDIARIES TAKEN AS A WHOLE.
5J. MAINTENANCE OF PROPERTIES; INSURANCE. MAINTAIN OR CAUSE TO BE
MAINTAINED IN GOOD REPAIR, WORKING ORDER AND CONDITION ALL PROPERTIES USED OR
USEFUL IN THE BUSINESS OF THE COMPANY AND ITS RESTRICTED SUBSIDIARIES AND
FROM TIME TO TIME MAKE OR CAUSE TO BE MADE ALL APPROPRIATE REPAIRS, RENEWALS
AND REPLACEMENTS THEREOF. THE COMPANY WILL MAINTAIN OR CAUSE TO BE
MAINTAINED, WITH FINANCIALLY SOUND AND REPUTABLE INSURERS, (i) INSURANCE WITH
RESPECT TO ITS PROPERTIES AND BUSINESS AND THE PROPERTIES AND BUSINESS OF ITS
RESTRICTED SUBSIDIARIES AGAINST LOSS OR DAMAGE OF THE KINDS CUSTOMARILY
INSURED AGAINST BY CORPORATIONS OF ESTABLISHED REPUTATION ENGAGED IN THE SAME
OR SIMILAR BUSINESS AND SIMILARLY SITUATED, OF SUCH TYPES AND IN SUCH AMOUNTS
AS ARE CUSTOMARILY CARRIED UNDER SIMILAR CIRCUMSTANCES BY SUCH OTHER
CORPORATIONS, AND (ii) LIFE INSURANCE, WITH THE COMPANY AS THE OWNER AND
NAMED BENEFICIARY, ON THE LIFE OF MYRON KUNIN IN THE AMOUNT (NET OF ANY
PREMIUM LOANS THEREON AND INTEREST DUE IN CONNECTION THEREWITH) OF NOT LESS
THAN $2,700,000, AND ON THE LIFE OF PAUL FINKELSTEIN IN THE AMOUNT (NET OF
ANY PREMIUM LOANS THEREON AND INTEREST DUE IN CONNECTION THEREWITH) OF NOT
LESS THAN $2,400,000, EACH OF WHICH LIFE INSURANCE POLICIES SHALL BE FREE OF
PREMIUM LOANS (EXCEPT AS SPECIFICALLY PROVIDED HEREIN) AND OTHER LIENS ON OR
OFFSETS AGAINST PROCEEDS PAYABLE TO THE COMPANY.
5K. AFFILIATE TRANSACTIONS, KEEPING OF BOOKS, BANK ACCOUNTS. (x) KEEP
AND CAUSE EACH OF ITS RESTRICTED SUBSIDIARIES TO KEEP SEPARATE AND PROPER
BOOKS OF RECORD AND ACCOUNT, IN WHICH FULL AND CORRECT ENTRIES SHALL BE MADE
OF ALL TRANSACTIONS INCLUDING ANY TRANSACTIONS BETWEEN THE COMPANY OR ANY
RESTRICTED SUBSIDIARY AND ANY AFFILIATE, ALL IN ACCORDANCE WITH GENERALLY
ACCEPTED ACCOUNTING PRINCIPLES, AND (y) MAINTAIN AND CAUSE EACH OF ITS
SUBSIDIARIES TO MAINTAIN BANK ACCOUNTS WHICH ARE SEPARATE AND SEGREGATED FROM
THE BANK ACCOUNTS OF ANY AFFILIATE.
7
<PAGE>
6. NEGATIVE COVENANTS.
6A. INTEREST COVERAGE RATIO. THE COMPANY WILL NOT PERMIT THE INTEREST
COVERAGE RATIO TO BE LESS THAN 2.0 TO 1.0 AT THE END OF ANY FISCAL QUARTER.
6B. NET WORTH. THE COMPANY WILL NOT PERMIT:
(i) CONSOLIDATED NET WORTH AT ANY TIME TO BE LESS THAN
$60,000,000 PLUS, TO THE EXTENT POSITIVE, 50% OF CONSOLIDATED NET INCOME
FOR THE PERIOD (TAKEN AS ONE ACCOUNTING PERIOD) COMMENCING JULY 1, 1995,
AND ENDING ON THE LAST DAY OF THE FISCAL QUARTER MOST RECENTLY ENDED AS OF
ANY DATE OF DETERMINATION; OR
(ii) TANGIBLE NET WORTH AT THE END OF ANY FISCAL QUARTER TO BE
LESS THAN $10,000,000.
6C. LIEN, DEBT AND OTHER RESTRICTIONS. THE COMPANY WILL NOT AND WILL
NOT PERMIT ANY RESTRICTED SUBSIDIARY TO:
6C(1). LIENS. CREATE, ASSUME OR SUFFER TO EXIST ANY LIEN UPON ANY OF
ITS PROPERTIES OR ASSETS, WHETHER NOW OWNED OR HEREAFTER ACQUIRED (WHETHER OR
NOT PROVISION IS MADE FOR THE EQUAL AND RATABLE SECURING OF THE NOTES IN
ACCORDANCE WITH THE PROVISIONS OF PARAGRAPH 5D), EXCEPT:
(i) LIENS FOR TAXES, ASSESSMENTS OR GOVERNMENTAL CHARGES NOT YET
DUE OR WHICH ARE BEING ACTIVELY CONTESTED IN GOOD FAITH BY APPROPRIATE
PROCEEDINGS,
(ii) LIENS INCIDENTAL TO THE CONDUCT OF ITS BUSINESS OR THE
OWNERSHIP OF ITS PROPERTY AND ASSETS WHICH DO NOT SECURE DEBT AND WHICH
DO NOT IN THE AGGREGATE MATERIALLY DETRACT FROM THE VALUE OF ITS
PROPERTY OR ASSETS OR MATERIALLY IMPAIR THE USE THEREOF IN THE OPERATION
OF ITS BUSINESS,
(iii) LIENS ON PROPERTY OR ASSETS OF A RESTRICTED SUBSIDIARY TO
SECURE OBLIGATIONS OF SUCH RESTRICTED SUBSIDIARY TO THE COMPANY OR A
WHOLLY-OWNED RESTRICTED SUBSIDIARY,
(iv) LIENS WHICH ARE THE SUBJECT OF AN OFFSET SHARING AGREEMENT,
AND
(v) OTHER LIENS SECURING DEBT PERMITTED BY PARAGRAPH 6C(2),
PROVIDED THAT PRIORITY DEBT SHALL AT NO TIME EXCEED 15% OF CONSOLIDATED
NET WORTH;
6C(2). DEBT. CREATE, INCUR, ASSUME OR SUFFER TO EXIST ANY DEBT, EXCEPT:
(i) FUNDED DEBT EVIDENCED BY THE NOTES,
8
<PAGE>
(ii) FUNDED DEBT WHICH IS FORM TIME TO TIME OUTSTANDING UNDER THE
PRIVATE SHELF AGREEMENT,
(iii) CURRENT DEBT THE AGGREGATE PRINCIPAL AMOUNT OF WHICH AT NO
TIME EXCEEDS $20,000,000, PROVIDED THAT ANY HOLDER OF SUCH CURRENT DEBT IS
PARTY TO AN OFFSET SHARING AGREEMENT, AND
(iv) OTHER FUNDED DEBT,
PROVIDED THAT AT NO TIME SHALL (a) THE RATIO OF TOTAL DEBT TO THE SUM OF TOTAL
DEBT AND CONSOLIDATED NET WORTH EXCEED .50 TO 1.00 OR (b) PRIORITY DEBT
EXCEED 15% OF CONSOLIDATED NET WORTH;
6C(3). INVESTMENTS. MAKE OR PERMIT TO REMAIN OUTSTANDING ANY LOAN OR
ADVANCE TO, OR EXTEND CREDIT TO, OR OWN, PURCHASE OR ACQUIRE ANY STOCK,
OBLIGATIONS OR SECURITIES OF, OR ANY OTHER INTEREST IN, OR MAKE ANY CAPITAL
CONTRIBUTION TO, ANY PERSON (ALL OF THE FOREGOING BEING REFERRED TO HEREIN AS
"INVESTMENTS"), EXCEPT THAT THE COMPANY OR ANY RESTRICTED SUBSIDIARY MAY:
(i) MAKE OR PERMIT TO REMAIN OUTSTANDING INVESTMENTS TO OR IN
ANY RESTRICTED SUBSIDIARY OR ANY CORPORATION WHICH IMMEDIATELY FOLLOWING
SUCH INVESTMENT WILL BE A RESTRICTED SUBSIDIARY,
(ii) OWN, PURCHASE OR ACQUIRE MARKETABLE DIRECT OBLIGATIONS
ISSUED OR UNCONDITIONALLY GUARANTEED BY THE UNITED STATES OF AMERICA OR
ANY AGENCY THEREOF AND MATURING WITHIN ONE YEAR FROM THE DATE OF
ACQUISITION THEREOF.
(iii) MAKE DEMAND DEPOSITS IN BANKS IN THE ORDINARY COURSE OF
BUSINESS, AND MAKE DEPOSITS OR OWN CERTIFICATES OF DEPOSIT OF UNITED
STATES DOLLARS MATURING WITHIN ONE YEAR FROM THE DATE OF ACQUISITION
THEREOF ISSUED BY COMMERCIAL BANKS CHARTERED UNDER THE LAWS OF THE
UNITED STATES OF AMERICA OR ANY STATE THEREOF OR THE DISTRICT OF COLUMBIA,
EACH HAVING AS AT ANY DATE OF DETERMINATION COMBINED CAPITAL, SURPLUS AND
UNDIVIDED PROFITS OF NOT LESS THAN $100,000,000 (DETERMINED IN ACCORDANCE
WITH GENERALLY ACCEPTED ACCOUNTING PRINCIPLES),
(iv) OWN, PURCHASE OR ACQUIRE COMMERCIAL PAPER MATURING NO MORE
THAN 270 DAYS FROM THE DATE OF ACQUISITION THEREOF AND RATED A-1 BY
STANDARD & POOR'S CORPORATION OR P-1 BY MOODY'S INVESTORS SERVICE, INC.,
(v) MAKE AND OWN INVESTMENTS IN MUTUAL FUNDS WHICH INVEST AT
LEAST 95% OF THEIR ASSETS IN INSTRUMENTS DESCRIBED IN CLAUSES (ii),
(iii) AND (iv) OF THIS PARAGRAPH 6C(3),
9
<PAGE>
(vi) ENDORSE NEGOTIABLE INSTRUMENTS FOR COLLECTION IN THE
ORDINARY COURSE OF BUSINESS,
(vii) MAKE OR PERMIT TO REMAIN OUTSTANDING INVESTMENTS TO OR IN
ANY UNRESTRICTED SUBSIDIARY, PROVIDED THAT (a) THE AGGREGATE AMOUNT (AT
ORIGINAL COST) OF ALL INVESTMENTS IN UNRESTRICTED SUBSIDIARIES
(EXCLUDING UP TO A $4,000,000 EQUITY CONTRIBUTION IN A SINGLE UNITED
KINGDOM BASED CORPORATION IF MADE AFTER JUNE 23, 1995 AND PRIOR TO
OCTOBER 1, 1995) SHALL AT NO TIME EXCEED 10% OF CONSOLIDATED NET WORTH
AND (b) ANY INVESTMENT MADE IN AN UNRESTRICTED SUBSIDIARY SUBSEQUENT TO
JUNE 30, 1995, SHALL ONLY BE DEEMED AN INVESTMENT FOR PURPOSES OF THIS
PARAGRAPH 6C(3) TO THE EXTEND IT INVOLVES A CASH OR OTHER ASSET
CONTRIBUTION OR ADVANCE (NET OF ANY RETURN THEREOF), AND
(viii) MAKE OR PERMIT TO REMAIN OUTSTANDING OTHER INVESTMENTS
(EXCLUSIVE OF INVESTMENTS IN UNRESTRICTED SUBSIDIARIES), PROVIDED THAT
THE AGGREGATE AMOUNT THEREOF SHALL AT NO TIME EXCEED 5% OF CONSOLIDATED
NET WORTH.
6C(4). SALE OF STOCK AND DEBT OF SUBSIDIARIES. SELL OR OTHERWISE
DISPOSE OF, OR PART WITH CONTROL OF, ANY SHARES OF STOCK OR DEBT OF ANY
RESTRICTED SUBSIDIARY, EXCEPT TO THE COMPANY OR A WHOLLY-OWNED RESTRICTED
SUBSIDIARY, AND EXCEPT THAT ALL SHARES OF STOCK AND DEBT OF ANY RESTRICTED
SUBSIDIARY AT THE TIME OWNED BY OR OWED TO THE COMPANY AND ALL RESTRICTED
SUBSIDIARIES MAY BE SOLD AS AN ENTIRETY FOR A CASH CONSIDERATION WHICH
REPRESENTS THE FAIR VALUE (AS DETERMINED IN GOOD FAITH BY THE BOARD OF
DIRECTORS OF THE COMPANY) AT THE TIME OF SALE OF THE SHARES OF STOCK AND DEBT
SO SOLD; PROVIDED THAT (i) SUCH SALE OR OTHER DISPOSITION, IF TREATED AS A
TRANSFER OF ASSETS OF SUCH RESTRICTED SUBSIDIARY, WOULD BE PERMITTED BY
PARAGRAPH 6C(6) AND (ii) AT THE TIME OF SUCH SALE, SUCH RESTRICTED SUBSIDIARY
SHALL NOT OWN, DIRECTLY OR INDIRECTLY, ANY SHARES OF STOCK OR DEBT OF ANY
OTHER RESTRICTED SUBSIDIARY (UNLESS ALL OF THE SHARES OF STOCK AND DEBT OF
SUCH OTHER RESTRICTED SUBSIDIARY OWNED, DIRECTLY OR INDIRECTLY, BY THE
COMPANY AND ALL RESTRICTED SUBSIDIARIES ARE SIMULTANEOUSLY BEING SOLD AS
PERMITTED BY THIS PARAGRAPH 6C(4));
6C(5). MERGER AND CONSOLIDATION. MERGE OR CONSOLIDATE WITH OR INTO ANY
OTHER PERSON, EXCEPT THAT:
(i) ANY RESTRICTED SUBSIDIARY MAY MERGE OR CONSOLIDATE WITH OR
INTO THE COMPANY, PROVIDED THAT THE COMPANY IS THE CONTINUING OR SURVIVING
CORPORATION,
(ii) ANY RESTRICTED SUBSIDIARY MAY MERGE OR CONSOLIDATE WITH OR
INTO ANOTHER RESTRICTED SUBSIDIARY, PROVIDED THAT A WHOLLY-OWNED RESTRICTED
SUBSIDIARY SHALL BE THE CONTINUING OR SURVIVING CORPORATION, AND
10
<PAGE>
(iii) THE COMPANY MAY MERGE OR CONSOLIDATE WITH ANY OTHER
CORPORATION, PROVIDED THAT (a) EITHER (X) THE COMPANY SHALL BE THE
CONTINUING OR SURVIVING CORPORATION, OR (Y) THE SUCCESSOR OR ACQUIRING
CORPORATION SHALL BE A CORPORATION ORGANIZED UNDER THE LAWS OF ANY STATE
OF THE UNITED STATES OF AMERICA AND SHALL EXPRESSLY ASSUME IN WRITING
ALL OF THE OBLIGATIONS OF THE COMPANY UNDER THIS AGREEMENT AND ON THE
NOTES, INCLUDING ALL COVENANTS HEREIN AND THEREIN CONTAINED, AND SUCH
SUCCESSOR OR ACQUIRING CORPORATION SHALL SUCCEED TO AND BE SUBSTITUTED
FOR THE COMPANY WITH THE SAME EFFECT AS IF IT HAD BEEN NAMED HEREIN AS A
PARTY HERETO AND (b) IMMEDIATELY AFTER GIVING EFFECT TO SUCH
TRANSACTION, NO DEFAULT OR EVENT OF DEFAULT WOULD EXIST HEREUNDER
(INCLUDING A DEFAULT OR EVENT OF DEFAULT UNDER CLAUSE (iii) OF PARAGRAPH
6C(2));
6C(6). TRANSFER OF ASSETS. TRANSFER ANY OF ITS ASSETS EXCEPT THAT:
(i) ANY RESTRICTED SUBSIDIARY MAY TRANSFER ASSETS TO THE COMPANY
OR A WHOLLY-OWNED RESTRICTED SUBSIDIARY.
(ii) THE COMPANY OR ANY RESTRICTED SUBSIDIARY MAY SELL INVENTORY
IN THE ORDINARY COURSE OF BUSINESS, AND
(iii) THE COMPANY OR ANY RESTRICTED SUBSIDIARY MAY OTHERWISE
TRANSFER ASSETS, PROVIDED THAT AFTER GIVING THERETO (a) THE AGGREGATE
PERCENTAGE OF EARNINGS CAPACITY TRANSFERRED PURSUANT TO THIS CLAUSE
(iii) SHALL NOT EXCEED 10% AND (b) THE AGGREGATE PERCENTAGE OF TOTAL
ASSETS TRANSFERRED PURSUANT TO THIS CLAUSE (iii) SHALL NOT EXCEED 10%.
6C(7). SALE OR DISCOUNT OF RECEIVABLES. SELL WITH RECOURSE, OR DISCOUNT
OR OTHERWISE SELL FOR LESS THAN THE FACE VALUE THEREOF, ANY OF ITS NOTES OR
ACCOUNTS RECEIVABLE;
6C(8). TRANSACTIONS WITH AFFILIATES. DIRECTLY OR INDIRECTLY, ENGAGE IN
ANY TRANSACTION (INCLUDING, WITHOUT LIMITATION, THE PURCHASE, SALE OR
EXCHANGE OF ASSETS OR THE RENDERING OF ANY SERVICE) WITH ANY AFFILIATE,
UNLESS (i) SUCH TRANSACTION IS IN THE ORDINARY COURSE OF AND PURSUANT TO THE
REASONABLE REQUIREMENTS OF THE COMPANY'S OR SUCH RESTRICTED SUBSIDIARY'S
BUSINESS AND UPON FAIR AND REASONABLE TERMS THAT ARE COMPARABLE TO THOSE
WHICH MIGHT BE OBTAINED IN AN ARM'S-LENGTH TRANSACTION BETWEEN UNAFFILIATED
PARTIES, AND (ii) IN THE CASE OF ANY SUCH TRANSACTION IN WHICH THE AGGREGATE
VALUE OF THE ASSETS OR SERVICES INVOLVED, OR OF THE PAYMENTS MADE, EXCEEDS
$1,000,000, SUCH TRANSACTION IS AUTHORIZED BY A MAJORITY OF THE INDEPENDENT
MEMBERS OF THE BOARD OF DIRECTORS OF THE COMPANY;
6C(9). RESTRICTED SUBSIDIARY DIVIDEND RESTRICTIONS. ENTER INTO, OR
OTHERWISE BE SUBJECT TO, ANY CONTRACT OR AGREEMENT (INCLUDING ITS CERTIFICATE
OR ARTICLES OF INCORPORATION), WHICH LIMITS THE AMOUNT OF, OR OTHERWISE
IMPOSES RESTRICTIONS ON THE PAYMENT OF, DIVIDENDS BY ANY RESTRICTED
SUBSIDIARY; OR
11
<PAGE>
6C(10). TAX CONSOLIDATION. CONSENT TO OR PERMIT THE FILING OF OR BE A
PARTY TO ANY CONSOLIDATED INCOME TAX RETURN WITH ANY PERSON, OTHER THAN A
CONSOLIDATED TAX RETURN OF THE COMPANY AND ITS SUBSIDIARIES.
6D. TRANSACTIONS BY RESTRICTED SUBSIDIARIES. THE COMPANY COVENANTS
THAT IT WILL NOT PERMIT ANY RESTRICTED SUBSIDIARY (EITHER DIRECTLY, OR
INDIRECTLY BY THE ISSUANCE OF RIGHTS OR OPTIONS FOR, OR SECURITIES
CONVERTIBLE INTO, SUCH SHARES) TO ISSUE, SELL OR OTHERWISE DISPOSE OF (i) ANY
SHARES OF ANY CLASS OF ITS STOCK (OTHER THAN COMMON STOCK) EXCEPT TO THE
COMPANY OR ANOTHER RESTRICTED SUBSIDIARY OR (ii) ANY SHARES OF ITS COMMON
STOCK EXCEPT (a) TO THE COMPANY OR ANOTHER RESTRICTED SUBSIDIARY AND (b)
CONCURRENTLY WITH DISPOSITIONS UNDER (a) ABOVE, TO ANY MINORITY SHAREHOLDERS
OF SUCH RESTRICTED SUBSIDIARY TO THE EXTENT NECESSARY TO MAINTAIN SUCH
MINORITY SHAREHOLDERS' PERCENTAGE OWNERSHIP OF OUTSTANDING SHARES OF COMMON
STOCK OF SUCH RESTRICTED SUBSIDIARY.
2. Paragraph 7A is amended by amending and restating clause (v)
thereof in its entirety and by adding thereto a new clause (xiv), as follows:
(v) THE COMPANY FAILS TO PERFORM OR OBSERVE ANY COVENANT OR
AGREEMENT CONTAINED IN PARAGRAPH 6 OR INCORPORATED BY REFERENCE INTO
THIS AGREEMENT PURSUANT TO PARAGRAPH 5F; OR
* * * *
(xiv) (a) ANY PLAN SHALL FAIL TO SATISFY THE MINIMUM FUNDING
STANDARDS OF ERISA OR THE CODE FOR ANY PLAN YEAR OR PART THEREOF OR A
WAIVER OF SUCH STANDARDS OR EXTENSION OF ANY AMORTIZATION PERIOD IS
SOUGHT OR GRANTED UNDER SECTION 412 OF THE CODE, (b) A NOTICE OF INTENT
TO TERMINATE ANY PLAN SHALL HAVE BEEN OR IS REASONABLY EXPECTED TO BE
FILED WITH THE PBGC OR THE PBGC SHALL HAVE INSTITUTED PROCEEDINGS UNDER
ERISA SECTION 4042 TO TERMINATE OR APPOINT A TRUSTEE TO ADMINISTER ANY
PLAN OR THE PBGC SHALL HAVE NOTIFIED THE COMPANY OR ANY ERISA AFFILIATE
THAT A PLAN MAY BECOME A SUBJECT OF SUCH PROCEEDINGS, (c) THE AGGREGATE
"AMOUNT OF UNFUNDED BENEFIT LIABILITIES" (WITHIN THE MEANING OF SECTION
4001(a)(18) OF ERISA) UNDER ALL PLANS, DETERMINED IN ACCORDANCE WITH
TITLE IV OF ERISA, SHALL EXCEED $500,000, (d) THE COMPANY OR ANY ERISA
AFFILIATE SHALL HAVE INCURRED OR IS REASONABLY EXPECTED TO INCUR ANY
LIABILITY PURSUANT TO TITLE I OR IV OF ERISA OR THE PENALTY OR EXCISE
TAX PROVISIONS OF THE CODE RELATING TO EMPLOYEE BENEFIT PLANS, (e) THE
COMPANY OR ANY ERISA AFFILIATE WITHDRAWS FROM ANY MULTIEMPLOYER PLAN, OR
(f) THE COMPANY OR ANY RESTRICTED SUBSIDIARY ESTABLISHES OR AMENDS ANY
EMPLOYEE WELFARE BENEFIT PLAN THAT PROVIDES POST-EMPLOYMENT WELFARE
BENEFITS IN A MANNER THAT WOULD INCREASE THE LIABILITY OF THE COMPANY OR
ANY RESTRICTED SUBSIDIARY THEREUNDER; AND ANY SUCH EVENT OR EVENTS
DESCRIBED IN CLAUSES (a) THROUGH (f) ABOVE, EITHER INDIVIDUALLY OR
TOGETHER WITH ANY OTHER SUCH EVENT OR EVENTS, COULD REASONABLY BE
EXPECTED TO HAVE A MATERIAL
12
<PAGE>
ADVERSE EFFECT ON THE BUSINESS OR CONDITION (FINANCIAL OR OTHERWISE) OF
THE COMPANY AND THE RESTRICTED SUBSIDIARIES, TAKEN AS A WHOLE;
3. Paragraph 10B is amended and restated in its entirety as follows:
"AFFILIATE" SHALL MEAN (i) ANY RESPONSIBLE OFFICER OR MEMBER OF THE
BOARD OF DIRECTORS OF THE COMPANY, (ii) ANY HOLDER OF AT LEAST 10% OF THE
TOTAL COMBINED VOTING POWER OF ALL CLASSES OF VOTING STOCK (OR THE
EQUIVALENT) OF THE COMPANY OR OF ANY CORPORATION OR OTHER ENTITY WHICH
DIRECTLY OR INDIRECTLY CONTROLS THE COMPANY, (iii) THE SPOUSE, ANY SIBLING
(BY BLOOD OR ADOPTION), OR ANY DESCENDANT (BY BLOOD OR ADOPTION) OF ANY
INDIVIDUAL REFERRED TO IN CLAUSE (i) OR (ii) ABOVE, OR ANY SPOUSE OF ANY SUCH
SIBLING OR DESCENDANT OR ANY DESCENDANT OF ANY SUCH SIBLING, (iv) ANY TRUST
IN WHICH ANY PERSON REFERRED TO IN CLAUSE (i), (ii) OR (iii) ABOVE HAS A
SUBSTANTIAL BENEFICIAL INTEREST, (v) ANY CORPORATION OR OTHER ENTITY (a) OF
WHICH THE COMPANY OR ANY PERSON REFERRED TO IN CLAUSE (i), (ii), (iii) OR
(iv) ABOVE HOLDS AT LEAST 10% OF THE TOTAL COMBINED ECONOMIC INTEREST OF ALL
CLASSES OF COMMON STOCK (OR THE EQUIVALENT) OR AT LEAST 10% OF THE TOTAL
COMBINED VOTING POWER OF ALL CLASSES OF VOTING STOCK (OR THE EQUIVALENT) OR
(b) DIRECTLY OR INDIRECTLY CONTROLLED BY ANY PERSON REFERRED TO IN CLAUSE
(i), (ii), (iii) OR (iv) ABOVE, AND (vi) ANY PERSON DIRECTLY OR INDIRECTLY
CONTROLLING, CONTROLLED BY, OR UNDER DIRECT OR INDIRECT COMMON CONTROL WITH,
THE COMPANY, PROVIDED THAT A RESTRICTED SUBSIDIARY SHALL NOT BE AN AFFILIATE.
A PERSON SHALL BE DEEMED TO CONTROL A CORPORATION OR OTHER ENTITY IF SUCH
PERSON POSSESSES, DIRECTLY OR INDIRECTLY, THE POWER TO DIRECT OR CAUSE THE
DIRECTION OF THE MANAGEMENT AND POLICIES OF SUCH CORPORATION OR OTHER ENTITY,
WHETHER THROUGH THE OWNERSHIP OF VOTING SECURITIES, BY CONTRACT OR OTHERWISE.
"AGGREGATE PERCENTAGE OF EARNINGS CAPACITY TRANSFERRED" SHALL MEAN, WITH
RESPECT TO ANY EIGHT CONSECUTIVE FISCAL QUARTER PERIOD, THE SUM OF THE
PERCENTAGES OF EARNINGS CAPACITY TRANSFERRED FOR EACH ASSET OF THE COMPANY
AND ITS RESTRICTED SUBSIDIARIES THAT IS TRANSFERRED DURING SUCH PERIOD.
"AGGREGATE PERCENTAGE OF TOTAL ASSETS TRANSFERRED" SHALL MEAN, WITH
RESPECT TO ANY EIGHT CONSECUTIVE FISCAL QUARTER PERIOD, THE SUM OF THE
PERCENTAGES OF TOTAL ASSETS TRANSFERRED FOR EACH ASSET OF THE COMPANY AND ITS
RESTRICTED SUBSIDIARIES THAT IS TRANSFERRED DURING SUCH PERIOD.
"AVERAGE CONSOLIDATED NET INCOME" SHALL MEAN, AS OF ANY TIME OF
DETERMINATION THEREOF, THE AVERAGE CONSOLIDATED NET INCOME OF THE COMPANY AND
RESTRICTED SUBSIDIARIES FOR THE THREE COMPLETE FISCAL YEARS OF THE COMPANY
THEN MOST RECENTLY ENDED.
"AUDITED FINANCIAL STATEMENTS" SHALL HAVE THE MEANING SPECIFIED IN
PARAGRAPH 8B.
"BANKRUPTCY LAW" SHALL HAVE THE MEANING SPECIFIED IN CLAUSE (viii) OF
PARAGRAPH 7A.
13
<PAGE>
"CAPITALIZED LEASE OBLIGATION" SHALL MEAN ANY RENTAL OBLIGATION
WHICH, UNDER GENERALLY ACCEPTED ACCOUNTING PRINCIPLES, IS OR WILL BE REQUIRED
TO BE CAPITALIZED ON THE BOOKS OF THE COMPANY OR ANY RESTRICTED SUBSIDIARY,
TAKEN AT THE AMOUNT THEREOF ACCOUNTED FOR AS INDEBTEDNESS (NET OF INTEREST
EXPENSES) IN ACCORDANCE WITH SUCH PRINCIPLES.
"CODE" SHALL MEAN THE INTERNAL REVENUE CODE OF 1986, AS AMENDED
FROM TIME TO TIME.
"COMMON STOCK" SHALL MEAN, AS APPLIED TO ANY CORPORATION, SHARES OF
SUCH CORPORATION WHICH SHALL NOT BE ENTITLED TO PREFERENCE OR PRIORITY OVER
ANY OTHER SHARES OF SUCH CORPORATION IN RESPECT OF EITHER THE PAYMENT OF
DIVIDENDS OR THE DISTRIBUTION OF ASSETS UPON LIQUIDATION.
"COMPUTATION PARAGRAPHS" SHALL HAVE THE MEANING SPECIFIED IN
PARAGRAPH 5A(iv).
"CONSOLIDATED INTEREST EXPENSE" SHALL MEAN, AS TO ANY PERIOD,
CONSOLIDATED INTEREST EXPENSE OF THE COMPANY AND RESTRICTED SUBSIDIARIES FOR
SUCH PERIOD, CALCULATED TO (i) INCLUDE IMPUTED INTEREST ON CAPITALIZED LEASE
OBLIGATIONS AND (ii) EXCLUDE AMORTIZATION OF DEBT DISCOUNT TO THE EXTENT NOT
ACTUALLY PAID IN CASH.
"CONSOLIDATED NET INCOME" SHALL MEAN, AS TO ANY PERIOD, THE NET
INCOME OF THE COMPANY AND RESTRICTED SUBSIDIARIES ON A CONSOLIDATED BASIS;
PROVIDED THAT FOR PERIODS ENDED ON OR PRIOR TO JUNE 30, 1994, THERE SHALL BE
EXCLUDED FROM THE DETERMINATION OF SUCH NET INCOME ANY NON-RECURRING CHARGES
RELATED TO MEI DIVERSIFIED, INC.
"CONSOLIDATED NET WORTH" SHALL MEAN, AS OF ANY TIME OF
DETERMINATION THEREOF, (i) THE SHAREHOLDERS' EQUITY (OR DEFICIT) OF THE
COMPANY AND ITS RESTRICTED SUBSIDIARIES, AS THE SAME WOULD BE SHOWN ON A
CONSOLIDATED BALANCE SHEET OF THE COMPANY, AND ITS RESTRICTED SUBSIDIARIES,
PLUS (ii) TO THE EXTENT THAT (a) THE CONVERTIBLE DEBENTURE OF THE COMPANY
ISSUED TO T. ROWE PRICE STRATEGIC PARTNERS II, L.P. REMAINS OUTSTANDING AND
(b) THE PUBLIC MARKET PRICE OF THE COMPANY'S COMMON STOCK IS IN EXCESS OF THE
CONVERSION PRICE SET FORTH IN SUCH CONVERTIBLE DEBENTURE, THE CONVERSION
PRICE OF SUCH CONVERTIBLE DEBENTURE, MINUS (iii) THE AGGREGATE AMOUNT OF
INVESTMENTS IN UNRESTRICTED SUBSIDIARIES WHICH ARE DEEMED NOT TO BE
INVESTMENTS FOR PURPOSES OF PARAGRAPH 6C(3) AS A RESULT OF CLAUSE (vii)(b)
THEREOF.
"CURRENT DEBT" SHALL MEAN, WITH RESPECT TO ANY PERSON, ALL
INDEBTEDNESS OF SUCH PERSON FOR BORROWED MONEY WHICH BY ITS TERMS OR BY THE
TERMS OF ANY INSTRUMENT OR AGREEMENT RELATING THERETO MATURES ON DEMAND OR
WITHIN ONE YEAR FROM THE DATE OF THE CREATION THEREOF, PROVIDED THAT
INDEBTEDNESS OUTSTANDING UNDER A REVOLVING CREDIT OR SIMILAR AGREEMENT WHICH
OBLIGATES THE LENDER OR LENDERS TO EXTEND CREDIT OVER A PERIOD OF MORE THAN
ONE YEAR SHALL CONSTITUTE CURRENT DEBT AND NOT FUNDED DEBT.
"DEBT" SHALL MEAN CURRENT DEBT AND FUNDED DEBT.
14
<PAGE>
"EBIT" SHALL MEAN, WITH RESPECT TO ANY PERIOD, CONSOLIDATED NET
INCOME FOR SUCH PERIOD (i) PLUS CONSOLIDATED INTEREST EXPENSE FOR SUCH
PERIOD, (ii) PLUS OR MINUS (AS APPROPRIATE) ANY PROVISION FOR INCOME TAXES
FOR SUCH PERIOD.
"ENVIRONMENTAL LAWS" SHALL MEAN ANY AND ALL FEDERAL, STATE, LOCAL,
AND FOREIGN STATUTES, LAWS, REGULATIONS, ORDINANCES, RULES, JUDGMENTS,
ORDERS, DECREES, PERMITS, CONCESSIONS, GRANTS, FRANCHISES, LICENSES,
AGREEMENTS, OR GOVERNMENTAL RESTRICTIONS RELATING TO THE ENVIRONMENT OR THE
RELEASE OF ANY MATERIALS INTO THE ENVIRONMENT, INCLUDING BUT NOT LIMITED TO
THOSE RELATED TO HAZARDOUS SUBSTANCES OR WASTES, AIR EMISSIONS AND DISCHARGES
TO WASTE OR PUBLIC SYSTEMS.
"ERISA" SHALL MEAN THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF
1974, AS AMENDED.
"ERISA AFFILIATE" SHALL MEAN ANY CORPORATION WHICH IS A MEMBER OF
THE SAME CONTROLLED GROUP OF CORPORATIONS AS THE COMPANY WITHIN THE MEANING OF
SECTION 414(b) OF THE CODE, OR ANY TRADE OR BUSINESS WHICH IS UNDER COMMON
CONTROL WITH THE COMPANY WITHIN THE MEANING OF SECTION 414(c) OF THE CODE.
"EVENT OF DEFAULT" SHALL MEAN ANY OF THE EVENTS IN PARAGRAPH 7A,
PROVIDED THAT THERE HAS BEEN SATISFIED ANY REQUIREMENT IN CONNECTION WITH
SUCH EVENT FOR THE GIVING OF NOTICE, OR THE LAPSE OF TIME, OR THE HAPPENING
OF ANY FURTHER CONDITION, EVENT OR ACT, AND "DEFAULT" SHALL MEAN ANY OF SUCH
EVENTS, WHETHER OR NOT ANY SUCH REQUIREMENT HAS BEEN SATISFIED.
"FINANCIAL PROJECTIONS" SHALL HAVE THE MEANING SPECIFIED IN
PARAGRAPH 8B.
"FINANCIAL STATEMENTS" SHALL HAVE THE MEANING SPECIFIED IN
PARAGRAPH 8B.
"FUNDED DEBT" SHALL MEAN WITH RESPECT TO ANY PERSON, ALL
INDEBTEDNESS OF SUCH PERSON WHICH BY IT TERMS OR BY THE TERMS OF ANY
INSTRUMENT OR AGREEMENT RELATING THERETO MATURES, OR WHICH IS OTHERWISE
PAYABLE OR UNPAID, MORE THAN ONE YEAR FROM, OR IS DIRECTLY OR INDIRECTLY
RENEWABLE OR EXTENDIBLE AT THE OPTION OF THE DEBTOR TO A DATE MORE THAN ONE
YEAR FROM, THE DATE OF THE CREATION THEREOF, PROVIDED THAT INDEBTEDNESS
OUTSTANDING UNDER A REVOLVING CREDIT OR SIMILAR AGREEMENT WHICH OBLIGATES THE
LENDER OR LENDERS TO EXTEND CREDIT OVER A PERIOD OF MORE THAN ONE YEAR SHALL
CONSTITUTE CURRENT DEBT AND NOT FUNDED DEBT.
"GENERAL INTANGIBLES" SHALL MEAN ALL CHOSES IN ACTION, CAUSES OF
ACTION AND ALL OTHER INTANGIBLE PROPERTY OF THE COMPANY AND ITS RESTRICTED
SUBSIDIARIES OF EVERY KIND AND NATURE NOW OWNED OR HEREAFTER ACQUIRED,
INCLUDING, WITHOUT LIMITATION, CORPORATE AND OTHER BUSINESS RECORDS, DEPOSIT
ACCOUNTS, INVENTIONS, DESIGNS, PATENTS, PATENT AND TRADEMARK REGISTRATIONS
AND APPLICATIONS, TRADEMARKS, TRADE NAMES, TRADE SECRETS, GOODWILL,
COPYRIGHTS REGISTRATIONS, LICENSES, FRANCHISES, DEFERRED TAX BENEFITS, TAX
REFUND CLAIMS, PREPAID EXPENSES, COMPUTER PROGRAMS NOT INCLUDED IN CAPITAL,
PROPERTY AND EQUIPMENT ON THE ANNUAL AUDITED
15
<PAGE>
CONSOLIDATED FINANCIAL STATEMENTS OF THE COMPANY AND ITS RESTRICTED
SUBSIDIARIES, COVENANTS NOT TO COMPETE, CUSTOMER LISTS AND MAILING LISTS,
CONTRACT RIGHTS, INDEMNIFICATION RIGHTS, AND ANY LETTERS OF CREDIT,
GUARANTEE CLAIMS, SECURITY INTERESTS OR OTHER SECURITY HELD BY OR GRANTED TO
THE COMPANY OR ITS RESTRICTED SUBSIDIARIES.
"GUARANTEE" SHALL MEAN, WITH RESPECT TO ANY PERSON, ANY DIRECT OR
INDIRECT LIABILITY, CONTINGENT OR OTHERWISE, OF SUCH PERSON WITH RESPECT TO
ANY INDEBTEDNESS, LEASE, DIVIDEND OR OTHER OBLIGATION OF ANOTHER, INCLUDING,
WITHOUT LIMITATION, ANY SUCH OBLIGATION DIRECTLY OR INDIRECTLY GUARANTEED,
ENDORSED (OTHERWISE THAN FOR COLLECTION OR DEPOSIT IN THE ORDINARY COURSE
OF BUSINESS) OR DISCOUNTED OR SOLD WITH RECOURSE BY SUCH PERSON, OR IN RESPECT
OF WHICH SUCH PERSON IS OTHERWISE DIRECTLY OR INDIRECTLY LIABLE, INCLUDING,
WITHOUT LIMITATION, ANY SUCH OBLIGATION IN EFFECT GUARANTEED BY SUCH PERSON
THROUGH ANY AGREEMENT (CONTINGENT OR OTHERWISE) TO PURCHASE, REPURCHASE OR
OTHERWISE ACQUIRE SUCH OBLIGATION OR ANY SECURITY THEREFOR, OR TO PROVIDE
FUNDS FOR THE PAYMENT OR DISCHARGE OF SUCH OBLIGATION (WHETHER IN THE FORM OF
LOANS, ADVANCES, STOCK PURCHASES, CAPITAL CONTRIBUTIONS OR OTHERWISE), OR TO
MAINTAIN THE SOLVENCY OR ANY BALANCE SHEET OR OTHER FINANCIAL CONDITION OF
THE OBLIGOR OF SUCH OBLIGATION, OR TO MAKE PAYMENT FOR ANY PRODUCTS,
MATERIALS OR SUPPLIES OR FOR ANY TRANSPORTATION OR SERVICE, REGARDLESS OF THE
NON-DELIVERY OR NON-FURNISHING THEREOF, IN ANY SUCH CASE IF THE PURPOSE OR
INTENT OF SUCH AGREEMENT IS TO PROVIDE ASSURANCE THAT SUCH OBLIGATION WILL BE
PAID OR DISCHARGED, OR THAT ANY AGREEMENTS RELATING THERETO WILL BE COMPLIED
WITH, OR THAT THE HOLDERS OF SUCH OBLIGATION WILL BE PROTECTED AGAINST LOSS
IN RESPECT THEREOF. THE AMOUNT OF ANY GUARANTEE SHALL BE EQUAL TO THE
OUTSTANDING PRINCIPAL AMOUNT OF THE OBLIGATION GUARANTEED OR SUCH LESSER
AMOUNT TO WHICH THE MAXIMUM EXPOSURE OF THE GUARANTOR SHALL HAVE BEEN
SPECIFICALLY LIMITED.
"HISTORICAL FINANCIAL DATA AND ANALYSIS" SHALL HAVE THE MEANING
SPECIFIED IN PARAGRAPH 8B.
"HOLDER AFFILIATE" OF ANY SIGNIFICANT HOLDER SHALL MEAN ANY OTHER HOLDER
OF NOTES WHICH DIRECTLY OR INDIRECTLY CONTROLS, IS CONTROLLED BY, OR IS UNDER
DIRECT OR INDIRECT COMMON CONTROL WITH, SUCH SIGNIFICANT HOLDER.
"INCLUDING" SHALL MEAN, UNLESS THE CONTEXT CLEARLY REQUIRES OTHERWISE,
"INCLUDING WITHOUT LIMITATION".
"INDEBTEDNESS" SHALL MEAN, WITH RESPECT TO ANY PERSON, WITHOUT
DUPLICATION, (i) ALL ITEMS (EXCLUDING ITEMS OF (a) CONTINGENCY RESERVES, (b)
RESERVED FOR DEFERRED INCOME TAXES, (c) DEFERRED COMPENSATION TO THE EXTENT
THAT SUCH DEFERRED COMPENSATION ITEMS ARE FULLY FUNDED BY LIFE INSURANCE
POLICIES, (d) DEFERRED RENT, (e) POST RETIREMENT BENEFITS LIABILITIES
DETERMINED IN ACCORDANCE WITH FINANCIAL ACCOUNTING STANDARDS BOARD STATEMENT
NO. 106, AND (f) CURRENT LIABILITIES FOR TRADE PAYABLES, TAX AND PAYROLL
OBLIGATIONS) WHICH IN ACCORDANCE WITH GENERALLY ACCEPTED ACCOUNTING
PRINCIPLES WOULD BE INCLUDED IN DETERMINING TOTAL LIABILITIES AS SHOWN ON THE
LIABILITY SIDE OF A BALANCE SHEET OF SUCH PERSON AS OF THE DATE
16
<PAGE>
ON WHICH INDEBTEDNESS IS TO BE DETERMINED, (ii) ALL INDEBTEDNESS SECURED BY
ANY LIEN ON ANY PROPERTY OR ASSET OWNED OR HELD BY SUCH PERSON SUBJECT
THERETO, WHETHER OR NOT THE INDEBTEDNESS SECURED THEREBY SHALL HAVE BEEN
ASSUMED, AND (iii) ALL INDEBTEDNESS AND OTHER OBLIGATIONS OF OTHERS WITH
RESPECT TO WHICH SUCH PERSON HAS BECOME LIABLE BY WAY OF GUARANTEE.
"INITIAL PUBLIC OFFERING" SHALL HAVE THE MEANING SPECIFIED IN PARAGRAPH
3D.
"INSTITUTIONAL INVESTOR" SHALL MEAN ANY INSURANCE COMPANY, PENSION FUND,
MUTUAL FUND, INVESTMENT COMPANY, BANK, SAVINGS BANK, SAVINGS AND LOAN
ASSOCIATION, INVESTMENT BANKING COMPANY, TRUST COMPANY, OR ANY FINANCE OR
CREDIT COMPANY, ANY PORTFOLIO OR ANY INVESTMENT FUND MANAGED BY ANY OF THE
FOREGOING, OR ANY OTHER INSTITUTIONAL INVESTOR, AND ANY NOMINEE OF THE
FOREGOING.
"INTEREST COVERAGE RATIO" SHALL MEAN, WITH RESPECT TO ANY PERIOD, THE
RATIO OF (i) EBIT FOR SUCH PERIOD TO (ii) CONSOLIDATED INTEREST EXPENSE FOR
SUCH PERIOD.
"INTERIM FINANCIAL STATEMENTS" SHALL HAVE THE MEANING SPECIFIED IN
PARAGRAPH 8B.
"INVESTMENT" SHALL HAVE THE MEANING SPECIFIED IN PARAGRAPH 6C(3).
"LIEN" SHALL MEAN ANY MORTGAGE, PLEDGE, SECURITY INTEREST, ENCUMBRANCE,
LIEN (STATUTORY OR OTHERWISE) OR CHARGE OF ANY KIND (INCLUDING ANY AGREEMENT
TO GIVE ANY OF THE FOREGOING, ANY CONDITIONAL SALE OR OTHER TITLE RETENTION
AGREEMENT, ANY LEASE IN THE NATURE THEREOF, AND THE FILING OF OR AGREEMENT TO
GIVE ANY FINANCING STATEMENT UNDER THE UNIFORM COMMERCIAL CODE OF ANY
JURISDICTION) OR ANY OTHER TYPE OF PREFERENTIAL ARRANGEMENT FOR THE PURPOSE,
OR HAVING THE EFFECT, OF PROTECTING A CREDITOR AGAINST LOSS OR SECURING THE
PAYMENT OR PERFORMANCE OF AN OBLIGATION.
"MEMORANDUM" SHALL HAVE THE MEANING SPECIFIED IN PARAGRAPH 8B.
"MULTIEMPLOYER PLAN" SHALL MEAN ANY PLAN WHICH IS A "MULTIEMPLOYER PLAN"
AS SUCH TERM IS DEFINED IN SECTION 4001(a)(3) OF ERISA.
"NASDAQ" SHALL MEAN THE NATIONAL ASSOCIATION OF SECURITIES DEALERS
AUTOMATED QUOTATION SYSTEM.
"NOTES" SHALL HAVE THE MEANING SPECIFIED IN PARAGRAPH 1.
"OFFICER'S CERTIFICATE" SHALL MEAN A CERTIFICATE SIGNED IN THE NAME OF
THE COMPANY BY A RESPONSIBLE OFFICER.
17
<PAGE>
"OFFSET SHARING AGREEMENT" SHALL MEAN THE OFFSET SHARING AGREEMENT DATED
AS OF JUNE 21, 1994, AMONG THE PRUDENTIAL INSURANCE COMPANY OF AMERICA,
LASALLE NATIONAL BANK, BANK HAPOALIM AND THE OTHER LENDERS NAMED AS PARTIES
THERETO (AS SUCH AGREEMENT MAY BE AMENDED FROM TIME TO TIME) AS WELL AS ANY
SIMILAR AGREEMENT WHICH HEREAFTER MAY BE ENTERED INTO BY THE HOLDERS OF THE
NOTES AND OTHER LENDERS TO THE COMPANY.
"PBGC" SHALL MEAN THE PENSION BENEFIT GUARANTY CORPORATION OR ANY OTHER
GOVERNMENTAL AUTHORITY SUCCEEDING TO ANY OF ITS FUNCTIONS.
"PERCENTAGE(S) OF EARNINGS CAPACITY TRANSFERRED" SHALL MEAN, WITH
RESPECT TO EACH ASSET TRANSFERRED PURSUANT TO CLAUSE (iii) OF PARAGRAPH
6C(6), THE RATIO (EXPRESSED AS A PERCENTAGE) OF (i) CONSOLIDATED NET INCOME
PRODUCED BY, OR ATTRIBUTABLE TO, SUCH ASSET DURING THE FOUR FISCAL QUARTER
PERIOD MOST RECENTLY ENDED PRIOR TO THE EFFECTIVE DATE OF SUCH TRANSFER TO
(ii) AVERAGE CONSOLIDATED NET INCOME.
"PERCENTAGE(S) OF TOTAL ASSETS TRANSFERRED" SHALL MEAN, WITH
RESPECT TO EACH ASSET TRANSFERRED PURSUANT TO CLAUSE (iii) OF PARAGRAPH
6C(6), THE RATIO (EXPRESSED AS A PERCENTAGE) OF (i) THE GREATER OF SUCH
ASSET'S FAIR MARKET VALUE OR NET BOOK VALUE ON THE DATE OF TRANSFER TO (ii)
THE BOOK VALUE OF THE CONSOLIDATED ASSETS OF THE COMPANY AND RESTRICTED
SUBSIDIARIES AS OF THE LAST DAY OF THE FISCAL QUARTER IMMEDIATELY PRECEDING
THE DAY OF TRANSFER.
"PERSON" SHALL MEAN AND INCLUDE AN INDIVIDUAL, A PARTNERSHIP, A JOINT
VENTURE, A CORPORATION, A TRUST, AN UNINCORPORATED ORGANIZATION AND A
GOVERNMENT OR ANY DEPARTMENT OR AGENCY THEREOF.
"PLAN" SHALL MEAN ANY EMPLOYEE PENSION BENEFIT PLAN (AS SUCH TERM IS
DEFINED IN SECTION 3 OF ERISA) WHICH IS OR HAS BEEN ESTABLISHED OR MAINTAINED,
OR TO WHICH CONTRIBUTIONS ARE OR HAVE BEEN MADE, BY THE COMPANY OR ANY ERISA
AFFILIATE.
"PRIORITY DEBT" SHALL MEAN, AS OF ANY TIME OF DETERMINATION THEREOF, (i)
DEBT OF ANY RESTRICTED SUBSIDIARY, OTHER THAN DEBT OWED TO THE COMPANY OR A
WHOLLY-OWNED RESTRICTED SUBSIDIARY AND (ii) DEBT OF THE COMPANY SECURED BY
ANY LIEN.
"PRIVATE SHELF AGREEMENT" SHALL MEAN THE PRIVATE SHELF AGREEMENT DATED
AS OF JULY 25, 1995 BETWEEN THE COMPANY, ON THE ONE HAND, AND THE PRUDENTIAL
INSURANCE COMPANY OF AMERICA AND EACH AFFILIATE THEREOF WHICH BECOMES A PARTY
THERETO, ON THE OTHER HAND.
"REGISTRATION STATEMENT" SHALL HAVE THE MEANING SPECIFIED IN PARAGRAPH
8B.
18
<PAGE>
"RELATED PERSON" SHALL MEAN ANY TRADE OR BUSINESS, WHETHER OR NOT
INCORPORATED, WHICH, TOGETHER WITH THE COMPANY, WOULD BE TREATED AS A SINGLE
EMPLOYER UNDER SECTION 414 OF THE CODE.
"REQUIRED HOLDER(S)" SHALL MEAN THE HOLDER OR HOLDERS OF AT LEAST
66-2/3% IN AGGREGATE PRINCIPAL AMOUNT OF ALL THE NOTES AT THE TIME
OUTSTANDING, PROVIDED THAT IF ANY HOLDER OF LESS THAN 10% IN AGGREGATE
PRINCIPAL AMOUNT OF THE NOTES AT THE TIME OUTSTANDING IS A HOLDER AFFILIATE
OF A SIGNIFICANT HOLDER, SUCH SIGNIFICANT HOLDER AND ALL OF ITS HOLDER
AFFILIATES SHALL BE DEEMED TO BE A SINGLE HOLDER OF NOTES FOR THE PURPOSE OF
THIS DEFINITION AND ANY CONSENT OR NOTICE EXECUTED BY SUCH SIGNIFICANT HOLDER
OR ANY OF ITS HOLDER AFFILIATES SHALL BE DEEMED TO HAVE BEEN EXECUTED BY SUCH
SIGNIFICANT HOLDER AND ALL OF ITS HOLDER AFFILIATES FOR THE PURPOSE OF
DETERMINING WHETHER THE REQUIRED HOLDER(S) HAVE GIVEN SUCH CONSENT OR NOTICE.
"RESPONSIBLE OFFICER" SHALL MEAN THE CHIEF EXECUTIVE OFFICER, CHIEF
OPERATING OFFICER, CHIEF FINANCIAL OFFICER OR CHIEF ACCOUNTING OFFICER OF THE
COMPANY, GENERAL COUNSEL OF THE COMPANY OR ANY OTHER OFFICER OF THE COMPANY
INVOLVED PRINCIPALLY IN ITS FINANCIAL ADMINISTRATION OR ITS CONTROLLERSHIP
FUNCTION.
"RESTRICTED SUBSIDIARY" SHALL MEAN ANY SUBSIDIARY ORGANIZED UNDER THE
LAWS OF ANY STATE OF THE UNITED STATES OF AMERICA, PUERTO RICO, CANADA, OR
ANY PROVINCE OF CANADA, WHICH CONDUCTS SUBSTANTIALLY ALL OF ITS BUSINESS IN
THE UNITED STATES OF AMERICA, PUERTO RICO OR CANADA, AND AT LEAST 80% OF THE
TOTAL COMBINED VOTING POWER OF ALL CLASSES OF VOTING STOCK OF WHICH SHALL, AT
THE TIME AS OF WHICH ANY DETERMINATION IS BEING MADE, BE OWNED BY THE COMPANY
EITHER DIRECTLY OR THROUGH RESTRICTED SUBSIDIARIES, PROVIDED THAT NO SUCH
SUBSIDIARY SHALL BE A RESTRICTED SUBSIDIARY UNLESS (i) IT IS LISTED AS A
RESTRICTED SUBSIDIARY IN EXHIBIT E ATTACHED HERETO OR (ii) (a) THE BOARD OF
DIRECTORS OF THE COMPANY HEREAFTER DESIGNATES SUCH SUBSIDIARY A RESTRICTED
SUBSIDIARY, (b) NOTICE OF SUCH DESIGNATION IS GIVEN BY THE COMPANY TO THE
HOLDERS OF THE NOTES WITH THE NEXT SUCCEEDING DELIVERY OF FINANCIAL
STATEMENTS PURSUANT TO PARAGRAPH 5A, AND (c) ON THE DATE OF AND IMMEDIATELY
AFTER GIVING EFFECT TO SUCH DESIGNATION, NO EVENT OF DEFAULT SHALL HAVE
OCCURRED AND BE CONTINUING.
"REVOLVING CREDIT AGREEMENTS" SHALL MEAN THE SENIOR REVOLVING CREDIT
AGREEMENT, TO BE DATED AS OF JUNE 21, 1991, BETWEEN THE COMPANY AND BARCLAYS
BANK PLC, PROVIDING FOR REVOLVING CREDIT LOANS IN AGGREGATE PRINCIPAL
AMOUNT NOT IN EXCESS OF $15,000,000, SUBSTANTIALLY IN THE FORM OF THE FINAL
DRAFT THEREOF DATED JUNE 21, 1991, AND THE SENIOR REVOLVING CREDIT AGREEMENT,
TO BE DATED AS OF JUNE 21, 1991, BETWEEN THE COMPANY AND FIRST BANK NATIONAL
ASSOCIATION, PROVIDING FOR REVOLVING CREDIT LOANS IN AGGREGATE PRINCIPAL
AMOUNT NOT IN EXCESS OF $5,000,000, SUBSTANTIALLY IN THE FORM OF THE FINAL
DRAFT THEREOF DATED JUNE 21, 1991.
"REVOLVING CREDIT LOANS" SHALL MEAN LOANS MADE UNDER THE REVOLVING
CREDIT AGREEMENTS.
"SECURITIES ACT" SHALL MEAN THE SECURITIES ACT OF 1933, AS AMENDED.
19
<PAGE>
"SIGNIFICANT HOLDER" SHALL MEAN (i) EACH PURCHASER, SO LONG AS IT SHALL
HOLD (OR BE COMMITTED UNDER THIS AGREEMENT TO PURCHASE) ANY NOTE AND SHALL
NOT HAVE PREVIOUSLY SOLD OR DISPOSED OF ALL NOTES HELD BY IT, (ii) ANY OTHER
INSTITUTIONAL INVESTOR WHICH SHALL HAVE ACQUIRED ALL OF THE NOTES HELD BY A
SIGNIFICANT HOLDER AND BY ALL HOLDER AFFILIATES OF SUCH SIGNIFICANT HOLDER,
SHALL AT THE TIME HOLD ANY NOTE, AND SHALL NOT HAVE PREVIOUSLY SOLD OR
DISPOSED OF ALL NOTES HELD BY IT, AND (iii) ANY OTHER INSTITUTIONAL INVESTOR
WHICH IS AT THE TIME A HOLDER OF AT LEAST 10% IN AGGREGATE PRINCIPAL AMOUNT
OF THE NOTES AT THE TIME OUTSTANDING, PROVIDED THAT NO PURCHASER OR OTHER
INSTITUTIONAL INVESTOR WHICH AT THE TIME HOLDS LESS THAN 10% IN AGGREGATE
PRINCIPAL AMOUNT OF THE NOTES AT THE TIME OUTSTANDING SHALL BE A SIGNIFICANT
HOLDER FOR THE PURPOSE OF DECLARING NOTES TO BE DUE AND PAYABLE PURSUANT TO
CLAUSE (b) OF PARAGRAPH 7A UNLESS ALL HOLDER AFFILIATES OF SUCH SIGNIFICANT
HOLDER JOIN IN SUCH DECLARATION.
"SUBSIDIARY" SHALL MEAN ANY CORPORATION, ASSOCIATION OR OTHER BUSINESS
ENTITY WHICH IS REQUIRED TO BE CONSOLIDATED IN THE FINANCIAL STATEMENTS OF
THE COMPANY IN ACCORDANCE WITH GENERALLY ACCEPTED ACCOUNTING PRINCIPLES AS IN
EFFECT FROM TIME TO TIME.
"TANGIBLE NET WORTH" SHALL MEAN, AS OF ANY TIME OF DETERMINATION
THEREOF, THE NET WORTH OF THE COMPANY AND ITS RESTRICTED SUBSIDIARIES
DETERMINED ON A CONSOLIDATED BASIS IN ACCORDANCE WITH GENERALLY ACCEPTED
ACCOUNTING PRINCIPLES, PLUS THE AMOUNT OF THE CASH SURRENDER VALUE OF LIFE
INSURANCE POLICIES MAINTAINED BY THE COMPANY ON THE LIVES OF EXECUTIVE
OFFICERS PLUS THE AMOUNT OF DEBT PERMITTED BY THIS AGREEMENT WHICH IS
SUBORDINATE IN RIGHT OF PAYMENT TO THE NOTES MINUS THE SUM OF (i) THE AMOUNT
OF ANY GENERAL INTANGIBLES, (ii) AMOUNTS DUE FROM AFFILIATES AND (iii) THE
AMOUNT OF INVESTMENTS IN UNRESTRICTED SUBSIDIARIES.
"TOTAL DEBT" SHALL MEAN, AS OF ANY TIME OF DETERMINATION THEREOF, THE
AGGREGATE AMOUNT OF (i) ALL FUNDED DEBT OF THE COMPANY AND RESTRICTED
SUBSIDIARIES, PLUS (ii) THE AVERAGE OUTSTANDING DAILY BALANCE OF ALL CURRENT
DEBT OF THE COMPANY AND RESTRICTED SUBSIDIARIES DURING THE TWELVE
CALENDAR MONTH PERIOD MOST RECENTLY ENDED AS OF ANY TIME OF DETERMINATION,
MINUS (iii) DEBT OF RESTRICTED SUBSIDIARIES OWED TO THE COMPANY OR A
WHOLLY-OWNED SUBSIDIARY, MINUS (iv) TO THE EXTENT THAT (a) THE CONVERTIBLE
DEBENTURE OF THE COMPANY ORIGINALLY ISSUED DECEMBER 31, 1992 TO T. ROWE PRICE
STRATEGIC PARTNERS II, L.P. REMAINS OUTSTANDING AND (b) THE PUBLIC MARKET
PRICE OF THE COMPANY'S COMMON STOCK IS IN EXCESS OF THE CONVERSION PRICE SET
FORTH IN SUCH CONVERTIBLE DEBENTURE, THE CONVERSION PRICE OF SUCH CONVERTIBLE
DEBENTURE.
"TRANSFER" SHALL MEAN, WITH RESPECT TO ANY ITEM, THE SALE, EXCHANGE,
CONVEYANCE, LEASE, TRANSFER OR OTHER DISPOSITION OF SUCH ITEM.
"TRANSFEREE" SHALL MEAN ANY DIRECT OR INDIRECT TRANSFEREE OF ALL OR ANY
PART OF ANY NOTE PURCHASED BY ANY PURCHASER UNDER THIS AGREEMENT.
20
<PAGE>
"UNRESTRICTED SUBSIDIARY" SHALL MEAN ANY SUBSIDIARY OTHER THAN A
RESTRICTED SUBSIDIARY. NO SUBSIDIARY WHICH IS OR BECOMES A RESTRICTED
SUBSIDIARY SHALL AT ANY TIME THEREAFTER BECOME OR BE AN UNRESTRICTED
SUBSIDIARY. NOTWITHSTANDING THE FOREGOING, SOLELY FOR THE PURPOSES OF CLAUSE
(iii) OF PARAGRAPH 5A, REGIS MEXICO, S.A. SHALL NOT BE DEEMED AN UNRESTRICTED
SUBSIDIARY UNLESS AND UNTIL EITHER IT CONTRIBUTES GREATER THAN 5% OF THE
CONSOLIDATED REVENUES OF THE COMPANY AND SUBSIDIARIES FOR ANY FISCAL YEAR OF
THE COMPANY OR ITS ASSETS CONSTITUTE GREATER THAN 5% OF THE CONSOLIDATED
ASSETS OF THE COMPANY AND SUBSIDIARIES AS AT THE END OF ANY FISCAL YEAR OF
THE COMPANY.
"VOTING STOCK" SHALL MEAN ANY SHARES OF STOCK (OR EQUIVALENT INTERESTS)
OF THE COMPANY OR ANY SUBSIDIARY WHOSE HOLDERS ARE ENTITLED UNDER ORDINARY
CIRCUMSTANCES TO VOTE FOR THE ELECTION OF DIRECTORS (OR PERSONS PERFORMING
SIMILAR FUNCTIONS) OF THE COMPANY OR SUCH SUBSIDIARY (IRRESPECTIVE OF WHETHER
AT THE TIME STOCK OF ANY OTHER CLASS OR CLASSES (OR EQUIVALENT INTERESTS)
SHALL HAVE OR MIGHT HAVE VOTING POWER BY REASON OF THE HAPPENING OF ANY
CONTINGENCY).
"WHOLLY-OWNED RESTRICTED SUBSIDIARY" SHALL MEAN A RESTRICTED SUBSIDIARY
ALL THE OUTSTANDING SHARES (OTHER THAN DIRECTORS' QUALIFYING SHARES, IF
REQUIRED BY LAW) OF EVERY CLASS OF STOCK OF WHICH ARE AT THE TIME OWNED BY
THE COMPANY OR BY ONE OR MORE WHOLLY-OWNED RESTRICTED SUBSIDIARIES.
If you are in agreement with the foregoing, please execute the enclosed
counterparts of this letter and return one such counterpart to each holder
named below whereupon this letter will become a binding agreement between the
Company and holders effective the date first appearing above.
Certain letter amendments to the Note Agreement executed and delivered
prior to the date hereof included consents or waivers to particular
transactions or circumstances, and did not amend the language of the
covenants of the Note Agreement. Any such letter amendments shall have no
continuing effect from and after the date hereof. If and to the extent the
transactions or circumstances that were the subject thereof are of continuing
effect, such transactions or circumstances shall be subject to the covenents
in the Note Agreement, as amended by this letter amendment.
Very truly yours,
THE PRUDENTIAL INSURANCE
COMPANY OF AMERICA
Percentage of Notes Held: 61.24%
By: B Ross Smead
------------------------------
Title: Second Vice President
21
<PAGE>
PRUCO LIFE INSURANCE COMPANY
Percentage of Notes Held: 15.12%
By: B Ross Smead
------------------------------
Title: Assistant Vice President
LIFE INSURANCE COMPANY
OF GEORGIA
By: INTERNATIONALE NEDERLANDEN
NORTH AMERICA INVESTMENT
CENTRE, INC.,
its Agent
Percentage of Notes Held: 9.09%
By: /s/ Fred C. Smith
------------------------------
Name: Fred C. Smith
Title: S.V.P. and Managing Director
SOUTHLAND LIFE INSURANCE
COMPANY
By: INTERNATIONALE NEDERLANDEN
NORTH AMERICA INVESTMENT
CENTRE, INC.,
its Agent
Percentage of Notes Held: 5.46%
By: /s/ Fred C. Smith
------------------------------
Name: Fred C. Smith
Title: S.V.P. and Managing Director
By: INTERNATIONALE NEDERLANDEN US
INSURANCE HOLDINGS, INC.
Percentage of Notes Held: 0.91%
By: Linda B. Emory
------------------------------
Title: Secretary
22
<PAGE>
INCE & CO.
By: LIFE INSURANCE COMPANY OF
GEORGIA, as beneficial holder of the
Note for which INCE & CO. is the
registered holder as its nominee
Percentage of Notes Held: 0.91%
By: /s/ Fred C. Smith
------------------------------
Name: Fred C. Smith
Title: S.V.P. and Managing Director
THE OHIO NATIONAL LIFE INSURANCE
COMPANY
Percentage of Notes Held: 7.27%
By: /s/ Michael A. Boedeker
------------------------------
Name: Michael A. Boedeker
Title: Vice President, Fixed
Income Securities
23
<PAGE>
Accepted and agreed to effective as of the date first appearing above. The
Company hereby represents and warrants that (i) immediately prior to the
execution and delivery of this letter amendment there exists, and immediately
following the execution and delivery of the letter amendment there will
exist, no Default or Event of Default, as defined in the Note Agreement, and
(ii) immediately following the execution and delivery of this letter
amendment (but without giving effect to paragraph 5F of the Note Agreement,
as amended), the Company will not be subject to any operational or financial
covenent in any document evidencing or pertaining to Debt (as defined in the
Note Agreement) of the Company which is more favorable to a lender or other
beneficiary than those set forth in paragraph 6 of the Note Agreement (as
amended).
REGIS CORPORATION
By: /s/ Paul D. Finkelstein
------------------------------
Name: Paul D. Finkelstein
Title: President
<PAGE>
Exhibit 1A(ii)
to
Amended and Restated Credit Agreement
-------------------------------------
Subsidiaries
------------
<TABLE>
Legal Name Type Ownership
---------- ---- ---------
<S> <C> <C> <C>
Hair Programming, Inc. Restricted 100%
Regis Hairstylists, Ltd. Restricted 100%
Supercuts, Inc. Restricted 100%
Trade Secret, Inc. Restricted 100%
Selatz de Mexico, S.A. de C.V. Unrestricted 100%
Seligman & Latz de Mexico, S.A. de C.V. Unrestricted 100%
S & L de Polanco, S.A. de C.V. Unrestricted 100%
Regis Europe, Ltd. Unrestricted 99%*
Regis Mexico, S.A. Unrestricted 100%
Regis Suisse, Ltd. Unrestricted 100%
</TABLE>
- ----------------------------
* Borrower owns 9,998 shares of the 10,000 shares which are outstanding.
The two shares not controlled by Borrower are owned by two employees of
Regis Europe, Ltd.
<PAGE>
EXHIBIT 3A
TO
AMENDED AND RESTATED CREDIT AGREEMENT
REPLACEMENT REVOLVING CREDIT NOTE
$________________________ Chicago, Illinois
December 30, 1997
FOR VALUE RECEIVED, on or before October 31, 1998 (or, if such day is not
a Business Day, on the next following Business Day), the undersigned, REGIS
CORPORATION, a Minnesota corporation (herein, together with its successors
and assigns, called the "Borrower"), promises to pay to the order of
___________________, a ___________________ (herein, together with its
succesors and assigns, called the "Bank"), the maximum principal sum of
______________________ DOLLARS ($___________), or, if less, the aggregate
unpaid principal amount of all Revolving Credit Loans made by the Bank to the
undersigned pursuant to that certain Amended and Restated Credit Agreement
dated as of December 30, 1997, between the Borrower, the Lenders signatory
thereto from time to time, and LaSalle National Bank, as Agent for the
Lenders (the "Agent") (herein, as the same may be further amended, modified
or supplemented from time to time, called the "Credit Agreement"), as shown
in the Bank's records.
The Borrower further promises to pay to the order of the Bank interest on
the aggregate unpaid principal amount hereof from time to time outstanding
from the date hereof until paid in full at such rates and at such times as
shall be determined in accordance with the provisions of the Credit
Agreement. Accrued interest shall be payable on the dates specified in the
Credit Agreement.
Payments of both principal and interest are to be made in the lawful money
of the United States of America in immediately available funds at the Agent's
principal office at 135 South LaSalle Street, Chicago, Illinois 60603, for
the benefit of the Bank pursuant to the Credit Agreement, or at such other
place as may be designated by the Agent to the Borrower in writing.
This Note is the one of the Revolving Credit Notes referred to in,
evidences indebtedness incurred under, and is subject to the terms and
provisions of the Credit Agreement, including, without limitation, the
provisions in ARTICLES 2 AND 3 therein. The Credit Agreement, to which
reference is hereby made, sets forth said terms and provisions, including
those under which this Note may or must be paid prior to its due date or may
have its due date accelerated. Terms used but not otherwise defined herein
are used herein as defined in the Credit Agreement.
<PAGE>
In addition to, and not in limitation of, the foregoing and the provisions
of the Credit Agreement hereinabove referred to, the Borrower further agrees,
subject only to any limitation imposed by applicable law, to pay all
expenses, including attorneys' fees and expenses, incurred by the holder of
this Note in seeking to collect any amounts payable hereunder which are not
paid when due, whether by acceleration or otherwise.
This Note and the Replacement Revolving Credit Note of even date herewith
payable to the order of _________________________ in the maximum principal
amount of $__________________ replace in its entirety and are in substitution
for but not in payment of that certain Substitute Revolving Note dated as of
March 19, 1997 (the "Prior Note") made by Borrower in favor of LaSalle
National Bank in the maximum principal amount available of $25,000,000, and
does not and shall not be deemed to constitute a novation thereof. Such Prior
Note shall be of no further force and effect upon the execution of this Note
and the other Replacement Revolving Credit Note; PROVIDED, HOWEVER, that all
outstanding indebtedness, including, without limitation, principal and
interest, under the Prior Note as of the date of this Note is hereby deemed
indebtedness evidenced by this Note and the other Replacement Revolving
Credit Note and is incorporated herein by this reference.
All parties hereto, whether as makers, endorsers or otherwise, severally
waive presentment, demand, protest and notice of dishonor in connection with
this Note.
This Note is binding upon the undersigned and its successors and assigns,
and shall inure to the benefit of the Bank and its successors and assigns.
This Note is made under and governed by the laws of the State of Illinois
without regard to conflict of laws principles.
REGIS CORPORATION
By:_____________________________
Name:________________________
Title:_______________________
2
<PAGE>
EXHIBIT 3L(k)
TO
AMENDED AND RESTATED CREDIT AGREEMENT
EXISTING LETTERS OF CREDIT
L/C NUMBER AMOUNT MATURITY DATE BENEFICIARY
- ---------- ------ ------------- -----------
9200100572 $740,000.00 6/30/98 Employers Insurance of
Wausau
9200102007 $7,035.00 10/31/98 Union Bank of
Switzerland, Geneva
<PAGE>
EXHIBIT 4B(1)(ii)(b)
TO
AMENDED AND RESTATED CREDIT AGREEMENT
FORM OF OPINION OF BORROWER'S COUNSEL
December 30, 1997
Each of the Lenders under the
Credit Agreement referred to below
LaSalle National Bank, as Agent
for the Lenders under the
Credit Agreement referred to below
135 South LaSalle Street
Chicago, IL 60603
RE: REGIS CORPORATION
Ladies and Gentlemen:
I have acted as legal counsel to Regis Corporation (the "Borrower") in
connection with the preparation, execution and delivery of an Amended and
Restated Credit Agreement (the "Credit Agreement") dated as of December 30,
1997, by and between the Borrower, the Lenders signatory thereto from time to
time, and LaSalle National Bank, as Agent for the Lenders (the "Agent"), and
the Notes, dated December 30, 1997, payable to each of the Lenders (the
"Notes")(the Credit Agreement and the Notes are collectively referred to
herein as the "Loan Documents"). In connection with that representation, I
have examined the Articles of Incorporation and Bylaws of the Borrower and
its Subsidiaries, the corporation records of the meetings of the Board of
Directors of said corporations, the Credit Agreement, the Notes and such
other documents, records, instruments, laws and regulations, and have made
such inquiries, as I have deemed appropriate for purposes of this opinion.
Except for the signatures on behalf of the Borrower on the Credit Agreement
and the Notes, I have assumed and not independently verified that all
signatures on all signed documents are genuine. All defined terms used
herein, except as otherwise defined herein, are used with the same meaning as
defined in or used in the Credit Agreement.
<PAGE>
December 30, 1997
Page 2
Based on the foregoing, and relying thereon, I am of the opinion that
under current law:
I. Each of the Borrower and its Subsidiaries is a corporation duly
incorporated, validly existing and in good standing under the laws of its
state of incorporation, and is in good standing, duly licensed and qualified
to transact business in all jurisdictions where the character of the property
owned or leased by it or the nature of the business transacted by it makes
such licensing or qualification necessary. Each of the Borrower and its
Subsidiaries has all requisite power and authority, corporate or otherwise,
to conduct its business and to own its properties, and to execute, deliver
and perform all of its obligations under the Credit Agreement.
II. The execution, delivery and performance by the Borrower of the Loan
Documents and all documents relating to the Loan Documents have been duly
authorized by all necessary action and do not (i) require any consent or
approval of the stockholders of any entity, or any consent or approval by any
governmental entity, or any consent or approval of any party to any
indenture, instrument or agreement known to me to which the Borrower or any
of its Subsidiaries is a party or by which any of them or their property may
be bound, (ii) violate any provision of any law, rule or regulation, order or
decree presently in effect having applicability to the Borrower, (iii) to the
best of my knowledge, conflict with, result in a breach of or constitute a
default under any indenture or loan or credit agreement or any other
agreement, lease or instrument to which the Borrower or any of its
Subsidiaries is a party or by which any of them or their properties may be
bound or affected, or (iv) result in or require the creating or imposition of
any mortgage, deed or trust, pledge, lien, security interest, or other charge
or encumbrance of any nature (other than in favor of the Lenders) upon or
with respect to any of the properties now owned or hereafter acquired by the
Borrower and its Subsidiaries.
III. The Credit Agreement constitutes the legal, valid and binding
obligations of the Borrower and is enforceable against the Borrower in
accordance with its terms, subject only to the application of bankruptcy,
insolvency, moratorium, reorganization and other laws affecting creditors'
rights generally and to usual equity principles. Each of the Loan Documents
has been duly executed and delivered by the Borrower.
IV. To the best of my knowledge, there are no actions, suits or
proceedings pending or threatened against the Borrower or any of its
Subsidiaries before any court or governmental entity which, if determined
adversely to the Borrower or any of its Subsidiaries, could have a material
adverse effect on the financial condition, properties or operations of the
Borrower or any of its Subsidiaries.
<PAGE>
December 30, 1997
Page 3
V. Borrower is not an "investment company" registered or required to
be registered under the Investment Company Act of 1940, as amended, or, to
our knowledge, controlled by such a company.
VI. Borrower is not a "holding company" or a "subsidiary company" of a
"holding company" or an "affiliate" of a "holding company" within the meaning
of the Public Utility Holding Company Act of 1935, as amended.
Very truly yours,
Bert M. Gross
<PAGE>
Exhibit 4B(1)(ii)(i)
OFFSET SHARING AGREEMENT
AGREEMENT, dated as of June 21, 1994, among LaSalle National Bank
("LaSalle"), Bank Hapoalim ("Bank Hapoalim"), The Prudential Insurance
Company of America, Pruco Life Insurance Company, Life Insurance Company of
Georgia, Southland Life Insurance Company, Wisconsin National Life Insurance
Company, Associated Doctors Health and Life Insurance Company and The Ohio
Life Insurance Company (the "Institutional Investors", and together with
LaSalle and Bank Hapoalim, the "Lenders").
WHEREAS, Regis Corporation, a Minnesota corporation (the
"Company"), has previously entered into a Note Agreement with the
Institutional Investors, dated as of June 21, 1991 (the "Note Agreement")
which provided for the issuance and sale to the Institutional Investors of
Senior Notes due June 30, 1998 of the Company and in the aggregate principal
amount of $55,000,000, which Notes are in the form of Exhibit A to the
Institutional Investors Agreement (the "Institutional Investors Notes");
WHEREAS, the Company has entered into a Credit Agreement of even
date herewith with LaSalle, for itself and as agent, and Bank Hapoalim (the
"Credit Agreement"), providing for revolving loans in the maximum aggregate
amount available of $15,000,000, which loans shall be evidenced by a
revolving note in favor of each of LaSalle and Bank Hapoalim in the form of
EXHIBIT 3.1 to the Credit Agreement (the Revolving Notes; the Institutional
Investor Notes and the Revolving Notes are collectively referred to herein as
the "Lender Notes"), which Credit Agreement and Revolving Notes shall replace
the Revolving Credit Loans and Revolving Credit Agreement (as such terms are
defined in the Note Agreement) originally in effect as of the date of the
Note Agreement; and
WHEREAS, pursuant to paragraph 6(C)(2) of the Note Agreement,
LaSalle and Bank Hapoalim, along with the Institutional Investors, are
required to execute this Offset Sharing Agreement in order for the Company to
incur Debt (as defined in the Note Agreement) in the form of revolving credit
loans by LaSalle and Bank Hapoalim (the Credit Agreement and the Note
Agreement are collectively referred to herein as the "Loan Documents").
NOW, THEREFORE, in consideration of the mutual covenants herein
contained, it is hereby agreed as follows:
1. The Lenders agree among themselves that if any Lender shall
obtain payment on the indebtedness under the Lender Notes held by it through
the exercise of a right of set-off or banker's lien, or through the exercise
of any similar rights, such Lender will promptly purchase from the other
Lenders participations in (or, if and to the extent specified by such Lender,
direct interests in) the Lender Notes held by each of the other Lenders in
such amounts, and make such other adjustments from time to time as shall be
equitable, to the end that each Lender shall share the benefit of such
payment (net of any expenses which may be incurred by such Lender in
obtaining or preserving such benefit) pro rata in accordance with the unpaid
principal, interest and premium, if any, on the Lender Notes held by each
Lender, PROVIDED that
<PAGE>
if all or any portion of such payment is thereafter rescinded or must
otherwise be restored (including, without limitation, by reason of the
insolvency, bankruptcy or reorganization of the Company), the Lenders shall
make appropriate adjustments among themselves (by the resale of
participations sold or otherwise) so that the Lender which shall have shared
the benefit of such rescinded or restored payment (or portion of payment)
shall not suffer a loss by reason of sharing such benefit. The treatment as
secured claims, in a bankruptcy, reorganization or similar proceeding of the
Company, of the indebtedness under any Lender Notes because (i) any funds of
the Company shall have been on deposit in any of the Lenders or (ii) other
amounts shall have been payable to the Company by any of the Lenders or (iii)
other assets of the Company shall have been in the possession of any of the
Lenders, which treatment results in payments or distributions to any of such
Lenders on account of such indebtedness in amount or value proportionately
greater than payments or distributions on account of unsecured claims, shall
be deemed for purposes of this Agreement to be the obtaining of payment on
such indebtedness held by such Lenders through the exercise of a right of
set-off or banker's lien or through the exercise of similar rights, to the
extent of the extra amount or value received by such Lenders. Nothing in this
Agreement shall be deemed to apply to any payment, funds or other amounts
obtained by LaSalle as reimbursement for indebtedness owed to LaSalle as a
result of its functioning as a depositary bank for the Company, PROVIDED that
if the amount so obtained at any time exceeds $100,000 or is applied to
indebtedness which has been outstanding for more than five days, the Company
will promptly notify each of the Lenders other than LaSalle and Bank Hapoalim
(collectively, the "Revolving Lenders") if such reimbursement and, if not
later than ten days after receiving such notification any Lender shall
request LaSalle, on behalf of the Revolving Lenders, in writing to share such
amount under this Agreement, the amount of such reimbursement so obtained
shall be deemed for purposes of section 1 of this Agreement to be a payment
obtained by the Revolving Lenders on the indebtedness under the Revolving
Notes issued by the Company in favor of the Revolving Lenders through the
exercise of a right of set-off. So long as LaSalle has not been notified or
is otherwise unaware that a default or an Event of Default (as defined by the
Note Agreement or the Credit Agreement) has occurred and is continuing under
the Note Agreement or the Credit Agreement, the restrictions on the Revolving
Lenders made by the proviso to the preceding sentence shall not apply to
automatic debits made by LaSalle, as agent for the Revolving Lenders, under
Paragraph 4A(2) of the Credit Agreement (in the form attached hereto as
Exhibit A) and the Revolving Lenders shall not be required to share the
amount so debited.
2. THIS AGREEMENT SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE
WITH, AND THE RIGHTS OF THE PARTIES SHALL BE GOVERNED BY, THE LAW OF THE
STATE OF NEW YORK. This Agreement may not be changed orally, but only by an
instrument in writing signed by the party against whom enforcement of any
waiver, change, modification or discharge is sought.
3. This Agreement may be executed in several counterparts, each of
which shall be deemed an original but all of which shall constitute one
agreement, and will constitute a binding agreement when executed by each of
the parties hereto. It shall not be necessary that each counterpart hereof be
signed by all the parties hereto, and in making proof of this Agreement
2
<PAGE>
it shall not be necessary to produce or account for more than sufficient
counterparts hereof to evidence execution by all the parties hereto.
4. This Agreement shall be binding upon and inure to the benefit
of the successors and assigns of the parties hereto, including any
transferees of the Lender Notes, PROVIDED that any transferee of Lender
Notes shall be entitled to the benefits of this Agreement only if it or the
Company shall have given notice to any other Lender obligated hereunder that
such transferee has become a holder of Lender Notes, such notice to be given
in accordance with the notice provisions of the respective Loan Agreements.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be duly executed by their respective duly authorized officers as of the
date first above written.
LASALLE NATIONAL BANK
By: /s/ [ILLEGIBLE]
----------------------------------------
Title: Commercial Loan Officer
-------------------------------------
BANK HAPOALIM
By: /s/ John M. Orpen /s/ Michael J. Byrne
----------------------------------------
Title: VICE PRESIDENT V.P.
-------------------------------------
THE PRUDENTIAL INSURANCE COMPANY OF
AMERICA
By: /s/ P. Scott von Fischer
----------------------------------------
Title: Vice President
-------------------------------------
PRUCO LIFE INSURANCE COMPANY
By: /s/ P. Scott von Fischer
----------------------------------------
Title: Vice President
-------------------------------------
LIFE INSURANCE COMPANY OF GEORGIA
By THE INVESTMENT CENTRE, INC., its Agent
By: /s/ Fred C. Smith
----------------------------------------
Title: SENIOR VICE PRESIDENT AND
MANAGING DIRECTOR
-------------------------------------
3
<PAGE>
SOUTHLAND LIFE INSURANCE COMPANY
By: Internationale Nederlanden North America Investment
Centre, Inc., its Agent
By: /s/ Fred C. Smith
------------------------------------------------
Title: Senior Vice President and Managing Director
------------------------------------------------
INTERNATIONALE NEDERLANDEN US INSURANCE
HOLDINGS, INC.
By: Internationale Nederlanden North America Investment
Centre, Inc., its Agent
By: /s/ Fred C. Smith
------------------------------------------------
Title: Senior Vice President and Managing Director
------------------------------------------------
ASSOCIATED DOCTORS HEALTH AND LIFE
INSURANCE COMPANY
By: Internationale Nederlanden North America Investment
Centre, Inc., its Agent
By: /s/ Fred C. Smith
------------------------------------------------
Title: Senior Vice President and Managing Director
------------------------------------------------
THE OHIO NATIONAL LIFE INSURANCE COMPANY
By:
------------------------------------------------
Title:
------------------------------------------------
The undersigned hereby acknowledges and consents to the terms of
the Offset Sharing Agreement; agrees that by executing this acknowledgement
and consent, the undersigned is bound by the terms of the Offset Sharing
Agreement as they effect and determine the relative rights of the Lenders;
and the undersigned further agrees that the terms of the Offset Sharing
Agreement and the performance of such terms by the parties thereto shall not
give the undersigned any additional rights vis-a-vis any of the Lenders. The
undersigned agrees to give the notifications referred to in the proviso to
the next to last sentence of Section 1 of the Offset Sharing Agreement.
REGIS CORPORATION
By: /s/ [ILLEGIBLE]
------------------------------------------------
Title: [ILLEGIBLE]
-----------------------------------------------
4
<PAGE>
EXHIBIT A
Paragraph 4A(2) of the Credit Agreement
4A(2) AUTOMATIC DEBIT. In order to cause timely payment to be made
to Agent in accordance with PARAGRAPH 4A(1) above, for the account of the
Banks, of all Borrower's Liabilities as and when due, Borrower hereby
authorizes and directs Agent, at Agent's option, to debit the amount of such
Borrower's Liabilities to any ordinary deposit account of Borrower or by
increasing the principal balance due under the Loans.
5
<PAGE>
EXHIBIT 5A
TO
AMENDED AND RESTATED CREDIT AGREEMENT
REPLACEMENT TERM LOAN A NOTE
$10,000,000 Chicago, Illinois
December 30, 1997
FOR VALUE RECEIVED, the undersigned, REGIS CORPORATION, a Minnesota
corporation (herein, together with its successors and assigns, called the
"Borrower"), promises to pay to the order of LaSALLE NATIONAL BANK, a
national banking association (herein, together with its successors and
assigns, called the "Bank"), the principal sum of TEN MILLION DOLLARS
($10,000,000), together with interest on the unpaid principal amount of this
Note outstanding from time to time.
This Note is the Term Loan A Note referred to in, evidences indebtedness
incurred under, and is subject to the terms and provisions of, that certain
Amended and Restated Credit Agreement dated as of December 30, 1997, between
the Borrower, the Lenders signatory thereto from time to time, and LaSalle
National Bank, as Agent for the Lenders (the "Agent") (herein, as the same
may be further amended, modified or supplemented from time to time, called
the "Credit Agreement"), including, without limitation, the provisions in
ARTICLE 5 therein. The Credit Agreement, to which reference is hereby made,
sets forth said terms and provisions, including those under which this Term
Loan A Note may or must be paid prior to its due date or may have its due
date accelerated. Terms used but not otherwise defined herein are used herein
as defined in the Credit Agreement.
The Borrower further promises to pay to the order of the Bank interest on
the aggregate unpaid principal amount hereof from time to time outstanding
from the date hereof until paid in full at such rates and at such times as
shall be determined in accordance with the provisions of the Credit
Agreement. Accrued interest shall be payable on the dates specified in the
Credit Agreement.
The principal amount of the indebtedness evidenced hereby shall be
payable in installments in the amounts and on the dates specified in the
Credit Agreement and, if not sooner paid in full, on July 1, 2000.
Payments of both principal and interest are to be made in the lawful
money of the United States of America in immediately available funds at the
Bank's principal office at 135 South LaSalle Street, Chicago, Illinois 60603,
or at such other place as may be designated by the Bank to the Borrower in
writing.
<PAGE>
In addition to, and not in limitation of, the foregoing and the
provisions of the Credit Agreement hereinabove referred to, the Borrower
further agrees, subject only to any limitation imposed by applicable law, to
pay all expenses, including attorneys' fees and expenses, incurred by the
holder of this Note in seeking to collect any amounts payable hereunder which
are not paid when due, whether by acceleration or otherwise.
This Note replaces in its entirety and is in substitution for but not in
payment of that certain Term Note dated as of October 28, 1996 (the "Prior
Note") made by Borrower in favor of the Bank in the principal amount of
$10,000,000, and does not and shall not be deemed to constitute a novation
thereof. Such Prior Note shall be of no further force and effect upon the
execution of this Note; PROVIDED, HOWEVER, that all outstanding indebtedness,
including, without limitation, principal and interest, under the Prior Note
as of the date of this Note is hereby deemed indebtedness evidenced by this
Note and is incorporated herein by this reference.
All parties hereto, whether as makers, endorsers or otherwise, severally
waive presentment, demand, protest and notice of dishonor in connection with
this Note.
This Note is binding upon the undersigned and its successors and assigns,
and shall inure to the benefit of the Bank and its successors and assigns.
This Note is made under and governed by the laws of the State of Illinois
without regard to conflict of laws principles.
REGIS CORPORATION
By:
--------------------------------
Name:
---------------------------
Title:
--------------------------
2
<PAGE>
EXHIBIT 6A
TO
AMENDED AND RESTATED CREDIT AGREEMENT
REPLACEMENT TERM LOAN B NOTE
$___________________ Chicago, Illinois
December 30, 1997
FOR VALUE RECEIVED, the undersigned, REGIS CORPORATION, a Minnesota
corporation (herein, together with its successors and assigns, called the
"Borrower"), promises to pay to the order of _________________________, a
______________________ (herein, together with its successors and assigns,
called the "Bank"), the principal sum of __________________________________
DOLLARS ($_________), or such lesser principal amount as may be outstanding
pursuant to the Credit Agreement (as hereinafter defined) with respect to
Term Loan B (as defined in the Credit Agreement) made by the Bank to the
undersigned pursuant to the Credit Agreement, together with interest on the
unpaid principal amount of this Note outstanding from time to time.
This Note is one of the Term Loan B Notes referred to in, evidences
indebtedness incurred under, and is subject to the terms and provisions of,
that certain Amended and Restated Credit Agreement dated as of December 30,
1997, between the Borrower, the Lenders signatory thereto from time to time,
and LaSalle National Bank, as Agent for the Lenders (the "Agent") (herein, as
the same may be further amended, modified or supplemented from time to time,
called the "Credit Agreement"), including, without limitation, the provisions
in ARTICLE 6 therein. The Credit Agreement, to which reference is hereby
made, sets forth said terms and provisions, including those under which this
Term Loan B Note may or must be paid prior to its due date or may have its
due date accelerated. Terms used but not otherwise defined herein are used
herein as defined in the Credit Agreement.
The Borrower further promises to pay to the order of the Bank interest on
the aggregate unpaid principal amount hereof from time to time outstanding
from the date hereof until paid in full at such rates and at such times as
shall be determined in accordance with the provisions of the Credit
Agreement. Accrued interest shall be payable on the dates specified in the
Credit Agreement.
The principal amount of the indebtedness evidence hereby shall be payable
in the amounts and on the dates specified in the Credit Agreement and, if not
sooner paid in full, on December 31, 1998.
<PAGE>
Payments of both principal and interest are to be made in the lawful
money of the United States of America in immediately available funds at the
Agent's principal office at 135 South LaSalle Street, Chicago, Illinois
60603, for the benefit of the Bank pursuant to the Credit Agreement, or at
such other place as may be designated by the Agent to the Borrower in writing.
In addition to, and not in limitation of, the foregoing and the
provisions of the Credit Agreement hereinabove referred to, the Borrower
further agrees, subject only to any limitation imposed by applicable law, to
pay all expenses, including attorneys' fees and expenses, incurred by the
holder of this Note in seeking to collect any amounts payable hereunder which
are not paid when due, whether by acceleration or otherwise.
This Note and the Replacement Term Loan B Note of even date herewith
payable to the order of ____________________ in the maximum principal amount
available of $____________ replace entirely and are in substitution for but
not in payment of that certain Term B Note dated July 11, 1997 (the "Prior
Note") made by Borrower in favor of LaSalle National Bank in the maximum
principal amount of Fifteen Million Dollars ($15,000,000), and does not and
shall not be deemed to constitute a novation thereof. Such Prior Note shall
be of no further force and effect upon the execution of this Note and the
other Replacement Term Loan B Note; PROVIDED, HOWEVER, all outstanding
indebtedness, including, without limitation, principal and interest, under
the Prior Note as of the date of this Note is hereby deemed indebtedness
evidenced by this Note and the other Replacement Term Loan B Note and is
incorporated herein by this reference.
All parties hereto, whether as makers, endorsers or otherwise, severally
waive presentment, demand, protest and notice of dishonor in connection with
this Note.
This Note is binding upon the undersigned and its successors and assigns,
and shall inure to the benefit of the Bank and its successors and assigns.
This Note is made under and governed by the laws of the State of Illinois
without regard to conflict of laws principles.
REGIS CORPORATION
By:
-------------------------------
Name:
Title:
-------------------------
2
<PAGE>
EXHIBIT 9B
TO
AMENDED AND RESTATED CREDIT AGREEMENT
CONTINGENT OR OTHER OBLIGATIONS, LEASES AND COMMITMENTS
NOT REFLECTED ON FINANCIAL STATEMENTS
NONE
<PAGE>
EXHIBIT 9D
TO
AMENDED AND RESTATED CREDIT AGREEMENT
DEBT
Balance at
9/30/97
-------
REGIS - DOMESTIC
Senior Term Note $14,000,000
Prudential Private Shelf Agreement 30,000,000
LaSalle Term Note 10,000,000
National Hair Care Acquisition Debt 1,530,000
Capital Lease Obligations 461,000
Non Compete Agreements 165,000
Deferred Compensation Note 212,000
REGIS - TRADE SECRET
Shareholder Notes $2,106,000
Leda Note 246,000
Trade Name Note 529,000
Non Compete and Deferred Purchase Price Notes 300,000
REGIS - SUPERCUTS
Prudential Private Shelf Agreement $22,000,000
Prime Leasing Term Loan 3,858,000
Gary Grace Debenture 1,050,000
Capital Lease Obligations 4,767,000
Acquisition Notes 1,291,000
---------
Total Debt $92,015,000
-----------
-----------
<PAGE>
EXHIBIT 90
TO
AMENDED AND RESTATED CREDIT AGREEMENT
AFFILIATES OF BORROWER
The following sets forth the nature and terms of all continuing transactions
or agreements between the Borrower and each Restricted Subsidiary or any
Affiliate other than a Subsidiary.
Affiliate Name Description
- -------------- -----------
Curtis Squire, Inc. ARTWORK RENTAL: The company annually rents artwork from
Curtis Squire, Inc. which is housed and displayed in
the corporate home office. The annual rental charge is
approximately $120,000 which is believed to be a fair
market rental. The proceeds from the rental charge are
used to pay for the accounting service fee charged by
Regis (see discussion below).
ACCOUNTING SERVICE FEE: The company annually charges
Curtis Squire, Inc. a fee for the performance of certain
accounting services provided by Regis Corporation
employees. The fee of approximately $132,000 is believed
to be a fair market charge. As discussed above, the
charge is essentially offset by the artwork rental.
<PAGE>
EXHIBIT 9V
TO
AMENDED AND RESTATED CREDIT AGREEMENT
INSURANCE
The attached sets forth a complete and accurate description of all policies
of insurance in effect as of the date of this Agreement, as required pursuant
to Paragraph 5J(i) of the Note Agreement.
In satisfaction of Paragraph 5J(ii) of the Note Agreement, the following sets
forth certain life insurance policies of the Borrower in effect as of the
date of this Agreement with the Borrower as owner and named beneficiary:
Insured Name Insurance Death Benefit Premium Loans and Interest
- ------------ ----------------------- --------------------------
Myron D. Kunin $3,843,722 $718,897
Paul D. Finkelstein $2,851,179 $0
<PAGE>
SCHEDULE OF INSURANCE
AS OF: 8/01/97
INSURED: Regis Corporation
7201 Metro Boulevard
Minneapolis, Minnesota 55439-2103
<TABLE>
<CAPTION>
EFF. EXP.
COVERAGE DESCRIPTION COMPANY POLICY NUMBER DATE DATE
- -------------------- ------- ------------- ------- -------
<S> <C> <C> <C> <C>
Commercial Property Coverage ROYAL INDEMNITY RHT307268 7/01/97 7/01/98
Boiler and Machinery Coverage FEDERAL 78360070 7/01/97 7/01/98
Collateral Bond U.S. FIRE 6102175401 6/12/97 6/12/98
Sales Tax Bond WAUSAU INS. CO. 035021130651 8/04/97 8/04/98
Sales Tax Bond WAUSAU INS. CO. 035022130651 9/22/97 8/22/98
Sales Tax Bond WAUSAU INS. CO. 055008100348 6/09/97 6/09/98
Utility Payment Bond WAUSAU INS. CO. 055005100348 2/01/97 2/01/98
Utility Payment Bond WAUSAU INS. CO. 035009130651 8/15/97 8/15/98
Utility Payment Bond WAUSAU INS. CO. 035008130651 8/16/97 8/16/98
Utility Payment Bond WAUSAU INS. CO. 035010130651 9/01/97 9/01/98
Utility Payment Bond WAUSAU INS. CO. 035013130651 9/01/97 9/01/98
Utility Payment Bond WAUSAU INS. CO. 035023130651 9/27/97 9/27/98
Utility Payment Bond WAUSAU INS. CO. 035014130651 9/29/97 9/29/98
Utility Payment Bond WAUSAU INS. CO. 035024130651 10/04/97 10/04/98
Utility Payment Bond WAUSAU INS. CO. 035015130651 11/01/97 11/01/98
Utility Payment Bond WAUSAU INS. CO. 035025130651 11/16/97 11/16/98
Utility Payment Bond WAUSAU INS. CO. 035016130651 12/29/97 12/29/98
Utility Payment Bond WAUSAU INS. CO. 055007100348 6/01/97 6/01/98
Utility Payment Bond WAUSAU INS. CO. 055006100348 6/07/97 6/07/98
Utility Payment Bond WAUSAU INS. CO. 035020130651 7/06/97 7/06/98
Utility Payment Bond WAUSAU INS. CO. 035006130651 7/26/97 7/26/98
Executive Risk Package FEDERAL 81389654 8/15/97 8/15/98
Directors & Officers Liability FEDERAL 81389654 8/15/97 8/15/98
Outside Directorship Liability FEDERAL 81389654 8/15/97 8/15/98
Fiduciary Liability FEDERAL 81389654 8/15/97 8/15/98
Executive Risk Insurance FEDERAL 81389654 8/15/97 8/15/98
Commercial Crime Coverage FEDERAL 81389654 8/15/97 8/15/98
Business Auto Coverage WAUSAU INS. CO. 052702100821 7/01/97 7/01/98
Business Auto Coverage WAUSAU INS. CO. 052703100821 7/01/97 7/01/98
Business Auto Coverage WAUSAU INS. CO. 052704100821 7/01/97 7/01/98
Business Auto Coverage WAUSAU INS. CO. 272700021903 7/01/97 7/01/98
Commercial General Liability ATLANTIC MUTUAL INS. 299500859 7/01/97 7/01/98
Commercial General Liability CENTENNIAL INS. 96002010 7/01/97 7/01/98
Foreign Property Coverage SEGUROS COMMERCIAL AMER NX101725 7/01/97 7/01/98
Foreign Property Coverage SEGUROS COMMERCIAL AMER LX100551 7/01/97 7/01/98
Foreign Property Coverage INS. CO ST OF PA 08002633423 9/01/97 9/01/98
Workers Compensation Coverage Wausau Insurance Co. 051702100821 7/01/97 7/01/98
Workers Compensation Coverage Wausau Insurance Co. 051700100821 7/01/97 7/01/98
Employers Liability Coverage Wausau Insurance Co. 271700021903 7/01/97 7/01/98
Aggregate Stop Loss Wausau Insurance Co. 052700100821 7/01/97 7/01/98
Statutory Disability Coverage TDIH10365 11/01/97 99/99/99
Statutory Disability Coverage ZURICH American Ins. 1595143001 1/01/97 99/99/99
Commercial Umbrella Cov. (Simp) FEDERAL 9779738148 7/01/97 7/01/98
Excess Umbrella Coverage CRUM & FORSTER 5520041685 7/01/97 7/01/98
Excess Umbrella Coverage FIREMAN'S FUND-UMB POL XXK82786708 7/01/97 7/01/98
</TABLE>
<PAGE>
EXHIBIT 9W
TO
AMENDED AND RESTATED CREDIT AGREEMENT
ASSUMED CORPORATE NAMES OF BORROWER
NONE
<PAGE>
Exhibit 15
LETTER RE: UNAUDITED INTERIM FINANCIAL INFORMATION
Securities and Exchange Commission
450 Fifth Street, North West
Washington, D.C. 20549
RE: Regis Corporation
Registrations on Form S-8
(File No. 33-44867, No. 33-89882)
Registration on Form S-4
(File No. 333-12099)
Registrations on Form S-3
(File No. 333-28511, No. 33-82094,
No. 33-86276, No. 33-89150,
No. 33-92244, No. 33-96224 and
No. 33-80337)
We are aware that our report dated January 22, 1998, on our reviews of the
interim financial information of Regis Corporation as of December 31, 1997 and
for the three and six month periods ended December 31, 1997 and 1996, and
included in the Company's quarterly report on Form 10-Q for the quarter ended
December 31, 1997, is incorporated by reference in these registration
statements. Pursuant to Rule 436 (C) under the Securities Act of 1933, this
report should not be considered a part of such registration statements prepared
or certified by us within the meaning of Sections 7 and 11 of that Act.
/s/ Coopers & Lybrand L.L.P.
Coopers & Lybrand L.L.P.
Minneapolis, MN
February 9, 1998
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE SECOND
QUARTER BALANCE SHEET AND INCOME STATEMENT
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-START> JUL-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 10,845
<SECURITIES> 0
<RECEIVABLES> 13,827
<ALLOWANCES> 57
<INVENTORY> 42,232
<CURRENT-ASSETS> 83,289
<PP&E> 286,532
<DEPRECIATION> 127,567
<TOTAL-ASSETS> 349,485
<CURRENT-LIABILITIES> 95,271
<BONDS> 0
0
0
<COMMON> 1,168
<OTHER-SE> 161,356
<TOTAL-LIABILITY-AND-EQUITY> 349,485
<SALES> 110,152
<TOTAL-REVENUES> 387,633
<CGS> 60,422
<TOTAL-COSTS> 310,615
<OTHER-EXPENSES> 7,037
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,887
<INCOME-PRETAX> 23,513
<INCOME-TAX> 9,760
<INCOME-CONTINUING> 13,753
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 13,753
<EPS-PRIMARY> .59<F1>
<EPS-DILUTED> .57
<FN>
<F1>REFLECTS BASIC EPS ACCORDING TO THE NEW ACCOUNTING PRONOUNCEMENT ON EPS.
</FN>
</TABLE>
