<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark one)
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X Annual Report Pursuant to Section 13 or 15(d) of
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the Securities Exchange Act of 1934
For the fiscal year ended January 29, 1994
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Transition Report Pursuant to Section 13 or 15 (d)
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of the Securities Exchange Act of 1934
For the Transition Period From ________ to ________
Commission File Number 0-12497
DAIRY MART CONVENIENCE STORES, INC.
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(Exact name of registrant as specified in its charter)
Delaware 04-2497894
- - ------------------------------- ------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
ONE VISION DRIVE, ENFIELD, CT 06082
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(Address of principal executive offices)
Registrant's telephone number, including area code (203) 741-4444
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Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
None None
Securities registered pursuant to Section 12(g) of the Act:
Class A Common Stock (Par Value $.01)
Class B Common Stock (Par Value $.01)
(Title of class)
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
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Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
As of April 1, 1994, 2,747,104 shares of Class A Common Stock and 2,780,058
shares of Class B Common Stock were outstanding, and the aggregate market value
of both classes of Common Stock outstanding of DAIRY MART CONVENIENCE STORES,
INC., held by nonaffiliates was approximately $23,700,000.
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DOCUMENTS INCORPORATED BY REFERENCE
-----------------------------------
Portions of the Registrant's 1994 definitive proxy statement to be filed
pursuant to Regulation 14A within 120 days after the end of Registrant's fiscal
year are incorporated by reference in Part III.
PART I
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ITEM 1. BUSINESS
GENERAL
Dairy Mart Convenience Stores, Inc., and its subsidiaries (the "Company"
or "Dairy Mart"), operates one of the nation's largest convenience store
chains. Founded in 1957, the Company operates or franchises approximately
1,000 stores under the "Dairy Mart" name in 11 states located in the
Northeast, Midwest and Southeast. Approximately 420 stores sell gasoline and
approximately 335 stores are franchised. The Company also manufactures,
processes and distributes certain dairy and other products.
Dairy Mart stores offer a wide range of products and services which cater
to the convenience needs of its customers, including milk, ice cream,
groceries, beverages, snack foods, candy, deli products, publications, health
and beauty aids, tobacco products, lottery tickets and money orders. The
stores are typically located in densely populated, suburban areas on sites
which are easily accessible to customers and provide ample parking. Dairy Mart
stores are generally free standing structures which are well-lit and are
designed to encourage customers to purchase high profit margin products, such
as deli items, coffee, fountain drinks and other fast food items.
The Company's facilities in Enfield, Connecticut and Cuyahoga Falls, Ohio
manufacture and process milk, fruit juices, and other non-carbonated beverages
which are distributed to stores in the Northeast and the Midwest regions. The
dairy plant in Ohio manufactures and distributes ice cream to most stores. In
the Southeast region, the Company distributes dairy products, tobacco
products, candy and certain other merchandise to stores in Kentucky and
Indiana.
The Company's primary growth strategy is to increase its retail gasoline
presence. As a result, almost all of the stores recently opened by the Company
are retail units, known as "super pumper" stores, which have approximately
four times the gasoline retailing capacity and a significantly larger in-store
size than the Company's traditional convenience stores. The Company plans to
open approximately 20 new super pumper stores in the fiscal year ending
January 28, 1995 and approximately 30 new super pumper stores per year
thereafter for the foreseeable future.
The Company is incorporated in Delaware and maintains its principal
executive offices at One Vision Drive, Enfield, Connecticut 06082. The
Company's telephone number is (203) 741-4444.
STORES
The Company's stores are generally located in densely populated suburban
areas, and are situated close to single-family homes and apartments to attract
neighborhood shoppers. Store location, design, lighting and layout are
intended to cater to customers' desire for fast and convenient access.
Approximately
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420 locations also sell gasoline, which the Company believes is an important
convenience for customers. Shelving and displays, including refrigeration
units, deli and other fast food counters and displays, are designed to
encourage customers to purchase high profit margin products including impulse
purchase items such as candy, fountain drinks and ice cream novelties. Stores
are located on sites which are well-lit, easily accessible by customers and
provide ample parking. All of the Company's stores also offer extended hours
for additional convenience, with over one-half of the stores open 24 hours per
day. A traditional Dairy Mart store is typically 2,400 square feet and most
are free standing structures.
As of January 29, 1994, the Company operated and franchised retail
convenience stores in the following three regions of the United States:
<TABLE>
<CAPTION>
NUMBER OF
NORTHEAST REGION STORES
---------
<S> <C>
Massachusetts.............................................. 73
Connecticut................................................ 67
New York................................................... 37
Rhode Island............................................... 25
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Total Northeast Stores................................ 202
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MIDWEST REGION
Ohio....................................................... 518
Michigan................................................... 49
Pennsylvania............................................... 41
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Total Midwest Stores.................................. 608
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SOUTHEAST REGION
Kentucky................................................... 169
Indiana.................................................... 18
Tennessee.................................................. 14
North Carolina............................................. 11
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Total Southeast Stores................................ 212
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Total Stores...................................... 1,022
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</TABLE>
SUPER PUMPER STORES
Super pumper stores are an important part of the Company's strategy to
expand and increase its profitability. Super pumper stores have approximately
four times the gasoline retailing capacity of traditional gasoline convenience
stores. Generally 2,700 square feet, super pumper stores are significantly
larger than the Company's traditional convenience stores. The stores are
designed to devote a greater amount of space to fast food counters, deli areas
and refrigeration display units which attract customers to high profit margin
products such as fountain drinks and fresh made sandwiches. Super pumper stores
are generally located at high-traffic intersections to provide convenient access
to customers, and all have
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canopies to shield gasoline customers from inclement weather. As of January 29,
1994, the Company had 34 super pumper stores, a majority of which have been
opened since February, 1992 and all of which have been opened since the
beginning of fiscal 1990.
UPGRADING EXISTING STORE BASE
Over the next four fiscal years, the Company plans to upgrade and remodel
up to 400 stores in order to modernize the stores' look, upgrade their
equipment and increase the space devoted to higher profit margin items, such
as fountain drinks and fast food and deli items. Management expects that this
remodeling program will favorably impact the amount of maintenance capital
expenditures required on its existing store base due to the installation of
newer, more reliable equipment. The Company also intends to convert
approximately 40 traditional gasoline convenience stores to super pumper
status over the same period. Stores recently upgraded to super pumper status
have shown significantly higher inside store and gasoline sales.
CLOSING UNDER PERFORMING STORES
The Company continually evaluates the performance of each of its stores in
order to identify actions aimed at improving the Company's overall
profitability. Based upon these evaluations, the Company continues to sell or
close certain under performing stores. The Company considers various factors in
deciding to sell or close stores, including store location, lease term, rental
and other obligations and store performance. Sales or closures of stores, while
reducing revenues, generally do not have an adverse effect on overall results,
since a majority of such stores operate at a loss. The Company sold or closed
approximately 60 stores in fiscal 1994.
GASOLINE OPERATIONS
A major part of the Company's growth strategy is to continue to increase
its level of gasoline sales. This strategy enables the Company to
significantly increase a store's total level of sales without a commensurate
increase in overhead. The Company believes that the sale of gasoline at its
stores offers a significant competitive advantage and that customers value
this additional convenience. Gasoline sales accounted for approximately 37% of
total revenues of the Company for each of the past three fiscal years. As of
January 29, 1994, 419 stores sold gasoline. Financial information related to
the Company's gasoline operations for the last three fiscal years is set forth
in Note 9 to the Consolidated Financial Statements on page F-15.
The Company's gasoline pricing strategy is designed, in part, to provide
value to customers by offering the same quality gasoline offered by major oil
companies at prices which are generally below nationally advertised brands and
comparable to other convenience store chains. The Company obtains its gasoline
from major oil company suppliers, primarily through spot market purchases, and
believes that there are adequate supplies of fuel available from a number of
sources at competitive prices.
Gasoline profit margins have an impact on the Company's income. Such
profit margins could be adversely influenced by factors beyond the Company's
control, such as volatility in the wholesale gasoline market due to supply
interruptions. In addition, gasoline profit margins are continually influenced
by competition in each local market area. Substantial decreases in gasoline
profit margins, or the volume of gasoline sold, may have an adverse impact on
the Company's earnings.
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PRODUCT SELECTION
All stores generally offer more than 3,000 food and non-food items limited
to a few, well-known brand names as well as the Company's private label
products. Most of these items would typically be offered in supermarkets. Food
items include a wide variety of products, including canned foods and groceries,
dairy products, beverages, snack items, candy, baked goods and food service
items, such as fountain soft drinks, coffee, hot dogs, deli meats and deli
sandwiches and similar foods. Non-food products and services include gasoline,
cigarettes, health and beauty aids, publications, lottery tickets and money
orders. In addition to selling well-known brand name products, the stores offer
many products that bear the "Dairy Mart" private label, including milk, bakery
products, juices and other non-carbonated beverages, ice cream and other dairy
products such as dips and cheeses.
In recent years, the Company has been altering the mix of products to
emphasize the sale of items carrying higher profit margins. Central to these
efforts has been the Company's installation of fast food counters, the "Hot Dog
Central" program which includes hot dog grills and related equipment and/or deli
areas in approximately 500 stores over the last three fiscal years. Fast food
items not only carry higher profit margins but also tend to lead to the purchase
of other high profit margin products and impulse items, including salty-snacks,
candy and beverages. Dairy Mart has introduced a number of new private label
products, including ice cream products and juices, which generally carry a
higher gross profit margin than the Company's average gross profit margin on
comparable products. These private label products include Dairy Mart's "Party
Time" (R) and "Special Occasion" (R) ice cream.
POS SYSTEM
The Company has initiated a program to install a Point-of-Sale (POS) system
in all stores within three years. The Company anticipates that, upon completion
of this program, each store will be equipped with a scanner and with a dedicated
personal computer, into which sales, inventory and other data will be input at
scheduled daily intervals, and then automatically transmitted to the Company's
headquarters. The Company believes that the POS system will: (i) provide more
accurate and timely information regarding store operations, including sales and
merchandising, and inventory levels and composition; (ii) reduce paperwork for
store managers, thereby allowing them to spend more time interacting with
customers and improving operations; (iii) decrease administrative overhead,
since the input and verification of data will be automated at both the store and
office level; and (iv) improve verification of product costs and retail pricing.
The cost of the POS system, including new cash registers and personal computers,
is currently estimated to be approximately $7.0 million to $9.0 million, and is
anticipated to be funded by third-party equipment financing. The Company
believes it will be among the first of the larger convenience store chains to
implement a chain-wide POS system.
MANUFACTURING AND DISTRIBUTION OPERATIONS
The Company supplies its stores and most franchised stores through a
product distribution system which includes the Company's own manufacturing,
distribution and processing facilities, and other distributors. Through its
manufacturing, processing and distribution facilities in Connecticut and Ohio,
the Company supplies all of the milk and a substantial portion of the ice cream,
juices and non-carbonated beverages for the stores in the Northeast and the
Midwest. Many other products which are not produced by the Company are supplied
to the Northeast and Midwest regions by one wholesale distributor under a ten-
year contract entered into in February, 1988. The Company supplies the Southeast
region stores in large part through its 35,000 square foot distribution facility
located in Louisville, Kentucky.
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In fiscal 1993, the Company reversed a prior policy and began to actively
market its excess manufacturing and processing capacity to third parties, such
as wholesalers and supermarkets. These efforts have resulted in a wholesale
arrangement with a regional brand name ice cream distributor which has more
than doubled the utilization of the Company's ice cream production capacity
since the beginning of fiscal 1993. To accommodate additional growth in the sale
of ice cream to third party purchasers, the Company invested approximately $1.4
million to further enhance product quality and to improve the efficiency and
capacity of its ice cream production. The Company also intends to continue to
pursue sales to third parties of other products produced at its manufacturing
and processing facilities.
FRANCHISE OPERATIONS
The Company franchises approximately 335 stores throughout its three
geographic regions. Franchise stores generally follow the same operating
policies as Company stores, and are subject to Company supervision under
franchise agreements. Company operated and franchise stores are of the same
basic store design and sell substantially the same products. The Company
currently franchises only existing stores. Most franchisees purchase milk, ice
cream, dairy products, fruit juices and other non-carbonated beverages
distributed by the Company and generally purchase other products through the
same suppliers used by the Company.
The Company offers two types of franchising arrangements- the "full"
franchise and the "limited" franchise. Under a full franchise agreement, the
franchisee purchases and owns both the merchandise inventory and the equipment
located in the store, and leases or subleases the store from the Company. Under
a limited franchise agreement, the franchisee owns only the merchandise
inventory while the Company retains ownership of the store equipment. Franchise
fees are higher for limited franchisees. As of January 29, 1994, there were 161
full franchise locations and 174 limited franchise locations.
The Company has recently revised its franchising strategy in order to: (i)
improve the level of retail experience of its new franchisees; and (ii) increase
the level of financial commitment by new franchisees. As part of this strategy,
new franchisees are now required to undergo more rigorous and thorough
interviews and background checks, receive increased levels of financial and
retail training, and typically make larger initial cash payments.
The following table sets forth the number of stores, on both a Company
operated and franchise operated basis, that were opened or acquired, closed or
sold, and transferred between Company operated and franchise operated, during
the last three fiscal years:
<TABLE>
<CAPTION>
January 29, 1994 January 30, 1993 February 2, 1992
----------------------------- ----------------------------- -----------------------------
Company Franchise Company Franchise Company Franchise
Operated Operated Total Operated Operated Total Operated Operated Total
--------- ---------- ------ --------- ---------- ------ --------- ---------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
At beginning of period.... 709 370 1,079 685 449 1,134 725 465 1,190
Opened or acquired........ 4 -- 4 6 -- 6 6 -- 6
Closed or sold............ (50) (11) (61) (34) (27) (61) (48) (14) (62)
Transferred (net)......... 24 (24) -- 52 (52) -- 2 (2) --
--- --- ----- --- --- ----- --- --- -----
At end of period.......... 687 335 1,022 709 370 1,079 685 449 1,134
=== === ===== === === ===== === === =====
</TABLE>
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INTERNATIONAL OPERATIONS
The Company conducts business outside the United States as a joint-
venturer, licensor or consultant. Currently, the Company is a party to two
agreements with convenience store operators in South Korea and Mexico, and
continues to pursue similar arrangements in other countries. As with the
Company's prior international arrangements, both such agreements require a
specified commitment of Company personnel, but do not require any significant
commitment of capital.
ADVERTISING
To promote a uniform image for all stores, the Company designs and
coordinates advertising for all stores to complement its marketing strategy,
which is derived, in part, from market surveys and research. Largely in response
to such research, the Company launched a new advertising program entitled "Close
to Home" which emphasizes the high percentage of neighborhood locations
throughout Dairy Mart's operating regions. In-store, newspaper, and direct-mail
advertising, special promotions and seasonal radio and television advertising
usually feature certain items which can be purchased at the stores, and
frequently include national brand items for which advertising costs are often
supplemented by the national brand suppliers. Sales promotions are generally
established and maintained on a bi-weekly or monthly basis.
COMPETITION
The convenience store and retail gasoline industries are highly
competitive. The number and type of competitors vary by location. The Company
presently competes with other convenience stores, large integrated gasoline
service station operators, supermarket chains, neighborhood grocery stores,
independent gasoline service stations, fast food operations and other similar
retail outlets, some of which are well recognized national or regional retail
chains. Some of the Company's competitors have greater financial resources than
the Company. Key competitive factors include, among others, location, ease of
access, store management, product selection, pricing, hours of operation, store
safety, cleanliness, product promotions and marketing.
SEASONALITY
Weather conditions have a significant effect on the Company's sales, as
convenience store customers are more likely to go to stores to purchase
convenience goods and services, particularly higher profit margin items such as
fast food items, fountain drinks and other beverages, when weather conditions
are favorable. Accordingly, the Company's stores generally experience higher
revenues and profit margins during the warmer weather months, which fall within
the Company's second and third fiscal quarters.
EMPLOYEES
As of January 29, 1994, exclusive of franchisees and franchisees'
employees, the Company employed, on a full-time or part-time basis,
approximately 5,000 employees.
ENVIRONMENTAL COMPLIANCE
The Company incurs ongoing costs to comply with federal, state and local
environmental laws and regulations, including costs for assessment, compliance,
remediation and certain capital expenditures
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relating to its gasoline operations. These laws and regulations relate primarily
to underground storage tanks ("USTs"). The United States Environmental
Protection Agency has established standards for, among other things: (i)
maintaining leak detection; (ii) upgrading UST systems; (iii) taking corrective
action in response to releases; (iv) closing USTs to prevent future releases;
(v) keeping appropriate records; and (vi) maintaining evidence of financial
responsibility for taking corrective action and compensating third parties for
bodily injury and property damage resulting from releases. A number of states in
which the Company operates also have adopted UST regulatory programs.
In the ordinary course of business, the Company periodically detects
releases of gasoline or other regulated substances from USTs it owns or
operates. As part of its program to manage USTs, the Company is involved in
environmental assessment and remediation activities with respect to releases of
regulated substances from its existing and previously operated retail gasoline
facilities. The Company accrues its estimates of all costs to be incurred for
assessment and remediation for known releases. These accruals are adjusted if
and when new information becomes known. Additionally, the Company records as
receivables the expected reimbursements of a portion of the total costs from
various state environmental trust funds which have provisions for sharing or
reimbursing certain costs incurred by UST owners or operators based upon
compliance with the terms and conditions of such funds. Due to the nature of
such releases, the actual costs of assessment and remediation activities may
vary significantly from year to year.
Under current federal and state regulatory programs, the Company also will
be obligated by December 22, 1998 to upgrade or replace most existing USTs it
owns or operates to meet certain corrosion-, overfill- and spill-protection and
leak-detection requirements. The Company currently is evaluating each site on an
individual basis to determine the type of expenditures required to comply with
these and other requirements under the federal and state UST regulatory
programs.
In addition to ongoing assessment and remediation costs, the Company
presently estimates that it will be required to make capital expenditures,
including those requiring upgrading or replacing of existing USTs, ranging from
approximately $16.0 million to $20.0 million in the aggregate over the next five
fiscal years to comply with current federal and state UST regulations, which
capital expenditures could be reduced for locations (especially low volume
locations) which may be closed in lieu of the capital costs of compliance.
The Company's estimates of costs to be incurred for environmental
assessment and remediation and for UST upgrading and other regulatory compliance
are based on factors and assumptions that could change due to modifications of
regulatory requirements, detection of unanticipated environmental conditions, or
other unexpected circumstances. As a result, the actual costs incurred may vary
significantly from the estimates noted above.
RECENT DEVELOPMENTS
SALE OF SENIOR SUBORDINATED NOTES
On March 3, 1994, the Company issued $75 million of 10.25% Senior
Subordinated Notes due 2004 (the "Notes") through a public offering underwritten
by Bear, Stearns & Co., Inc. (the "Underwriter").
The Company used part of the net proceeds from the sale of the Notes: (1)
to repay the entire indebtedness outstanding of approximately $34.0 million
under the Company's credit agreement with
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Chemical Bank (as successor to Manufacturers Hanover Trust Company) as agent
lender, along with other lenders party thereto, dated as of January 9, 1991, as
amended (the "Existing Credit Agreement"); and (2) to redeem all of the
Company's outstanding 14.25% Subordinated Debentures Due 2000 ("Subordinated
Debentures") in the aggregate principal amount of $27.9 million, which amount
includes a premium for early redemption, and which redemption was completed on
April 4, 1994. The net proceeds of the sale of the Notes remaining after the
payment of the indebtedness under the Existing Credit Agreement, the redemption
of the Subordinated Debentures, the payment of the Underwriter's discount, and
the payment of fees and expenses was approximately $11.0 million and will be
used for working capital and general corporate purposes.
In connection with the above transaction, the Company entered into a senior
revolving credit facility with Fleet Bank, National Association ("Fleet") and
Society National Bank ("Society") (the "New Credit Agreement"). The New Credit
Agreement provides for the availability of up to $30.0 million in revolving
credit loans reduced by letters of credit not to exceed $15.0 million in the
aggregate. All outstanding indebtedness, if any, under the New Credit Agreement
will be due and payable in full on March 1, 1997; however, provided no default
exists under the New Credit Agreement, the Company may extend such due date for
up to two additional one-year periods, with the consent of the lenders.
All amounts outstanding under the New Credit Agreement are secured by the
pledge of all of the outstanding capital stock of most of the Company's direct
and indirect subsidiaries, and by amounts payable to the Company which arise by,
from, or were created by, loans or other extensions of credit by the Company to
any of its subsidiaries. Loans under the New Credit Agreement will generally
bear interest, at the Company's option, at the per annum rate of either (1)
0.25% above Fleet's then current prime rate and/or (2) from 2.00% to 2.50% above
LIBOR.
ITEM 2. PROPERTIES
Of the 1,022 stores in operation as of January 29, 1994, 123 store
locations were owned by the Company and 899 were leased. In addition, the
Company owns 15 locations and is the primary lessee for 72 locations not
currently operated as Dairy Mart stores. The Company's policy is to endeavor to
lease or sublease such locations to third parties.
The Company owns its corporate headquarters facility in Enfield,
Connecticut. This facility is approximately 77,000 square feet and is located on
eighty-eight acres of land. The Company also owns its Northeast region operating
office building and manufacturing and processing plant located in a 33,000
square foot building, and its 200,000 square foot Midwest processing plant and
regional administrative office located in Cuyahoga Falls, Ohio. The Company
leases administrative offices for its Southeast regional offices and leases a
warehouse facility in Louisville, Kentucky.
ITEM 3. LEGAL PROCEEDINGS
In the ordinary course of business, the Company is party to various legal
actions which the Company believes are routine in nature and incidental to the
operation of its business. The Company believes that the outcome of the
proceedings to which the Company currently is party will not have a material
adverse effect upon its results of operations or financial condition.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of security holders during the
fourth quarter of fiscal 1994.
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PART II
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ITEM 5. MARKET INFORMATION FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
The Company is limited in the amount of cash dividends that it may pay and
the amount of capital stock and subordinated indebtedness that it may repurchase
by applicable covenants contained in the New Credit Agreement and Notes. As of
January 29, 1994, taking into account such limitations, the Company would have
been able to pay approximately $1,100,000 in cash dividends in the aggregate.
The Company has not paid any cash dividends during the last two fiscal years.
Both classes of the Company's common stock are traded in the over-the-
counter market and are listed for quotation on the National Association of
Securities Dealers (NASDAQ), National Market System (NMS). The following table
sets forth the high and low sales prices per share of the Company's Common Stock
as quoted on the NASDAQ, NMS for the last two fiscal years.
<TABLE>
<CAPTION>
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Class A Class B
Common Common
Stock Stock
---------------------------------
High Low High Low
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Fiscal Year Ended January 29, 1994:
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<S> <C> <C> <C> <C>
First Quarter 6 4 1/2 6 3/4 4 3/4
Second Quarter 5 7/8 4 3/8 6 3/8 4 11/16
Third Quarter 6 7/8 5 1/2 6 3/4 5 5/8
Fourth Quarter 7 5 3/4 7 1/2 5 3/4
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Fiscal Year Ended January 30, 1993:
- - ----------------------------------------------------------------------
First Quarter 11 7 1/4 10 3/4 7
Second Quarter 8 7/8 6 1/4 9 1/4 7
Third Quarter 6 7/8 5 3/8 8 1/4 5 3/4
Fourth Quarter 6 1/2 5 1/8 7 1/2 6
- - ----------------------------------------------------------------------
</TABLE>
There were approximately 2,800 stockholders as of January 29, 1994. Included in
this number are shares held in nominee or street names.
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ITEM 6. SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
Five Year Summary Dairy Mart Convenience Stores, Inc. and Subsidiaries
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Five Years Ended January 29, 1994
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1994 (a) 1993 (b) 1992 1991 1990
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(in thousands, except per share amounts)
<S> <C> <C> <C> <C> <C>
Operating Results:
Net Sales of the Company, Its Subsidiaries and Franchises.....................$ 760,551 $ 773,766 $ 794,758 $ 807,586 $ 741,183
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Revenues...................................................................... 590,751 578,767 571,980 586,984 535,640
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Earnings Before Interest Expense, Income Taxes, Depreciation,
and Amortization (EBITDA)..................................................... 23,646 16,323 28,852 28,526 21,533
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Interest Expense.............................................................. 7,644 7,456 8,260 8,366 8,220
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Income (Loss) Before Income Taxes, Extraordinary Item and Cumulative Effect of
Accounting Change............................................................. 3,102 (4,797) 7,021 6,802 1,259
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Net Income (Loss)............................................................. 866 (6,850) 4,092 3,813 682
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Earnings (Loss) Per Share:
Before extraordinary item and cumulative effect of accounting change..... .33 (.53) .75 .72 .13
Net earnings (loss) per share............................................ .16 (1.26) .75 .72 .13
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Cash Dividends Paid Per Share................................................. - - - - .02
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Balance Sheet Data:
Net Property and Equipment................................................... $ 92,014 $ 90,643 $ 82,974 $ 81,399 $ 68,227
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Total Assets................................................................. 169,442 175,178 165,555 165,068 149,109
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Long-Term Debt Including Capital Lease Obligations (c)....................... 77,343 81,035 79,119 78,576 66,703
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Stockholders' Equity......................................................... 33,870 32,732 39,100 34,842 30,966
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</TABLE>
(a) Fiscal 1994 includes an extraordinary loss on extinguishment of debt of
$928,000, net of related income tax benefit (see Note 4 of Notes to
Consolidated Financial Statements).
(b) Fiscal 1993 includes the cumulative effect of a change in accounting for
income taxes of $3,951,000 (see Note 6 of Notes to Consolidated Financial
Statements) and a nonrecurring pretax charge for restructuring of
$5,200,000 (see Note 12 of Notes to Consolidated Financial Statements).
(c) Long-term debt including capital lease obligations includes the current
portion of long-term debt and capital lease obligations.
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
The Company generates substantial operating cash flow since most of its
revenues are received in cash. Currently, the amount of cash generated from
operations significantly exceeds all of the current debt service requirements of
the Company's long-term debt and capital lease obligations. The capital
expenditures of the Company are primarily funded by the excess cash flow
available after debt service, but may also be funded using mortgage and
equipment financing. Additionally, the Company has a revolving line of credit
available to address the seasonality of operations and the timing of certain
working capital disbursements. For the fiscal year ended January 29, 1994, the
cash flow from operations available after meeting all of the Company's debt
service requirements was insufficient to fund total capital expenditures due in
large part to payments made related to nonrecurring restructuring expenses (as
described below). As a result, the Company obtained new mortgage and equipment
financing.
During the fiscal year ended January 29, 1994, the Company paid its trade
payables in an average of 24 days, which compares to 23 days for the fiscal year
ended January 30, 1993 and 24 days for the fiscal year ended February 1, 1992.
The cash flow of the Company is also favorably impacted by the Company's use of
funds from the sale of money orders, pending weekly remittance of such funds to
the issuer of the money orders. The amount due the issuer each week varies,
depending on the volume and dollar values of money orders issued. At January 29,
1994 and January 30, 1993, $6.2 million and $6.0 million, respectively, were due
the issuer. The Company's remittance obligation to the issuer of the money
orders is primarily secured by an outstanding letter of credit in the amount of
$6.5 million.
During the current fiscal year, cash generated by operations was $1.6
million lower than the prior fiscal year. This decrease resulted from the
payment in fiscal 1994 of $4.8 million in expenditures (which were accrued in
fiscal 1993) related to severance, relocation and other personnel related costs
associated with the Company's restructuring, which involved the downsizing and
consolidation of three administrative offices into a new corporate headquarters
facility in Enfield, Connecticut. The majority of these nonrecurring payments
have been made in fiscal 1994. Partially offsetting the effect of the
nonrecurring restructuring payments was the increase in earnings in the current
fiscal year. See "Results of Operations."
Cash used by the Company's investing activities was $6.2 million lower in
the current fiscal year as compared to the prior fiscal year, primarily as a
result of the fiscal 1993 purchase of the new corporate headquarters facility.
The Company continues to develop new stores and remodel existing locations, the
capital expenditures for which are being financed primarily by cash generated
from operations and mortgage and equipment financing. In addition, in order to
accelerate the development of new super pumper stores, the Company may sell and
leaseback certain of its existing super pumper locations and may in the future
lease, or sell and leaseback, the real estate of new super pumper locations.
Additionally, the Company estimates that future capital expenditure requirements
to comply with federal and state underground gasoline storage tank regulations
will be approximately $16.0 million to $20.0 million in the aggregate through
December, 1998, which cost could be reduced for locations (especially low volume
locations) which may be closed in lieu of the capital costs of compliance. The
Company has also initiated a program to install in all stores within three years
a point-of-sale (POS) system designed to provide more accurate and timely
information regarding store operations and to decrease administrative overhead.
The cost of the POS system, including new cash registers and personal computers,
is currently estimated to be approximately $7.0 million to $9.0 million, and is
anticipated to be funded by equipment financing. The ultimate amount of
discretionary capital expenditures that the Company will incur in the future
will be determined by the available sources of funds, including, but not limited
to, those described above.
-12-
<PAGE>
During the past three fiscal years, the total number of store locations has
fluctuated as follows:
<TABLE>
<CAPTION>
1994 1993 1992
------------------------------------------------------
<S> <C> <C> <C>
Number of stores:
At beginning of year........... 1,079 1,134 1,190
Opened or acquired
during year................... 4 6 6
Closed or sold during
year.......................... (61) (61) (62)
------------------------------------------------------
At end of year................. 1,022 1,079 1,134
------------------------------------------------------
</TABLE>
The decrease in the overall number of stores is due to the continual closing
and/or sale of locations whose performance was deemed to be inadequate, which
closings generally occur at the expiration of their lease terms in order to
minimize the cost to close.
Subsequent to year end, the Company issued $75.0 million principal amount
of 10.25% senior subordinated notes (the "Notes") due March 15, 2004 (see Note 4
to Consolidated Financial Statements). The proceeds from the sale of the Notes,
net of estimated offering expenses of $2.6 million, were used to repay the
entire outstanding indebtedness under a previous bank term loan and a bank
revolving loan and to redeem in full the Company's 14.25% subordinated
debentures. Excess proceeds of approximately $11.0 million realized from the
sale of the Notes will provide funds for general corporate and working capital
purposes. The Company issued the Notes in order to facilitate future growth and
to improve the Company's financial and operating flexibility by significantly
reducing the Company's near-term debt amortization requirements. The Company's
maturities on long-term debt for the next five fiscal years, based on the debt
structure in place as of January 29, 1994, as well as after giving effect to the
sale of the Notes and the application of the proceeds therefrom are as follows:
<TABLE>
<CAPTION>
AS OF 1-29-94
------------------------------
ACTUAL
FISCAL AS
YEAR ACTUAL ADJUSTED
--------- ------------- -------------
<S> <C> <C>
1995................. $ 8,071,000 $3,071,000/a/
1996................. 17,996,000 1,746,000
1997................. 22,160,000 810,000
1998................. 6,038,000 788,000
1999................. 6,860,000 1,610,000
------------ ----------
TOTAL................ $61,125,000 $8,025,000
============ ==========
</TABLE>
- - -----------
/a/ Includes $2.0 million paid on February 28, 1994 under the terms of the
Company's previous credit facility.
-13-
<PAGE>
In addition to cash flow from operations, potential mortgage, equipment and
other financing and the available net proceeds from the sale of the Notes, the
Company's sources of liquidity include borrowing availability under a new senior
credit facility entered into by the Company subsequent to year end in
connection with the issuance of the Notes and the repayment of the previous
bank term and revolving loans. This new facility provides for the availability
of up to $30.0 million in revolving credit loans reduced by outstanding letters
of credit not to exceed $15.0 million in the aggregate (see Note 4 to the
Consolidated Financial Statements). As of the date of the issuance of the Notes,
the Company did not have outstanding revolving credit loans under the new credit
facility, but did have $11.6 million of letters of credit outstanding thereunder
including, as discussed above, the letter of credit issued to secure the
Company's remittance obligation to the issuer of money orders. The Company
intends to utilize the new credit facility as needed for working capital and
general corporate purposes, especially to address the seasonality of operations
and timing of certain working capital disbursements.
RESULTS OF OPERATIONS
FISCAL 1994 COMPARED TO FISCAL 1993
Revenues for the fiscal year ended January 29, 1994 increased by $12.0
million or 2.1% from the prior fiscal year ended January 30, 1993. This revenue
increase was due to higher revenues from the convenience store, gasoline and
manufacturing and distribution areas of the Company. Convenience store revenues
increased to $355.8 million in fiscal 1994 from $345.4 million in fiscal 1993.
This increase was primarily due to a change in the mix of stores in the current
fiscal year to include more Company operated stores and fewer franchise stores,
since the Company records as revenue the gross sales of Company operated stores
compared with franchise fees which are a percentage of franchise store sales.
This change in store mix was a result of the Company's ongoing review and
evaluation of its store base to determine whether its stores are best suited as
either a Company operated or franchise location, using economic and non-economic
criteria. Such transfers between Company operated and franchise stores have
occurred and will continue in the ordinary course of business, and generally
result in minimal transfer costs to the Company. The overall increase in the
Company's convenience store revenues was partially offset by decreased revenues
resulting from the closing of sixty-one underperforming stores in the current
fiscal year. Although such closures had a negative impact on revenues, they did
not have a material adverse effect on the results of operations (other than the
initial write-off of estimated unrecoverable costs as discussed in Note 1 to the
Consolidated Financial Statements), since the majority of stores closed had been
operating at a loss. Additionally, comparable store sales decreased by 0.4% in
fiscal 1994 as compared to fiscal 1993. This slight decrease was entirely due to
the effect of the tobacco industry's cigarette price reductions, substantially
all of which were passed on to the Company's customers. These cigarette price
reductions lowered comparable store sales by approximately 2.0% for the current
fiscal year.
The higher gasoline revenues in fiscal 1994 resulted from an increase in
total gasoline gallons sold of 9.7 million gallons. On a per location basis,
average gallonage increased by approximately 7.2% in the current fiscal year as
compared to the prior fiscal year. These gallonage increases were due primarily
to the further development of the Company's new super pumper stores as well as
the remodeling and expansion of gasoline facilities at a number of existing
locations. Partially offsetting the impact of the higher gallonage on total
gasoline revenues was a decrease in the average selling price of gasoline of 3.5
cents per gallon for the current fiscal year as compared to the prior fiscal
year.
-14-
<PAGE>
Manufacturing and distribution revenues increased in the current fiscal
year due to the introduction of new business, which began during the second
quarter of the prior fiscal year. The new business includes the sale of ice
cream to an external distributor as well as the distribution of new product
lines, including cigarettes and candy, to stores in certain marketing areas of
the Company.
Income from operations increased by $8.6 million in fiscal 1994 as compared
to fiscal 1993, due primarily to a $5.2 million nonrecurring charge in the prior
fiscal year for restructuring expenses related to the downsizing and
consolidation of the Company's administrative offices (see Note 12 to
Consolidated Financial Statements) as well as increased income from both
gasoline and convenience store operations in the current fiscal year.
Income from gasoline operations increased due to the favorable impact of
the higher gasoline gallons described above, combined with an increase in
gasoline gross margins in fiscal 1994 as compared to fiscal 1993. Additionally,
the Company incurred lower operating costs in the current fiscal year related to
compliance with environmental regulations, reflecting a reduction in the
expenses associated with the remediation of the Company's gasoline locations
after considering expected reimbursements of a portion of total remediation
costs from various state environmental trust funds. Such remediation costs are
incurred in the ordinary course of business and can fluctuate significantly from
year to year.
Income from convenience store operations increased in the current fiscal
year due to improved product gross margins as well as higher lottery and money
order commissions. The increased product gross margins resulted, in part, from a
reduction in costs associated with the Company's last-in, first-out (LIFO)
inventory valuation method. This reduction in the LIFO provision resulted from a
current year decrease in cigarette prices as discussed above, which constitutes
one of the Company's major product categories. The overall increase in product
margins for the current fiscal year was partially offset by a lower level of
marketing allowances, related to monies received from vendors for specific
product promotions, as compared to the prior fiscal year. Selling expenses
associated with the convenience store group were increased over the prior year
due, in part, to increased advertising and store maintenance expenses.
Income from foreign consulting operations decreased primarily due to the
recognition of a one-time license fee in fiscal 1993 which was earned upon the
start-up of the Company's Mexican joint venture operation. Income from
operations in the Company's manufacturing and distribution operation decreased
in fiscal 1994 due primarily to reduced product margins resulting from an
increase in raw product costs without a corresponding increase in retail dairy
prices. This decrease was partially offset by increased profits realized from
the new business described above.
The overall increase in income from operations was also impacted by a
decrease in administrative salaries in fiscal 1994 as compared to fiscal 1993 as
a result of the corporate consolidation described above which was completed
during the second half of the current fiscal year. The Company also benefitted
from reduced costs in the current fiscal year related to legal and professional
fees. Primarily offsetting these administrative expense decreases were higher
costs in the current fiscal year for management bonuses and profit sharing due
to the increased earnings in the current fiscal year as well as the
implementation of a new 401(k) employee benefit program. Additionally, the
Company incurred higher relocation costs in the current fiscal year.
Inflation had little effect on the Company's revenues and income from
operations in fiscal years 1994 and 1993, other than the effect of the cigarette
price reductions discussed above.
-15-
<PAGE>
The effective tax rate for the Company was a provision of 42% for the
current fiscal year as compared to a benefit of 40% for fiscal 1993 (See Note 6
to the Consolidated Financial Statements). The Company provides for income taxes
at the effective rate expected to be incurred for the entire year.
Net income for fiscal 1994 was $866,000 or $.16 per share, as compared to a
net loss of $6,850,000 or $1.26 per share for fiscal 1993. The Company incurred
an extraordinary loss on extinguishment of debt in the current fiscal year,
which reduced net income by $928,000 (See Note 4 to the Consolidated Financial
Statements). Included in the net loss for the prior fiscal year was a $3,951,000
charge for the cumulative effect of a change in accounting for income taxes (See
Note 6 to the Consolidated Financial Statements). This one-time cumulative
charge related to the adoption of SFAS No. 109, "Accounting for Income Taxes."
FISCAL 1993 COMPARED TO FISCAL 1992
Revenues for the fiscal year ended January 30, 1993 increased by $6.8
million or 1.2% from the prior fiscal year ended February 1, 1992. The higher
revenues in fiscal 1993 were due to increased revenues from the Company's
convenience store group as well as its gasoline and international operations,
partially offset by decreased revenues from the Company's manufacturing and
distribution operations.
Convenience store revenues increased from $343.0 million in fiscal 1992 to
$345.4 million in fiscal 1993. This increase was due to a change in the mix of
stores in fiscal 1993 to include more Company operated stores and fewer
franchise stores since the Company records as revenue the gross sales of Company
operated stores compared with recording the lower franchise fees earned from
franchise stores. The overall increase in the Company's convenience store
revenues was partially offset by decreased revenues resulting from the closing
of underperforming stores. Although such closures had a negative impact on
revenues, they did not have a material adverse effect on the results of
operations since the majority of stores closed had been operating at a loss.
Comparable inside store sales decreased by 2.4% in fiscal 1993 as compared to
fiscal 1992, due in large part to a continuing weak economy as well as adverse
weather conditions, especially in the fiscal 1993 second fiscal quarter, in all
of the Company's major market areas.
The higher gasoline revenues in fiscal 1993 were attributable to an
increase in total gasoline gallons sold. On a per location basis, average
gallonage increased by approximately 8% in fiscal 1993 as compared to fiscal
1992. These gallonage increases were due primarily to the further development of
the Company's new super pumper stores as well as the remodeling and expansion of
gasoline facilities at a number of existing locations. The increased gallonage
was partially offset by a decrease in the average selling price of gasoline of
approximately 2.6 cents per gallon in fiscal 1993.
Revenues from international operations were higher in fiscal 1993 due
primarily to the recognition of a $450,000 one-time license fee earned upon the
start up of the Company's Mexican joint venture operation. The Company will
record its appropriate share of future profit and loss based upon the sales and
performance of this one-third owned Mexican joint venture. However, any future
earnings potential cannot be quantified at this time.
The Company's manufacturing and distribution revenues decreased in fiscal
1993 due to reduced volume resulting from the lower number of stores as well as
the overall decrease in average inside store sales, both of which are discussed
above. This was partially offset by increased revenues resulting from
-16-
<PAGE>
the introduction of new business, which included the sale of ice cream to an
external distributor as well as the distribution of new product lines, including
cigarettes and candy, to stores in certain marketing areas of the Company.
Income from operations decreased by $13.0 million for fiscal 1993 as
compared to fiscal 1992. $5.2 million of this decrease was due to a nonrecurring
charge in fiscal 1993 for restructuring expenses related to the downsizing and
consolidation of the Company's administrative offices (see Note 12 to the
Consolidated Financial Statements). The Company anticipates that expense
reductions, including reduced salaries and benefits, travel, telecommunication
costs and other office overhead costs, realized from this restructuring will
approximate $2.0 million annually which should favorably impact income from
operations in future fiscal years once this restructuring is completed.
In addition to the nonrecurring charge, income from operations was also
lower in fiscal 1993 due to decreases from the convenience store and
manufacturing and distribution groups as well as higher other selling, general
and administrative expenses. The decrease from the convenience store group
resulted primarily from the reduced comparable inside store sales and an
increase in store selling expenses, partially offset by improved product gross
margins. The store selling expense increase resulted primarily from increased
labor expense, higher medical insurance costs and certain individually large
claims incurred in the Company's commercial liability and worker's compensation
insurance programs. Income from operations in the Company's manufacturing and
distribution operations decreased in fiscal 1993 due to reduced volume resulting
from the fewer number of stores as well as reduced product margins resulting
from an increase in raw product costs without a corresponding increase in retail
dairy prices. This was partially offset by profits realized from the
introduction of new business described above. The increase in other selling,
general and administrative expenses was caused by increases in group health and
commercial liability insurance expense, based on specific claims experience, as
well as normal increases in administrative salaries.
Partially offsetting the decreases in income from operations discussed
above was an increase in income from international operations, resulting
primarily from the recognition of the Mexican joint venture license fee
discussed above. Additionally, income from operations in the Company's gasoline
operations was essentially the same in fiscal 1993 as compared to fiscal 1992.
The positive impact of increased gasoline gallonage described above combined
with a slight increase in gasoline margins was offset by an increase in the cost
of compliance with environmental regulations due primarily to remediation
requirements at gasoline sites closed by the Company.
Inflation had little effect on the Company's revenues and income from
operations in fiscal years 1993 and 1992.
Interest expense (net of interest income) decreased by $1,270,000 in fiscal
1993 primarily due to a decrease in average interest rates related to the
Company's variable rate term and revolving loans under the existing credit
agreement.
The Company recorded a net loss on disposition of properties of $433,000 in
fiscal 1993 compared to a net loss of $298,000 in fiscal 1992. The majority of
these losses resulted from the closing of underperforming stores and the
resulting write-off of abandoned fixtures, equipment and leasehold improvements.
-17-
<PAGE>
The effective tax rate for the Company was a benefit of 40% for fiscal 1993
as compared to a provision of 42% for fiscal 1992 (See Note 6 to the
Consolidated Financial Statements).
The Company recorded a net loss of $6,850,000, or $1.26 per share, for
fiscal 1993 as compared to net income of $4,092,000 or $.75 per share, in fiscal
1992. In addition to the items discussed above, the net loss in fiscal 1993 was
also partially attributable to a $3,951,000 charge for the cumulative effect of
a change in accounting for income taxes (see Note 6 to the Consolidated
Financial Statements). This one-time cumulative charge related to the adoption
of SFAS No. 109, "Accounting for Income Taxes".
-18-
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The consolidated financial statements of the Company and its subsidiaries
and notes thereto, appear on Pages F-1 through F-18 of this Form 10-K.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURES
None.
-19-
<PAGE>
PART III
--------
Information required by items 10, 11 and 12 (Directors and Executive Officers of
the Registrant, Executive Compensation and Security Ownership of Certain
Beneficial Owners and Management) is incorporated herein by reference from the
sections entitled "ITEM 1. - ELECTION OF DIRECTORS - Nominees For Election As
Directors", "INFORMATION CONCERNING DIRECTORS AND EXECUTIVE OFFICERS", "THE
BOARD OF DIRECTORS AND ITS COMMITTEES", "OUTSTANDING STOCK AND VOTING RIGHTS",
"PRINCIPAL SHAREHOLDERS", and "COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS"
of the Company's definitive proxy statement to be filed pursuant to Regulation
14A within 120 days after the close of its 1994 fiscal year.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information required by this item is set forth under "CERTAIN TRANSACTIONS"
in the Company's definitive proxy statement, and is incorporated herein by
reference.
-20-
<PAGE>
PART IV
-------
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
(a) The following are filed as part of this Form 10-K:
(1) Financial Statements:
For a listing of financial statements which are filed as part of this
Form 10-K, see Page F-1.
<TABLE>
<CAPTION>
Page
--------
<S> <C>
(2) Financial Statement Schedules:
Report of Independent Public Accountants 25
Schedule V - Property, Plant and Equipment 26
Schedule VI - Accumulated Depreciation of Property,
Plant and Equipment 27
Schedule VIII - Valuation Accounts 28
Schedule X - Supplementary Income Statement
Information 29
</TABLE>
All other schedules are omitted because they are not applicable, or
not required, or because the required information is included in the
consolidated financial statements or notes thereto.
(3) Exhibits:
Exhibit Number:
(3) Articles of Incorporation and Bylaws. The Company's Restated
-------------------------------------
Certificate of Incorporation, as amended, was filed as Exhibit
3.1 to the Company's Form 10-K for the fiscal year ended
February 1, 1992 and is incorporated herein by reference. The
Company's Bylaws, as amended, were filed as Exhibit 3.2 to the
Company's Form 10-K for the fiscal year ended February 3, 1990,
and are incorporated herein by reference.
(4) Instruments defining the rights of security holders, including
--------------------------------------------------------------
indentures. The instruments defining the rights of the holders
-----------
of the Company's Common Stock include the Company's Restated
Certificate of Incorporation and Bylaws, filed as Exhibit 3
hereto, and those instruments filed as Exhibit 4.1 of the
Company's Registration Statement on Form S-1 (Registration No.
33-639) dated November
-21-
<PAGE>
5, 1985, which are incorporated herein by reference. The
instrument defining the rights of the holders of the Company's
10.25% Senior Subordinated Notes due 2004 is the Indenture
dated March 3, 1994, among the Company, Society National Bank,
as trustee, and certain other parties, which is filed as
Exhibit 4.1 hereto.
(10.1) Material Contracts. Credit Agreement dated as of February 25,
-------------------
1994, among the Company, Fleet Bank, National Association and
Society National Bank is attached hereto as Exhibit 10.1.
(10.2) 1985 Incentive Stock Option Plan, as amended, and form of
Incentive Stock Option Agreement, were filed as Exhibit 10.4 to
the Company's annual report on Form 10-K for the fiscal year
ended January 30, 1988, and are incorporated herein by
reference.
(10.3) 1983 Incentive Stock Option Plan and form of Incentive Stock
Option Agreement thereunder were filed as Exhibits 4.1 and 4.2,
respectively, to the Company's Registration Statement on Form
S-8 (File No. 33-8209) filed on August 26, 1986, and are
incorporated herein by reference.
(10.4) 1990 Stock Option Plan and forms of qualified and non-qualified
stock option agreements thereunder were filed as Exhibit 10.4
to the Company's Form 10-K for the fiscal year ended February
2, 1991, and are incorporated hereby by reference.
(10.5) Employment Agreement between the Company and Charles Nirenberg,
dated December 5, 1991, was filed as Exhibit 10.5 to the
Company's annual report on Form 10-K for the fiscal year ended
February 1, 1992, and is incorporated herein by reference.
(21) Subsidiaries of the Registrant is attached hereto as Exhibit
21.
(23) Consent of Arthur Andersen & Co. to the incorporation of their
reports included in this Form 10-K, into the Company's
previously filed Registration Statements on Forms S-8, is
attached hereto as Exhibit 23.
(b) Reports on Form 8-K
None filed during fourth quarter.
(c) See (3) above.
(d) See (2) above.
-22-
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
Dated: April 29, 1994
DAIRY MART CONVENIENCE STORES, INC.
By /s/ Frank Colaccino By /s/ Gregory G. Landry
---------------------------- --------------------------
Frank Colaccino Gregory G. Landry
President and Executive Vice President and
Chief Executive Officer Chief Financial Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant and
in the capacities and on the date indicated.
Dated: April 29, 1994 /s/ Frank Colaccino
----------------------------------------------
Frank Colaccino
President, Chief Executive Officer and
Director (Principal Executive Officer)
Dated: April 29, 1994 /s/ Charles Nirenberg
----------------------------------------------
Charles Nirenberg
Chairman of the Board and
Director
Dated: April 29, 1994 /s/ Gregory G. Landry
----------------------------------------------
Gregory G. Landry
Executive Vice President,
Chief Financial Officer and
Director (Principal Financial and Accounting Officer)
-23-
<PAGE>
Dated: April 29, 1994 /s/ Mitchell J. Kupperman
----------------------------------------------
Mitchell J. Kupperman
Executive Vice President
Director
Dated: April 29, 1994 /s/ Robert B. Stein, Jr.
----------------------------------------------
Robert B. Stein, Jr.
Executive Vice President
Director
Dated: April 29, 1994 /s/ Frank W. Barrett
----------------------------------------------
Frank W. Barrett
Director
Dated: April 29, 1994 /s/ Theodore W. Leed
----------------------------------------------
Theodore W. Leed
Director
-24-
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ON SCHEDULES
-----------------------------------------------------
To Dairy Mart Convenience Stores, Inc.:
We have audited in accordance with generally accepted auditing standards,
the consolidated financial statements of Dairy Mart Convenience Stores, Inc. and
subsidiaries (the Company) included in this Form 10-K, and have issued our
report thereon dated April 21, 1994. Our audits were made for the purpose of
forming an opinion on the basic financial statements taken as a whole. The
schedules listed in the accompanying index are the responsibility of the
Company's management and are presented for purposes of complying with the
Securities and Exchange Commission's rules and are not part of the basic
financial statements. These schedules have been subjected to the auditing
procedures applied in the audits of the basic financial statements and, in our
opinion, fairly state in all material respects the financial data required to be
set forth therein in relation to the basic financial statements taken as a
whole.
ARTHUR ANDERSEN & CO.
Hartford, Connecticut
April 21, 1994
-25-
<PAGE>
SCHEDULE V
DAIRY MART CONVENIENCE STORES, INC. AND SUBSIDIARIES
PROPERTY, PLANT AND EQUIPMENT
<TABLE>
<CAPTION>
Column A Column B Column C Column D Column E Column F
------------ ------------ ------------ ------------ ------------ ------------
Balance at Other Balance at
Beginning Additions Changes End
Description of Period at Cost Retirements Add(Deduct) of Period
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Fiscal year end February 1, 1992
Land and improvements $ 10,211,250 $ 1,377,498 $ (112,170) $ - $ 11,476,578
Buildings and leaseholds 42,206,298 3,484,100 (847,781) - 44,842,617
Equipment 60,186,906 7,866,648 (3,423,761) - 64,629,793
Property under capital leases 7,048,864 218,635 - - 7,267,499
------------ ------------ ------------ ------------ ------------
$119,653,318 $ 12,946,881 $(4,383,712) $ - $128,216,487
============ ============ ============ ============ ============
Fiscal year end January 30, 1993
Land and improvements $ 11,476,578 $ 2,717,987 $ (61,000) $ - $ 14,133,565
Buildings and leaseholds 44,842,617 5,397,704 (659,470) 2,078,518(a) 51,659,369
Equipment 64,629,793 9,876,728 (3,315,520) - 71,191,001
Property under capital leases 7,267,499 - - - 7,267,499
------------ ------------ ------------ ------------ ------------
$128,216,487 $ 17,992,419 $(4,035,990) $ 2,078,518 $144,251,434
============ ============ ============ ============ ============
Fiscal year end January 29, 1994
Land and improvements $ 14,133,565 $ 1,027,096 $ (64,823) $ 102,877 $ 15,198,715
Buildings and leaseholds 51,659,369 4,450,395 (2,048,753) 169,660 54,230,671
Equipment 71,191,001 8,271,404 (4,043,753) - 75,418,652
Property under capital leases 7,267,499 329,949 (692,044) - 6,905,404
------------ ------------ ------------ ------------ ------------
$144,251,434 $ 14,078,844 $(6,849,373) $ 272,537 $151,753,442
============ ============ ============ ============ ============
</TABLE>
(a) Represents an adjustment to the carrying value of buildings due to a
change in accounting for income taxes (See Note 6 of Notes to
Consolidated Financial Statements).
26
<PAGE>
SCHEDULE VI
DAIRY MART CONVENIENCE STORES, INC. AND SUBSIDIARIES
ACCUMULATED DEPRECIATION OF PROPERTY, PLANT AND EQUIPMENT
<TABLE>
<CAPTION>
Column A Column B Column C Column D Column E Column F
-------- ------------ ------------ ------------- ----------- -------------
Additions
Balance at Charged to Other Balance at
Beginning Cost and Changes End
Description of Period Expenses Retirements Add(Deduct) of Period
----------- ------------ ------------ ------------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Fiscal year end February 1, 1992
Land and improvements $ 94,044 $ 40,234 $ (1,750) $ - $ 132,528
Buildings and leaseholds 9,918,389 2,096,685 (426,928) - 11,588,146
Equipment 21,192,661 7,483,859 (2,422,706) - 26,253,814
Property under capital leases 2,647,468 1,156,522 - - 3,803,990
------------ ------------ ------------- ----------- ------------
$ 33,852,562 $ 10,777,300 $ (2,851,384) $ - $ 41,778,478
============ ============ ============= ============ ============
Fiscal year end January 30, 1993
Land and improvements $ 132,528 $ 58,617 $ (9,234) $ - $ 181,911
Buildings and leaseholds 11,588,146 2,546,574 (1,016,073) 642,359(a) 13,761,006
Equipment 26,253,814 7,118,095 (974,084) - 32,397,825
Property under capital leases 3,803,990 1,030,102 - - 4,834,092
------------ ------------ ------------- ----------- ------------
$ 41,778,478 $ 10,753,388 $ (1,999,391) $ 642,359 $ 51,174,834
============ ============ ============= ============ ============
Fiscal year end January 29, 1994
Land and improvements $ 181,911 $ 57,624 $ (409) $ - $ 239,126
Buildings and leaseholds 13,761,006 1,982,829 (911,092) (55,573) 14,777,170
Equipment 32,397,825 8,004,721 (2,584,373) - 37,818,173
Property under capital leases 4,834,092 1,002,326 (691,384) - 5,145,034
------------ ------------ ------------- ----------- ------------
$ 51,174,834 $ 11,047,500 $ (4,187,258) $ (55,573) $ 57,979,503
============ ============ ============= ============ ============
</TABLE>
(a) Represents an adjustment to the carrying value of buildings due to a
change in accounting for income taxes (See Note 6 of Notes to
Consolidated Financial Statements).
27
<PAGE>
SCHEDULE VIII
DAIRY MART CONVENIENCE STORES, INC. AND SUBSIDIARIES
VALUATION ACCOUNTS
<TABLE>
<CAPTION>
Column A Column B Column C Column D Column E
- - -------------------------------------- ---------- ------------------------- ------------ ------------
Additions
-------------------------
Balance at Charged to Deductions Balance at
Beginning Costs and Other and Accounts End of
Description of Period Expenses Recoveries Written off Period
- - -------------------------------------- ---------- ---------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Reserve for Doubtful Accounts:
Fiscal Year End February 1, 1992...... $ 814,319 $ 567,787 $ (17,997) $ (180,686) $ 1,183,423
Fiscal Year End January 30, 1993...... 1,183,423 955,220 -- (485,519) 1,653,124
Fiscal Year End January 29, 1994...... 1,653,124 958,336 -- (787,283) 1,824,177
</TABLE>
28
<PAGE>
SCHEDULE X
DAIRY MART CONVENIENCE STORES, INC. AND SUBSIDIARIES
SUPPLEMENTARY INCOME STATEMENT INFORMATION
<TABLE>
<CAPTION>
Column A Column B
- - ----------------------------------- ------------------------------------
Item Charged to Costs and Expenses
------------------------------------
1994 1993 1992
------------------------------------
<S> <C> <C> <C>
Maintenance and Repairs $9,538,625 $9,167,333 $8,902,331
Taxes other than payroll and income taxes $32,587,727 $27,082,748 $24,346,314
</TABLE>
Royalties, advertising and amortization of intangible assets are not set forth
inasmuch as each such item does not exceed 1% of revenues as shown in the
related consolidated statements of operations.
Taxes other than payroll and income taxes include excise taxes collected from
customers on retail gasoline sales.
29
<PAGE>
DAIRY MART CONVENIENCE STORES, INC.
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Form 10-K
Page
---------
<S> <C>
Report of Independent Public Accountants F-2
Consolidated Statements of Operations and Retained
Earnings for the Fiscal Years Ended January 29, 1994,
January 30, 1993 and February 1, 1992 F-3
Consolidated Balance Sheets as of January 29, 1994
and January 30, 1993 F-4
Consolidated Statements of Cash Flows for the Fiscal
Years Ended January 29, 1994, January 30, 1993
and February 1, 1992 F-5
Notes to Consolidated Financial Statements for the
Fiscal Years Ended January 29, 1994, January 30, 1993
and February 1, 1992 F-6 to F-18
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
----------------------------------------
To the Stockholders and the Board of Directors of
Dairy Mart Convenience Stores, Inc.:
We have audited the accompanying consolidated balance sheets of Dairy Mart
Convenience Stores, Inc. (a Delaware corporation) and subsidiaries as of January
29, 1994 and January 30, 1993, and the related consolidated statements of
operations and retained earnings and cash flows for each of the three years in
the period ended January 29, 1994. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit also includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Dairy Mart Convenience Stores,
Inc. and subsidiaries as of January 29, 1994 and January 30, 1993, and the
results of their operations and their cash flows for each of the three years in
the period ended January 29, 1994, in conformity with generally accepted
accounting principles.
ARTHUR ANDERSEN & CO.
Hartford, Connecticut
April 21, 1994
F-2
<PAGE>
Consolidated Statements of Operations and Retained Earnings
Dairy Mart Convenience Stores, Inc. and Subsidiaries
- - -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the Years Ended January 29, 1994, January 30, 1993 and February 1, 1992
- - ----------------------------------------------------------------------------------------------------
1994 1993 1992
- - ----------------------------------------------------------------------------------------------------
(in thousands, except per share amounts)
<S> <C> <C> <C>
Net Sales of the Company, its Subsidiaries and Franchises......... $ 760,551 $773,766 $794,758
====================================================================================================
Revenues.......................................................... $ 590,751 $578,767 $571,980
Cost of goods sold and expenses:
Cost of goods sold........................................... 430,254 425,180 415,981
Selling, general and administrative expenses................. 150,006 151,742 141,201
- - ----------------------------------------------------------------------------------------------------
Income from operations................................... 10,491 1,845 14,798
Interest expense.................................................. (7,644) (7,456) (8,260)
Interest income................................................... 749 1,247 781
Loss on disposition of properties, net............................ (494) (433) (298)
- - -----------------------------------------------------------------------------------------------------
Income (loss) before income taxes, extraordinary item
and cumulative effect of accounting change.......... 3,102 (4,797) 7,021
(Provision for) benefit from income taxes......................... (1,308) 1,898 (2,929)
- - -----------------------------------------------------------------------------------------------------
Income (loss) before extraordinary item and cumulative
effect of accounting change......................... 1,794 (2,899) 4,092
Extraordinary loss on extinguishment of debt (net of income
tax benefit of $677)............................ (928) - -
- - -----------------------------------------------------------------------------------------------------
Income (loss) before cumulative effect of accounting
change................................................ 866 (2,899) 4,092
Cumulative effect of change in accounting for income taxes........ - (3,951) -
- - -----------------------------------------------------------------------------------------------------
Net income (loss)........................................ $ 866 $ (6,850) $ 4,092
=====================================================================================================
Earnings (loss) per share:
Before extraordinary item and cumulative effect of
accounting change..................................... $ .33 $ (.53) $ .75
Extraordinary loss on extinguishment of debt............. (.17) - -
Cumulative effect of change in accounting for income
taxes.................................................... - (.73) -
- - -----------------------------------------------------------------------------------------------------
Earnings (loss) per share......................................... $ .16 $ (1.26) $ .75
=====================================================================================================
Retained earnings, beginning of year.............................. $ 10,463 $ 17,313 $ 13,221
Net income (loss)................................................. 866 (6,850) 4,092
- - -----------------------------------------------------------------------------------------------------
Retained earnings, end of year.................................... $ 11,329 $ 10,463 $ 17,313
=====================================================================================================
</TABLE>
Note: Excise taxes approximating $29,209,000, $23,855,000 and $21,230,000
collected from customers on retail gasoline sales are included in
Revenues and Cost of goods sold for fiscal years 1994, 1993 and 1992,
respectively.
The accompanying notes are an integral part of these financial
statements.
F-3
<PAGE>
<TABLE>
<CAPTION>
Consolidated Balance Sheets Dairy Mart Convenience Stores, Inc. and Subsidiaries
- - --------------------------------------------------------------------------------------------------------------------------------
January 29, 1994 and January 30, 1993 1994 1993
- - --------------------------------------------------------------------------------------------------------------------------------
(in thousands, except
share amounts)
<S> <C> <C>
Assets
Current Assets:
Cash................................................................................................$ 6,632 $ 6,483
Accounts and notes receivable....................................................................... 11,770 11,700
Inventory........................................................................................... 26,269 26,857
Prepaid expenses and other current assets........................................................... 2,013 1,993
Deferred income taxes............................................................................... 2,098 4,045
------------------
Total current assets............................................................................. 48,782 51,078
------------------
Property and Equipment:
Land and improvements............................................................................... 15,199 14,134
Buildings and leaseholds............................................................................ 54,231 51,659
Equipment........................................................................................... 75,418 71,191
------------------
144,848 136,984
Less -- Accumulated depreciation.................................................................... 52,834 46,341
------------------
Net property and equipment....................................................................... 92,014 90,643
------------------
Property Under Capital Leases, net of accumulated amortization of $5,145 and $4,834..................... 1,760 2,433
------------------
Other Assets:
Goodwill, net of accumulated amortization of $2,864 and $2,509...................................... 10,961 11,316
Franchise and operating rights, net of accumulated amortization of $2,488 and $2,135................ 7,656 8,009
Notes receivable.................................................................................... 2,267 3,607
Other............................................................................................... 6,002 8,092
------------------
Total other assets............................................................................... 26,886 31,024
------------------
Total assets...........................................................................................$ 169,442 $ 175,178
==================
Liabilities and Stockholders' Equity
Current Liabilities:
Current portion of long-term debt....................................................................$ 3,071 $ 7,803
Current portion of capital lease obligations......................................................... 1,038 1,087
Accounts payable..................................................................................... 29,461 27,768
Accrued expenses..................................................................................... 15,360 14,230
Accrued restructuring expenses....................................................................... 367 5,200
------------------
Total current liabilities........................................................................ 49,297 56,088
------------------
Long-Term Debt, less current portion above.............................................................. 71,604 69,645
------------------
Capital Lease Obligations, less current portion above................................................... 1,630 2,500
------------------
Other Liabilities and Deferred Credits.................................................................. 6,222 5,352
------------------
Deferred Income Taxes................................................................................... 6,819 8,861
------------------
Commitments and Contingencies (Note 11)
Stockholders' Equity:
Class A Common Stock, par value $.01, 20,000,000 shares authorized, 3,268,729 and 3,173,802 issued... 33 32
Class B Common Stock, par value $.01, 10,000,000 shares authorized, 2,956,015 and 2,971,318 issued... 30 30
Paid-in capital in excess of par value............................................................... 27,483 27,212
Retained earnings.................................................................................... 11,329 10,463
Treasury stock, at cost.............................................................................. (5,005) (5,005)
------------------
Total stockholders' equity....................................................................... 33,870 32,732
------------------
Total liabilities and stockholders' equity.............................................................$ 169,442 $175,178
==================
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE>
<TABLE>
<CAPTION>
Consolidated Statements of Cash Flows Dairy Mart Convenience Stores, Inc. and Subsidiaries
- - --------------------------------------------------------------------------------------------------------------------------
For the Years Ended January 29, 1994, January 30, 1993 and February 1, 1992
- - --------------------------------------------------------------------------------------------------------------------------
1994 1993 1992
- - --------------------------------------------------------------------------------------------------------------------------
(in thousands)
<S> <C> <C> <C>
Cash flows from operating activities:
Net Income (loss) ..................................................................... $ 866 $ (6,850) $ 4,092
Adjustments to reconcile net income to net cash provided by operating activities:
Extraordinary Item ................................................................ 928 - -
Cumulative effect of change in accounting for income taxes......................... - 3,951 -
Depreciation and amortization...................................................... 12,900 13,664 13,571
(Decrease) increase in deferred income taxes....................................... (95) (3,647) 1,231
Decrease in store fixed assets resulting from franchising activities............... 65 - 679
Loss on other disposition of properties, net....................................... 494 433 298
(Increase) decrease in accounts and notes receivable............................... (152) 1,438 (3,377)
Decrease (increase) in inventory................................................... 588 (2,726) 2,244
Increase (decrease) in accounts payable............................................ 932 2,286 (4,360)
(Decrease) increase in accrued restructuring....................................... (4,833) 5,200 -
Decrease (increase) in other current assets and liabilities, net................... 1,787 1,090 (2,107)
Increase (decrease) in other noncurrent liabilities and deferred credits........... 870 1,147 (24)
- - --------------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities................................................ 14,350 15,986 12,247
- - --------------------------------------------------------------------------------------------------------------------------
Cash flows from investing activities:
Purchase of property and equipment..................................................... (13,749) (17,992) (12,521)
Proceeds from sale of property and equipment........................................... 1,860 1,603 623
Increase in long-term notes receivable................................................. (291) (1,057) (1,791)
Proceeds from long-term notes receivable............................................... 1,631 2,074 1,042
Decrease (increase) in intangibles and other assets.................................... 15 (1,383) (1,116)
- - --------------------------------------------------------------------------------------------------------------------------
Net cash used by investing activities.................................................... (10,534) (16,755) (13,763)
- - --------------------------------------------------------------------------------------------------------------------------
Cash flows from financing activities:
Repayment of term debt................................................................. (7,000) (4,000) (2,000)
Increase in revolving loan, net........................................................ 300 5,400 2,900
Additional long-term debt ............................................................. 4,915 2,327 1,736
Repayment of other long-term debt and capital lease obligations........................ (2,154) (1,811) (1,881)
Repurchase of subordinated debentures.................................................. - - (380)
Increases in common stock and paid-in capital.......................................... 272 482 166
- - --------------------------------------------------------------------------------------------------------------------------
Net cash (used in) provided by financing activities...................................... (3,667) 2,398 541
- - --------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in cash.............................................................. 149 1,629 (975)
Cash at beginning of year................................................................ 6,483 4,854 5,829
- - --------------------------------------------------------------------------------------------------------------------------
Cash at end of year...................................................................... $ 6,632 $ 6,483 $ 4,854
==========================================================================================================================
Supplemental disclosures:
Cash paid during the year --
Interest............................................................................... $ 7,700 $ 7,191 $ 8,064
Income taxes........................................................................... 1,199 1,535 2,453
Noncash investing and financing activities --
Capital lease obligations.............................................................. 330 - 168
Investment in Mexican Joint Venture.................................................... - 500 -
==========================================================================================================================
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE>
Notes To Consolidated Financial Statements Dairy Mart Convenience Stores, Inc.
and Subsidiaries
- - -------------------------------------------------------------------------------
January 29, 1994, January 30, 1993 and February 1, 1992
- - -------------------------------------------------------------------------------
1. Significant Corporate organization and consolidation--The accompanying
Accounting financial statements include the accounts of Dairy Mart
Policies: Convenience Stores, Inc. and its subsidiaries (the
Company). All intercompany transactions have been
eliminated.
Nature of business--The Company owns, operates and
franchises convenience retail stores, a number of which also
sell gasoline. The Company also manufactures and distributes
certain dairy and other products for sale at the majority of
these locations.
Fiscal year--The Company's fiscal year ends on the Saturday
closest to January 31.
Inventory--Store and manufacturing and distribution
inventory is stated primarily at the lower of last-in,
first-out (LIFO) cost or market. Gasoline inventory is
stated at the lower of first-in, first-out (FIFO) cost or
market.
Property and depreciation--Property is stated at cost and is
depreciated on the straight-line basis for financial
reporting purposes over the following estimated useful
lives:
------------------------------------------------------------
Buildings.....................................30-40 years
------------------------------------------------------------
Equipment......................................5-20 years
------------------------------------------------------------
Leaseholds are depreciated primarily over 10 years or the
life of the lease.
Goodwill and franchise and operating rights--Goodwill
represents the excess of cost over fair value of net assets
purchased and is being amortized on a straight-line basis
over a period of 40 years. Franchise and operating rights
represent the value of franchise relationships purchased in
connection with past acquisitions and are being amortized on
a straight-line basis over 40 years. The Company assesses
the recoverability of these intangibles by determining
whether the amortization of the goodwill and franchise and
operating rights over the remaining lives can be recovered
through projected future operating results. At this time,
the Company is profitable, and expects full recoverability.
Therefore, it is the Company's belief that no impairment of
goodwill and franchise and operating rights has occurred.
Income taxes--Effective February 2, 1992, the Company
adopted Statement of Financial Accounting Standards (SFAS)
No. 109, "Accounting for Income Taxes," which requires
recognition of deferred tax liabilities and assets for the
expected future tax consequences of events that have been
included in the financial statements or tax returns. Prior
to the implementation of SFAS No. 109, the Company accounted
for income taxes using the deferral method as required by
Accounting Principles Board Opinion No. 11.
Self insurance reserves--The Company is self-insured for
certain property and liability, and accident and health
insurance risks and establishes reserves for estimated
outstanding claims based on its historical claims experience
and reviews by third-party loss reserve specialists. The
Company has purchased insurance coverage for losses that may
occur above certain levels. As of January 29, 1994 and
January 30, 1993, the Company has established reserves for
these risks of $6,696,000 and $6,231,000, respectively,
which are recorded on a present value basis using a discount
rate of 8%. The Company is considering changing its method
of accounting to discount these reserves at a risk free rate
of return. The cumulative effect of this change in
accounting method, if adopted as of January 29, 1994, would
have been a charge of approximately $700,000.
Revenue recognition--The Company recognizes revenues as
earned, including franchise revenues. Franchise revenues
represent a percentage of franchise store sales remitted to
the Company on a weekly or monthly basis, as well as
revenues derived from initial fees and the gain on sale of
store assets to franchisees. Net Sales of the Company, its
Subsidiaries and Franchises is comprised of the Company's
revenues plus store sales of franchise locations and
excludes related franchise fees.
Store preopening and closing costs--Expenditures of a non-
capital nature associated with opening a new store are
expensed as incurred. At the time the decision is made to
close a store, estimated unrecoverable costs are charged to
expense. Such costs include the net book value of abandoned
fixtures, equipment, leasehold improvements and a provision
for the present value of future lease obligations, less
estimated sub-rental income.
Earnings per share--Earnings per share have been calculated
based on the weighted average number of shares outstanding
and the effect of stock options, if dilutive, during each
period. The number of shares used in the calculations for
earnings per share were 5,532,201, 5,422,971 and 5,467,514
for the years ended January 29, 1994, January 30, 1993 and
February 1, 1992, respectively.
Reclassifications--Certain prior year amounts in the
Consolidated Financial Statements have been reclassified to
conform to the presentation used for the current year.
F-6
<PAGE>
Dairy Mart Convenience Stores, Inc. and Subsidiaries
- - --------------------------------------------------------------------------------
2. Accounts and A summary of accounts and notes receivable as of January
Notes Receivable: 29, 1994 and January 30, 1993 is as follows:
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------
1994 1993
----------------------------------------------------------------------------------
(in thousands)
<S> <C> <C>
Franchise accounts receivable.................................. $ 5,017 $ 4,614
Franchise notes receivable..................................... 2,476 3,967
Marketing allowances and other................................. 8,368 8,379
----------------------------------------------------------------------------------
15,861 16,960
Less allowance for doubtful accounts and notes................. 1,824 1,653
----------------------------------------------------------------------------------
Net accounts and notes receivable.............................. 14,037 15,307
Less noncurrent notes receivable............................... 2,267 3,607
----------------------------------------------------------------------------------
Current accounts and notes receivable.......................... $ 11,770 $ 11,700
==================================================================================
</TABLE>
The carrying amount of current accounts and notes
receivable approximates fair value because of the short
maturity of those receivables. The fair value of the
Company's noncurrent notes receivable is estimated by
discounting the future cash flows using the rates at
which similar loans would be made to borrowers with
similar credit ratings and for the same remaining
maturities. As of January 29, 1994, the fair value of the
noncurrent notes receivable exceeds the carrying value of
$2,267,000 by approximately $400,000. As of January 30,
1993, the carrying amount of the noncurrent notes
receivable of $3,607,000 approximated the fair value.
F-7
<PAGE>
Dairy Mart Convenience Stores, Inc. and Subsidiaries
- - --------------------------------------------------------------------------------
3. Inventory: A summary of inventory as of January 29, 1994, January 30,
1993 and February 1, 1992 is as follows:
<TABLE>
<CAPTION>
- - -----------------------------------------------------------------------------------
1994 1993 1992
- - -----------------------------------------------------------------------------------
(in thousands)
<S> <C> <C> <C>
Inventory valued at FIFO cost............................ $30,852 $32,265 $28,781
LIFO reserve............................................. (4,583) (5,408) (4,650)
- - -----------------------------------------------------------------------------------
Inventory primarily valued at LIFO cost.................. $26,269 $26,857 $24,131
===================================================================================
</TABLE>
The LIFO reserve reflects the difference between stating the inventory at
historical LIFO cost and the more current FIFO cost. Had the FIFO method been
used, cost of goods sold would have been increased by $825,000 in 1994 and
decreased by $758,000 and $470,000 in 1993 and 1992, respectively. Earnings per
share would have been decreased by $.09 in 1994, and increased by $.05 in 1992
and loss per share would have been reduced by $.08 in 1993, had the FIFO
method been used.
During 1994, the Company liquidated certain LIFO inventory that was carried at
higher costs prevailing in prior years. The effect of the liquidation was to
decrease net income by approximately $45,000 ($.01 per share). During 1993 and
1992, the Company liquidated certain LIFO inventory that was carried at lower
costs prevailing in prior years. The effect of the liquidation was to decrease
net loss by approximately $60,000 ($.01 per share) in 1993 and increase net
income by $61,000 ($.01 per share) in 1992.
F-8
<PAGE>
Dairy Mart Convenience Stores, Inc. and Subsidiaries
- - -------------------------------------------------------------------------------
4. Long-Term Debt: The Company had the following long-term debt at January 29,
1994 and on a pro forma basis after giving effect to the
issuance of the Senior Subordinated Notes and the
application of the proceeds therefrom, subsequent to year
end, as described below:
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------
Interest Maturity January 29,1994 Pro Forma
--------------------------
Rate (Fiscal Year) Current Long-Term Total Total
-------------------------------------------------------------------------------------------------------------
(in thousands)
<S> <C> <C> <C> <C> <C> <C>
Subordinated debentures.................... 14.25% 1996-2001 $ - $27,183 $27,183 $ -
Bank term loan............................. Prime+1/4% 1995-1997 2,000 20,000 22,000 -
Bank revolving loan........................ Prime+1/4% 1997 - 12,100 12,100 -
Real estate mortgage notes payable.........6.25%-12.0% 1995-2012 268 5,933 6,201 6,201
Small Business Administration debentures... 7.9%-10.7% 1996-2002 - 4,220 4,220 4,220
Equipment financing........................ Various 1996-2000 803 2,168 2,971 2,971
Senior Subordinated Notes.................. 10.25% 2005 - - - 75,000
New bank revolving loan.................... Prime+1/4% 1998 - - - -
-------------------------------------------------------------------------------------------------------------
$3,071 $71,604 $74,675 $88,392
=============================================================================================================
</TABLE>
Subsequent to year end, the Company issued $75,000,000
principal amount of 10.25% senior subordinated notes (the
"Notes") due March 15, 2004. The proceeds received from the
sale of the Notes, net of estimated offering costs of
$2,600,000, were used to repay the entire outstanding
indebtedness under the previous bank term loan and bank
revolving loan and to redeem in full the Company's 14.25%
subordinated debentures due November, 2000. In connection with
this transaction, the Company paid a premium of 2.8%, or
$761,000, related to the redemption of the 14.25% subordinated
debentures and recorded a charge of $844,000 representing the
write-off of the remaining deferred financing costs related to
the indebtedness repaid. At January 29, 1994, the Company
accounted for the total of the premium paid and the charge for
deferred financing costs as an extraordinary loss of $928,000,
net of related income tax benefit.
The Notes are redeemable, at the option of the Company, after
March 15, 1999 at rates starting at 104.75% of principal amount
reduced annually through March 15, 2002 at which time they
become redeemable at 100% of principal amount. The terms of the
Notes may restrict, among other things, the payment of
dividends and other distributions, investments, the repurchase
of capital stock and the making of certain other restricted
payments by the Company and its subsidiaries, the incurrence of
additional indebtedness and new operating lease obligations by
the Company or any of its subsidiaries, and certain mergers,
consolidations and dispositions of assets. Additionally,
according to the terms of the Notes, if a change of control
occurs, as defined, each holder of Notes will have the right to
require the Company to repurchase such holder's Notes at 101%
of the principal amount thereof.
In connection with the sale of the Notes and the repayment of
the indebtedness referred to above, the Company entered into a
senior revolving credit facility with a group of banks which
provides for the availability of up to $30,000,000 in revolving
credit loans reduced by outstanding letters of credit not to
exceed $15,000,000 in the aggregate. The outstanding balance,
if any, is due and payable on March 1, 1997; however, provided
no default exists under this new credit agreement, the Company
may extend such due date for up to two additional one-year
periods, with the consent of the lenders. Revolving credit
loans under the credit agreement bear interest, at the
Company's option, at the agent bank's prime rate plus 1/4% or
from 2.00% to 2.50% above LIBOR. The credit agreement also
provides for a commitment fee of 1/2% on any unused portion of
the revolving credit facility. Among other restrictions, the
credit agreement contains financial covenants relating to
specified levels of: earnings before interest expense, rent and
taxes to interest expense and rent; earnings before interest
expense, taxes, depreciation and amortization (EBITDA) less
capital expenditures paid in cash to interest expense;
indebtedness to EBITDA; as well as the maintenance of a minimum
net worth. In connection with the credit agreement, the Company
pledged as collateral capital stock of certain subsidiary
corporations of the Company, as well as any loans between the
Company and its subsidiaries.
The Company is limited in the amount of cash dividends that it
may pay and the amount of capital stock and subordinated
indebtedness that it may repurchase by applicable covenants
contained in the senior revolving credit facility and Notes. As
of January 29, 1994, taking into account such limitations, the
Company would have been able to pay approximately $1,100,000 in
cash dividends in the aggregate.
As of January 29, 1994 and January 30, 1993, the fair value of
the bank term loan, bank revolving loan, real estate mortgage
notes payable and Small Business Administration debentures
approximated the carrying amount. As of January 29, 1994 and
January 30, 1993, the fair value of the 14.25% subordinated
debentures was approximately $27,900,000 and $28,300,000,
respectively.
Maturities on long-term debt for the next five years, as of
January 29, 1994 after giving effect to the issuance of the
Notes and the application of the proceeds therefrom, are as
follows:
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------
January 29,
Fiscal Year 1994
------------------------------------------------------------------------------------------------------------------
(in thousands)
<S> <C>
1995 $3,071
1996 1,746
1997 810
1998 788
1999 1,610
------------------------------------------------------------------------------------------------------------------
</TABLE>
F-9
<PAGE>
Dairy Mart Convenience Stores, Inc. and Subsidiaries
- - --------------------------------------------------------------------------------
5. Leases: The Company leases operating properties, including store locations
and office space, under various lease agreements expiring through
2015. Certain of these locations are sublet to the Company's
franchisees.
A summary of future minimum lease payments and sublease receipts at
January 29, 1994 is as follows:
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------
Net
Capital Operating Operating Operating
Payable/Receivable in Fiscal Year Ending Leases Leases Subleases Leases
--------------------------------------------------------------------------------------------------------
(in thousands)
<S> <C> <C> <C> <C>
1995....................................................... $1,202 $13,517 $3,460 $10,057
1996....................................................... 452 10,454 2,599 7,855
1997....................................................... 423 7,797 1,883 5,914
1998....................................................... 364 5,311 1,373 3,938
1999....................................................... 267 3,022 793 2,229
Thereafter................................................. 736 6,705 218 6,487
----------------------------------------------------------------------------------------------------------
Total minimum.............................................. 3,444 $46,806 $10,326 $36,480
===================================
Less amounts representing interest and executory costs..... 776
-------------------------------------------------------------------
Present value of minimum lease payments.................... $2,668
===================================================================
</TABLE>
<TABLE>
<CAPTION>
Rental expense for all operating leases was as follows:
----------------------------------------------------------------------------------------------------------
1994 1993 1992
----------------------------------------------------------------------------------------------------------
(in thousands)
<S> <C> <C> <C>
Leases............................................................ $14,803 $15,573 $15,579
Less subleases.................................................... 4,396 4,659 4,656
----------------------------------------------------------------------------------------------------------
Net............................................................... $10,407 $10,914 $10,923
==========================================================================================================
</TABLE>
F-10
<PAGE>
Dairy Mart Convenience Stores, Inc. and Subsidiaries
- - --------------------------------------------------------------------------------
6. Federal and State The Company adopted the provisions of SFAS No. 109
Income Taxes: effective February 2, 1992 and recorded a charge in
fiscal 1993 of $3,951,000 which decreased earnings per
share by $.73 for the cumulative effect of this change in
accounting principle. The Company also adjusted the
carrying value of certain assets and recorded additional
depreciation and amortization expense of $452,000 in
fiscal 1993 as a result of this change.
The provision for (benefit from) income taxes for the
fiscal years ended January 29, 1994, January 30, 1993 and
February 1, 1992 was as follows:
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------
1994 1993 1992
---------------------------------------------------------------------------------
(in thousands)
<S> <C> <C> <C>
Current provision
Federal............................................... $ 188 $ 1,309 $1,215
State and local....................................... 447 440 483
---------------------------------------------------------------------------------
Total current provision............................. 635 1,749 1,698
---------------------------------------------------------------------------------
Deferred (benefit) provision
Federal............................................... (115) (3,118) 930
State and local....................................... 111 (529) 301
---------------------------------------------------------------------------------
Total deferred (benefit) provision.................. (4) (3,647) 1,231
---------------------------------------------------------------------------------
Total provision (benefit)............................... $ 631 $(1,898) $2,929
=================================================================================
</TABLE>
The Company is subject to minimum state taxes in excess
of statutory state income taxes in many of the states in
which it operates. These minimum taxes are included in
the provision for (benefit from) state income taxes. In
addition, the Company records a reduction in the
provision for income taxes for the benefit to be realized
from targeted jobs credits in the year in which they
arise. A reconciliation of the difference between the
statutory federal income tax rate and the effective
income tax rate follows:
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
Percent of Pretax Income
--------------------------------------------------------------------------------
1994 1993 1992
--------------------------------------------------------------------------------
<S> <C> <C> <C>
Statutory federal income tax rate...................... 34 % (34)% 34%
Increase (decrease) from:
State income tax provision (benefit), net of federal
tax effect.......................................... 24 (1) 7
Nondeductible depreciation and amortization of
acquired assets..................................... 8 2 4
Targeted jobs credit................................. (27) (7) (3)
Other................................................ 3 - -
--------------------------------------------------------------------------------
Effective income tax rate.............................. 42 % (40)% 42%
================================================================================
</TABLE>
F-11
<PAGE>
Dairy Mart Convenience Stores, Inc. and Subsidiaries
- - -------------------------------------------------------------------------------
Deferred tax assets and liabilities are determined based on the difference
between the financial statement and tax bases of assets and liabilities using
enacted tax rates in effect for the year in which the differences are expected
to reverse. Significant deferred tax assets (liabilities) as of January 29, 1994
and January 30, 1993 were as follows:
<TABLE>
<CAPTION>
- - --------------------------------------------------------------------------------
1994 1993
- - --------------------------------------------------------------------------------
(in thousands)
<S> <C> <C>
Capitalized leases.........................................$ 269 $ 306
Depreciation and amortization.............................. (12,142) (11,474)
Vacation accrual........................................... 314 402
Inventory (LIFO)........................................... (1,622) (1,628)
Reserve for asset valuations............................... 982 677
Insurance reserves not deductible for tax purposes......... 1,245 1,586
Income deferred for financial statement purposes........... 955 842
Reserve for closed stores and renovations.................. 613 667
Accrued restructuring expenses............................. 149 2,111
Tax credit and state net operating loss carryforwards...... 3,581 1,883
Loss on extinguishment of debt............................. 677 --
Other...................................................... 258 (188)
- - --------------------------------------------------------------------------------
Net deferred tax liability.................................$ (4,721) $ (4,816)
================================================================================
</TABLE>
As of January 29, 1994, the Company had alternative minimum tax credits
aggregating $1,015,000 which carryforward indefinitely for federal income tax
purposes. These credits can be used in the future to the extent that the
Company's regular tax liability exceeds its liability calculated under the
alternative minimum tax method. In addition, the Company had $2,077,000 of
targeted jobs credit carryforwards that expire from fiscal 2006 to 2009 and
$179,000 of foreign tax credit carryforwards that expire in fiscal 1999. The
Company and its subsidiaries file a consolidated federal income tax return but
generally file separate state income tax returns. As of January 29, 1994, the
Company had net operating loss carryforwards for state income tax purposes of
$4,706,000 which expire, if unused, from fiscal 1995 to 2008. No valuation
allowance for deferred tax assets was provided as of January 29, 1994 and
January 30, 1993.
F-12
<PAGE>
Dairy Mart Convenience Stores, Inc. and Subsidiaries
- - --------------------------------------------------------------------------------
7. Capital Stock: An analysis of the capital stock accounts is as follows:
------------------------------------------------------------
<TABLE>
<CAPTION>
Common Stock
------------------------------------------
Class A shares Class B shares Paid-in capital
issued at $.01 issued at $.01 in excess of
par value par value Amount par value
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Balance February 2, 1991..................... 2,368,669 2,451,335 $48,201 $26,576,593
Employee stock options exercised............. 2,187 14,275 165 69,522
Employee stock purchase plan................. 16,889 - 169 99,240
Exchange of Class B shares for Class A shares 101,400 (101,400) - -
Five-for-four stock split.................... 596,314 609,483 12,058 (12,058)
Other........................................ - - - (2,681)
----------------------------------------------------------------------------------------------------------
Balance February 1, 1992..................... 3,085,459 2,973,693 60,593 26,730,616
Employee stock options exercised............. 70,313 - 703 389,518
Employee stock purchase plan................. 15,655 - 157 91,672
Exchange of Class B shares for Class A shares 2,375 (2,375) - -
----------------------------------------------------------------------------------------------------------
Balance January 30, 1993..................... 3,173,802 2,971,318 61,453 27,211,806
Employee stock options exercised............. 2,812 49,697 525 149,053
Employee stock purchase plan................. 27,115 - 271 122,190
Exchange of Class B shares for Class A shares 65,000 (65,000) - -
----------------------------------------------------------------------------------------------------------
Balance January 29, 1994..................... 3,268,729 2,956,015 $62,249 $27,483,049
==========================================================================================================
</TABLE>
Dividends may be declared and paid on Class A Common Stock without
being paid on Class B Common Stock. No dividend may be paid on Class B
Common Stock without equal amounts paid concurrently on Class A Common
Stock. Holders of Class A Common Stock have one-tenth vote per share
and are entitled to elect 25% of the Board of Directors so long as the
number of outstanding shares of Class A Common Stock is at least 10% of
the total of all shares of Common Stock outstanding. Holders of Class B
Common Stock have one vote per share. Holders of Class B Common Stock
have the right to convert their shares at any time for an equivalent
number of shares of Class A Common Stock.
In June 1986, the stockholders approved an Employee Stock Purchase
Plan. The plan, as amended in June, 1992, provides that employees may
purchase quarterly, through payroll deductions, up to 250 shares of
Class A Common Stock at 85% of the market value. Of the original
1,250,000 shares provided for under this plan, 1,089,805 shares
remained available for issuance as of January 29, 1994.
As of January 29, 1994, January 30, 1993, and February 1, 1992, the
Company held 521,625 shares of Class A Common Stock and 175,957 shares
of Class B Common Stock as treasury shares.
F-13
<PAGE>
<TABLE>
<CAPTION>
Dairy Mart Convenience Stores, Inc. and Subsidiaries
- - ------------------------------------------------------------------------------------------------------------------------------------
8. Stock Option Plan: The Company adopted Stock Option Plans in 1983, 1985 and 1990 providing for the granting to employees of up to
an aggregate of 226,875 shares of Class B Common Stock and 750,000 shares of Class A Common Stock. The Company
granted incentive stock options pursuant to these Plans totalling 100,500, 10,000 and 150,000 in fiscal 1994,
1993 and 1992, respectively. At January 29, 1994, the Company had available for grant under these Plans
options to purchase 24,508 shares of Class B Common Stock and 120,938 shares of Class A Common Stock, after
considering the lapse of options previously granted. In addition to the incentive stock options granted under
the above Plans, the Company has granted non-qualified stock options which are not part of a specific plan. A
summary of activity for all stock options during the fiscal year ended January 29, 1994 is as follows:
-------------------------------------------------------------------------------------------------------------------
Net
Options Options Options Options
Plan or Fiscal Stock Outstanding Granted Options Outstanding Exercisable
Year Type Option Price January 30, 1993 (Lapsed) Exercised January 29, 1994 January 29, 1994
-------------------------------------------------------------------------------------------------------------------
Incentive Stock Options:
<S> <C> <C> <C> <C> <C>
1983 Plan Class B $3.46 to $5.50 91,508 (4,011) (49,697) 37,800 37,800
1985 Plan Class A $6.20 to $10.75 301,500 58,250 - 359,750 252,750
1990 Plan Class A $4.60 to $7.25 219,375 (3,438) (2,812) 213,125 120,938
-------------------------------------------------------------------------------------------------------------------
Total Incentive Stock Options 612,383 50,801 (52,509) 610,675 411,488
-------------------------------------------------------------------------------------------------------------------
Non-qualified Stock Options:
1986 Class B $ 4.00 12,750 - - 12,750 12,750
1987 Class A $ 8.80 11,250 (1,250) - 10,000 10,000
1991 Class A $ 4.60 5,000 - - 5,000 5,000
-------------------------------------------------------------------------------------------------------------------
Total Non-qualified Stock Options 29,000 (1,250) - 27,750 27,750
-------------------------------------------------------------------------------------------------------------------
Total Stock Options 641,383 49,551 (52,509) 638,425 439,238
===================================================================================================================
</TABLE>
F-14
<PAGE>
Dairy Mart Convenience Stores, Inc. and Subsidiaries
- - ------------------------------------------------------------------------------
9. Gasoline A summary of gasoline operations for the years ended
Operations: January 29, 1994, January 30, 1993 and February 1,
1992 is as follows:
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------
1994 1993 1992
-----------------------------------------------------------------------------
<S> <C> <C> <C>
(in thousands)
Gasoline gallons sold........................ 206,365 196,703 189,625
Gasoline revenues............................ $217,289 $214,087 $211,152
Cost of gasoline sold........................ 191,969 194,110 192,340
Depreciation................................. 2,025 1,916 1,789
Capital expenditures......................... 952 2,128 2,118
Net book value of gasoline equipment......... 11,300 12,373 12,161
=============================================================================
</TABLE>
F-15
<PAGE>
Dairy Mart Convenience Stores, Inc. and Subsidiaries
- - --------------------------------------------------------------------------------
10. Employee The Company provides benefits to qualified employees through a
Benefit defined contribution profit sharing plan. Contributions under
Plans: this plan are made annually in amounts determined by the
Company's Board of Directors. The Company recorded a provision
for contributions under this plan of $100,000, $100,000 and
$400,000 for fiscal 1994, 1993 and 1992, respectively.
Effective January 1, 1993, the profit sharing plan was amended
pursuant to section 401(k) of the Internal Revenue Code
enabling eligible employees to contribute up to 15% of their
annual compensation to the plan, with the Company matching 25%
of such contributions up to 6% of the employees' annual
compensation. Matching contributions from the Company for
fiscal 1994 were $181,000. The Company does not offer any
additional postretirement and postemployment benefits to its
employees.
F-16
<PAGE>
Dairy Mart Convenience Stores, Inc. and Subsidiaries
- - --------------------------------------------------------------------------------
11. Commitments At January 29, 1994, the Company is contingently liable for
and outstanding letters of credit amounting to $11,569,000. The
Contingencies: Company is also contingently liable as guarantor on certain
loans obtained by convenience store operators to finance the
purchase of equipment and initial inventory in the
approximate amount of $1,200,000 at January 29, 1994. In
consideration of these guarantees, the Company participates
with the lending institutions in the interest paid on these
obligations which are secured by inventory and equipment
owned by the convenience store operators.
The Company has certain environmental contingencies related
to the ongoing costs to comply with federal, state and local
environmental laws and regulations, including costs for
assessment, compliance, remediation and certain capital
expenditures related to its gasoline operations. In the
ordinary course of business, the Company is involved in
environmental assessment and remediation activities with
respect to releases of regulated substances from existing
and previously operated retail gasoline facilities. The
Company accrues its estimates of all costs to be incurred
for assessment and remediation for known releases. These
accruals are adjusted if and when new information becomes
known. Due to the nature of such releases, the actual costs
of assessment and remediation may vary significantly from
year to year. At January 29, 1994, the Company had recorded
an accrual of $2,219,000 for such costs. The Company is
entitled to reimbursements of a portion of the above costs
from various state environmental trust funds based upon
compliance with the terms and conditions of such funds. At
January 29, 1994, the Company had recorded a reimbursement
receivable of $1,227,000. Additionally, under current
federal and state regulatory programs, the Company will be
obligated by December, 1998 to upgrade or replace most of
its existing underground storage tanks ("USTs"). The Company
presently estimates that it will be required to make capital
expenditures related to the upgrading or replacing of USTs
ranging from approximately $16.0 million to $20.0 million in
the aggregate through December, 1998, which capital
expenditures could be reduced for locations which may be
closed in lieu of the capital costs of compliance. The
Company's estimates of costs to be incurred for
environmental assessment and remediation and for UST
upgrading and other regulatory compliance are based on
factors and assumptions that could change due to
modifications of regulatory requirements, detection of
unanticipated environmental conditions or other unexpected
circumstances.
In fiscal 1989, the Company entered into agreements for the
wholesale supply of various grocery items to its Northeast
and Midwest region stores. Under the supply agreement, the
Company is obligated to annually purchase a minimum amount
of merchandise for a period of ten years. The level of
purchases was achieved during the first six years of the
agreement and management believes it is readily achievable
for the balance of the agreement. Prices to be charged by
the supplier must be competitive.
The Company is party to an employment agreement with the
Chairman of the Board of the Company for a five year term
that began on February 2, 1992 and ends on January 31, 1997,
unless terminated earlier. Under the employment agreement,
Mr. Nirenberg receives an annual salary of $500,000, payable
in installments according to the Company's normal
compensation policy, plus customary fringe benefits.
The Company is party to a number of lawsuits which have
arisen in the ordinary course of business. Management does
not believe the outcome of this litigation will have a
material impact on the Company's results of operations or
financial position.
F-17
<PAGE>
Dairy Mart Convenience Stores, Inc. and Subsidiaries
- - --------------------------------------------------------------------------------
12. Nonrecurring In March 1993, the Company announced that it was downsizing
Charge for and consolidating its three administrative offices into its
Restructuring: new Corporate headquarters facility in Enfield, Connecticut.
The Company historically maintained administrative offices
in Enfield, Connecticut, Louisville, Kentucky and Cuyahoga
Falls, Ohio. In fiscal 1993, the Company recorded a
nonrecurring charge of $5,200,000 primarily related to
severance, relocation and other personnel related costs
associated with the Company's restructuring.
F-18
<PAGE>
EXHIBIT 4.1
================================================================================
INDENTURE
Dated as of March 3, 1994
by and among
DAIRY MART CONVENIENCE STORES, INC.
AND
ITS SUBSIDIARIES EXECUTING A SIGNATURE PAGE HERETO,
as Guarantors
AND
SOCIETY NATIONAL BANK,
as Trustee
------------------------------------
$75,000,000
10 1/4% Senior Subordinated Notes due 2004
================================================================================
<PAGE>
CROSS REFERENCE TABLE /1/
<TABLE>
<CAPTION>
TIA Indenture
Section Section
<S> <C>
310 (a) (1)................................................... 7.10
(a) (2)................................................... 7.10
(a) (3)................................................... N.A./2/
(a) (4)................................................... N.A.
(b)....................................................... 7.10
(c)....................................................... N.A.
311 (a)....................................................... 7.11
(b)....................................................... 7.11
(c)....................................................... N.A.
312 (a)....................................................... 2.05
(b)....................................................... 12.03
(c)....................................................... 12.03
313 (a)....................................................... 7.06
(b) (1)................................................... N.A.
(b) (2)................................................... 7.06
(c)....................................................... 12.02
(d)....................................................... 7.06
314 (a)....................................................... 4.02
(c) (1)................................................... 12.04
(c) (2)................................................... 12.04
(c) (3)................................................... N.A.
(e)....................................................... 12.05
(f)....................................................... 4.03
315 (a)....................................................... 7.01
(b)....................................................... 7.05
(c)....................................................... 7.01
(e)....................................................... 6.11
316 (a) (last sentence)....................................... 2.08
(a) (1) (A)............................................... 6.05
(a) (1) (B)............................................... 6.04
(a) (2)................................................... N.A.
(b)....................................................... 6.07
317 (a) (1)................................................... 6.08
(a) (2)................................................... 6.09
(b)....................................................... 2.04
318 (a)....................................................... 12.01
- - ------------------------------
</TABLE>
/1/. Note: This Cross Reference Table shall not, for any purpose, be deemed
to be part of this Indenture.
/2/. N.A. means Not Applicable.
i
<PAGE>
TABLE OF CONTENTS/3/
-
<TABLE>
<CAPTION>
Page
----
ARTICLE 1
DEFINITIONS AND INCORPORATION BY REFERENCE
<S> <C> <C>
SECTION 1.01. Definitions............................................... 1
SECTION 1.02. Other Definitions......................................... 17
SECTION 1.03. Incorporation by Reference of Trust Indenture Act......... 17
SECTION 1.04. Rules of Construction..................................... 18
SECTION 1.05. Acts of Holders........................................... 18
<CAPTION>
ARTICLE 2
THE SECURITIES
<S> <C> <C>
SECTION 2.01. Form and Dating........................................... 19
SECTION 2.02. Execution and Authentication.............................. 20
SECTION 2.03. Registrar and Paying Agent................................ 21
SECTION 2.04. Paying Agent to Hold Money in Trust....................... 21
SECTION 2.05. Securityholder Lists...................................... 22
SECTION 2.06. Transfer and Exchange..................................... 22
SECTION 2.07. Replacement Securities.................................... 23
SECTION 2.08. Outstanding Securities; Determinations of Holders' Action. 23
SECTION 2.09. Temporary Securities...................................... 24
SECTION 2.10. Cancellation.............................................. 25
SECTION 2.11. CUSIP Numbers............................................. 25
SECTION 2.12. Defaulted Interest........................................ 25
<CAPTION>
ARTICLE 3
REDEMPTION AND REPURCHASE
<S> <C> <C>
SECTION 3.01. Right to Redeem; Notices to Trustee....................... 26
SECTION 3.02. Public Equity Offering Redemption......................... 26
SECTION 3.03. Selection of Securities to be Redeemed.................... 26
SECTION 3.04. Notice of Redemption...................................... 27
SECTION 3.05. Effect of Notice of Redemption............................ 27
SECTION 3.06. Deposit of Redemption Price............................... 28
SECTION 3.07. Securities Redeemed in Part............................... 28
SECTION 3.08. Offer to Repurchase Upon Change of Control................ 28
SECTION 3.09. Offer to Repurchase With Cash
Proceeds from Certain Asset Dispositions.................. 29
- - ------------------
/3/ This Table of Contents shall not, for any purpose, be deemed to be part of
- this Indenture.
</TABLE>
ii
<PAGE>
<TABLE>
<CAPTION>
ARTICLE 4
COVENANTS
Page
----
<S> <C> <C>
SECTION 4.01. Payment of Securities.................................... 32
SECTION 4.02. SEC Reports.............................................. 32
SECTION 4.03. Compliance Certificates.................................. 32
SECTION 4.04. Further Instruments and Acts............................. 33
SECTION 4.05. Maintenance of Office or Agency.......................... 33
SECTION 4.06. Limitation on Additional Indebtedness
and New Operating Leases................................. 34
SECTION 4.07. Limitation on Restricted Payments........................ 34
SECTION 4.08. Limitation on Investments................................ 37
SECTION 4.09. Limitation on Liens...................................... 36
SECTION 4.10. Limitation on Dividends and Other Payment
Restrictions Affecting Subsidiaries...................... 36
SECTION 4.11. Limitation on Sale-Leaseback Transactions................ 37
SECTION 4.12. Limitation on Transactions with Affiliates............... 37
SECTION 4.13. Limitation on Other Senior Subordinated Indebtedness..... 38
SECTION 4.14. Additional Guarantors.................................... 38
SECTION 4.15. Use of Proceeds.......................................... 38
SECTION 4.16. Limitation on Sales of Assets............................ 39
SECTION 4.17. Payments of Taxes and Other Claims....................... 40
SECTION 4.18. Corporate Existence...................................... 41
SECTION 4.19. Maintenance of Properties and Insurance.................. 41
SECTION 4.20. Conflicting Agreements................................... 42
SECTION 4.21. Investment Company Act................................... 42
SECTION 4.22. Payments for Consents.................................... 42
SECTION 4.23. Covenant to Comply with Securities Laws
Upon Purchase of Securities.............................. 42
<CAPTION>
ARTICLE 5
SUCCESSOR CORPORATION
<S> <C> <C>
SECTION 5.01. When the Company or any Guarantor May Merge, Etc........ 42
<CAPTION>
ARTICLE 6
DEFAULTS AND REMEDIES
<S> <C> <C>
SECTION 6.01. Events of Default........................................ 44
SECTION 6.02. Acceleration............................................. 46
SECTION 6.03. Other Remedies........................................... 47
SECTION 6.04. Waiver of Past Defaults.................................. 47
</TABLE>
iii
<PAGE>
<TABLE>
Page
----
<S> <C> <C>
SECTION 6.05. Control by Majority...................................... 47
SECTION 6.06. Limitation on Suits...................................... 47
SECTION 6.07. Rights of Holders to Receive Payment..................... 48
SECTION 6.08. Collection Suit by Trustee............................... 48
SECTION 6.09. Trustee May File Proofs of Claim......................... 48
SECTION 6.10. Priorities............................................... 49
SECTION 6.11. Undertaking for Costs.................................... 49
SECTION 6.12. Waiver of Stay, Extension or Usury Laws.................. 50
<CAPTION>
ARTICLE 7
TRUSTEE
<S> <C> <C>
SECTION 7.01. Duties of Trustee........................................ 50
SECTION 7.02. Rights of Trustee........................................ 51
SECTION 7.03. Individual Rights of Trustee............................. 52
SECTION 7.04. Trustee's Disclaimer..................................... 52
SECTION 7.05. Notice of Defaults....................................... 52
SECTION 7.06. Reports by Trustee to Holders............................ 52
SECTION 7.07. Compensation and Indemnity............................... 53
SECTION 7.08. Replacement of Trustee................................... 53
SECTION 7.09. Successor Trustee by Merger.............................. 54
SECTION 7.10. Eligibility; Disqualification............................ 55
SECTION 7.11. Preferential Collection of Claims Against the Company.... 55
<CAPTION>
ARTICLE 8
SATISFACTION AND DISCHARGE OF INDENTURE;
DEFEASANCE OF CERTAIN OBLIGATIONS;
UNCLAIMED MONEYS
<S> <C> <C>
SECTION 8.01. Satisfaction and Discharge of Indenture.................. 55
SECTION 8.02. Application by Trustee of Funds Deposited
for Payment of Securities................................ 59
SECTION 8.03. Repayment of Moneys Held by Paying Agent................. 59
SECTION 8.04 Return of Moneys Held by Trustee and
Paying Agent Unclaimed for Three Years................... 59
<CAPTION>
ARTICLE 9
AMENDMENTS
<S> <C> <C>
SECTION 9.01. Without Consent of Holders............................... 60
SECTION 9.02. With Consent of Holders.................................. 60
</TABLE>
iv
<PAGE>
<TABLE>
Page
----
<S> <C> <C>
SECTION 9.03. Compliance with Trust Indenture Act...................... 61
SECTION 9.04. Revocation and Effect of Consents, Waivers and Actions... 62
SECTION 9.05. Notation on or Exchange of Securities.................... 62
SECTION 9.06. Trustee to Sign Supplemental Indentures.................. 62
SECTION 9.07. Effect of Supplemental Indentures........................ 63
<CAPTION>
ARTICLE 10
SUBORDINATION
<S> <C> <C>
SECTION 10.01. Securities Subordinated to Senior Indebtedness........... 63
SECTION 10.02. Priority and Payment Over of Proceeds in
Certain Events........................................... 63
SECTION 10.03. Payments to Be Made Prior to Dissolution................. 65
SECTION 10.04. Rights of Holders of Senior Indebtedness Not
to Be Impaired........................................... 66
SECTION 10.05. Authorization to Trustee to Take Action to
Effectuate Subordination................................. 66
SECTION 10.06. Subrogation.............................................. 66
SECTION 10.07. Obligations of Company Unconditional..................... 67
SECTION 10.8. Trustee Entitled to Assume Payments Not
Prohibited in Absence of Notice.......................... 67
SECTION 10.09. Right of Trustee to Hold Senior Indebtedness............. 68
<CAPTION>
ARTICLE 11
GUARANTEE OF SECURITIES
<S> <C> <C>
SECTION 11.01. Guarantee................................................ 68
SECTION 11.02. Agreement to Subordinate................................. 70
SECTION 11.03. Release of Guarantor..................................... 71
SECTION 11.04. Guarantor May Consolidate, etc., on Certain Terms........ 71
SECTION 11.05. Limitation on Guarantee.................................. 72
SECTION 11.06. Execution and Delivery of Guarantees..................... 72
SECTION 11.07. Successors............................................... 73
<CAPTION>
ARTICLE 12
MISCELLANEOUS
<S> <C> <C>
SECTION 12.01. Trust Indenture Act Controls............................. 73
SECTION 12.02. Notices.................................................. 73
SECTION 12.03. Communications by Holders with Other Holders............. 74
</TABLE>
v
<PAGE>
<TABLE>
Page
----
<S> <C> <C>
SECTION 12.04. Certificate and Opinion as to Conditions Precedent....... 74
SECTION 12.05. Statements Required in Certificate or Opinions........... 75
SECTION 12.06. Severability Clause...................................... 75
SECTION 12.07. Rules by Trustee, Paying Agent and Registrar............. 75
SECTION 12.08. Legal Holidays........................................... 75
SECTION 12.09. GOVERNING LAW............................................ 76
SECTION 12.10. No Recourse Against Others............................... 76
SECTION 12.11. Successors............................................... 76
SECTION 12.12. Multiple of Originals.................................... 76
SECTION 12.13. No Adverse Interpretation of Other Agreements............ 76
SECTION 12.14. Table of Contents, Headings, etc......................... 76
SECTION 12.15. Benefits of Indenture.................................... 76
SIGNATURES ......................................................... 78
EXHIBIT I - FORM OF SECURITY
EXHIBIT 2 - FORM OF NOTATION OF GUARANTEE ENDORSED ON
SECURITY
</TABLE>
vi
<PAGE>
INDENTURE, dated as of March 3, 1994, by and among DAIRY MART
CONVENIENCE STORES, INC., a Delaware corporation (the "Company"), each of the
subsidiaries of the Company executing a signature page hereto, as Guarantors
(as hereinafter defined), and SOCIETY NATIONAL BANK, as trustee (the
"Trustee").
The Company has authorized the issuance of the Securities (as hereinafter
defined), and to provide therefor, the Company and each of the Guarantors have
duly authorized the execution and delivery of this Indenture. All things
necessary to make the Securities, and each of the Guarantees (as hereinafter
defined), when duly issued and executed by the Company and each Guarantor and
authenticated and delivered hereunder, the valid obligations of the Company and
each Guarantor, and to make this Indenture a valid and binding agreement of
the Company and each Guarantor, in accordance with their respective terms,
have been done.
Each party agrees as follows for the benefit of the other party and for the
equal and ratable benefit of the Holders of the Company's 10 1/4% Senior
Subordinated Notes due 2004 (the "Securities"):
ARTICLE 1
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.01 Definitions.
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"Acquired Indebtedness" means Indebtedness of a Person existing at the time
such Person becomes a Subsidiary (or such Person is merged into the Company or a
Subsidiary) or assumed in connection with the acquisition of properties or
assets from any such Person and not incurred in connection with, or in
contemplation of, such Person becoming a Subsidiary or such acquisition.
"Acquired Operating Lease" means any Operating Lease of a Person existing
at the time such Person becomes a Subsidiary (or such Person is merged into the
Company or a Subsidiary) or assumed in connection with the acquisition of
properties or assets from any such Person after the Issue Date and not entered
into in connection with, or in contemplation of, such Person becoming a
Subsidiary or in contemplation of such acquisition, and includes any
replacements or renewals of any such Operating Lease.
"Affiliate" of any specified Person means any other Person, directly or
indirectly, controlling or controlled by or under direct or indirect common
control with such specified Person. For the purposes of this definition,
"control" when used with respect to any person means the power to direct the
management and policies of such Person, directly or indirectly, whether through
the ownership of voting securities, by contract or otherwise; and the terms
"controlling" and "controlled" have meanings correlative to the foregoing. A
specified Person beneficially owning 30% or more of the voting power of the
Voting Stock of a corporation will be
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presumed to control such corporation unless another Person beneficially owns
more Voting Stock than such specified Person beneficially owns and such other
Person has actual control. Notwithstanding the foregoing, the term Affiliate
shall not include any Wholly Owned Subsidiary which is a Guarantor but shall
include the Non-Recourse Subsidiary.
"Asset Disposition" means any sale, lease, sublease, transfer, issuance or
other disposition (or series of related sales, leases, subleases, transfers,
issuances or dispositions) of shares of Capital Stock of the Company, any
Subsidiary or the Non-Recourse Subsidiary (other than directors' qualifying
shares), property or other assets (each referred to for the purposes of this
definition as a "disposition"), by the Company, any Subsidiary or the Non-
Recourse Subsidiary, including any disposition by means of a merger,
consolidation, or similar transaction (other than (i) a disposition of inventory
at not less than fair market value in the ordinary course of business, (ii) a
disposition of obsolete assets in the ordinary course of business, (iii) a sale
or issuance of Capital Stock of the Company which is not Exchangeable Stock,
(iv) sales of individual assets in the ordinary course of business having a fair
market value of less than, and for consideration less than, $5,000, (v) any
disposition of assets of the Non-Recourse Subsidiary not constituting, together
with any related dispositions by the Non-Recourse Subsidiary, a sale of all or
substantially all of the assets of the Non-Recourse Subsidiary, and (vi) any
disposition to a Wholly Owned Subsidiary which is a Guarantor).
"Attributable Indebtedness" in respect of a Sale-Leaseback Transaction
means, as at the time of the Sale-Leaseback Transaction, the greater of (i) the
fair value of the property subject to such arrangement (as determined in good
faith by the Board of Directors) or (ii) the present value (discounted at the
interest rate borne by the Securities, compounded annually) of the total
obligations of the lessee for rental payments during the remaining term of the
lease included in such arrangement (including any period for which such lease
has been extended).
"Average Life" means, as of the date of determination, with respect to any
Indebtedness, the quotient obtained by dividing (i) the sum of the products of
the numbers of years from the date of determination to the dates of each
successive scheduled principal payment of such Indebtedness multiplied by the
amount of such principal payment by (ii) the sum of all such principal payments.
"beneficial owner" has the meaning ascribed thereto in Rules 13d-3 and 13d-
5 promulgated by the Commission under the Exchange Act, except that a person
shall be deemed to be the beneficial owner of all shares that such person has
the right to acquire, whether such right is exercisable immediately or only
after the passage of time; and the terms "beneficial ownership" and
"beneficially owns" have meanings correlative to the foregoing.
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"Board of Directors" means the Board of Directors of the Company or any
committee thereof duly authorized to act on behalf of such Board.
"Business Day" means any day that is not a Saturday, a Sunday or a day on
which the principal office of the Trustee or banking institutions in New York
are required to close.
"Capital Lease Obligations" of a Person means any obligation which is
required to be classified and accounted for as a capital lease on the face of a
balance sheet of such Person prepared in accordance with GAAP; the amount of
such obligation shall be the capitalized amount thereof, determined in
accordance with GAAP; and the stated maturity thereof shall be the date of the
last payment of rent or any other amount due under such lease prior to the first
date upon which such lease may be terminated by the lessee without payment of a
penalty.
"Capital Stock" means any and all shares, interests, rights to purchase,
warrants, options, participations or other equivalents of or interests in
(however designated) corporate stock, including any Preferred Stock.
"Change of Control" means the occurrence of any of the following events:
(i) any "person" or "group" (as such terms are used in Section 13(d) and 14(d)
of the Exchange Act), other than one or more Permitted Holders or any Person or
Persons controlled by one or more Permitted Holders, is or becomes the
"beneficial owner", directly or indirectly, of more than 50% of the total voting
power of the Voting Stock of the Company; (ii) during any period of two
consecutive years, individuals who at the beginning of such period constituted
the Board of Directors of the Company (together with any new directors whose
election by such Board of Directors or whose nomination for election by the
shareholders of the Company was approved by the Directors then still in office
who either were Directors at the beginning of such period or whose election or
nomination for Director was previously so approved) cease for any reason to
constitute a majority of the Board of Directors of the Company then in office;
(iii) the direct or indirect, sale, lease, exchange or other transfer of all or
substantially all of the assets of the Company to any "person" (as such term is
used in Section 13(d) or 14(d) of the Exchange Act), provided that the foregoing
shall not apply to the granting of Liens on such assets to the extent permitted
by this Indenture; (iv) the Permitted Holders cease to control at least 10% of
the total voting power of the Voting Stock of the Company; (v) any acceleration
of any Indebtedness under the New Credit Agreement occurs as a result of a
change in the beneficial ownership of the Capital Stock of the Company; or (vi)
the Company consolidates with or merges into another corporation or any Person
consolidates with or merges into the Company, in either event pursuant to a
transaction in which either (A) the outstanding Voting Stock of the Company is
changed into or exchanged for cash, securities or other property (other than any
such transaction where the outstanding Voting Stock of the Company is changed
into or exchanged
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for Voting Stock of the surviving corporation which is neither Redeemable Stock
nor Exchangeable Stock) or (B) the holders of a majority of the voting power of
the Voting Stock of the Company immediately prior to such transaction own,
directly or indirectly, less than a majority of the voting power of the Voting
Stock of the surviving corporation immediately after such transaction.
"Code" means the Internal Revenue Code of 1986, as from time to time
amended.
"Company Senior Indebtedness" means all Indebtedness of the Company under:
(i) the New Credit Agreement as in effect on the date hereof; and (ii) all
additional Indebtedness that is permitted under the Indenture that is not by its
terms subordinated to or pari passu with the Securities (it being understood
that Indebtedness permitted under the Indenture that is not by its terms
subordinated to or pari passu with the Securities shall not in any event
constitute Company Senior Indebtedness if such Indebtedness is subordinated by
its terms to any other Indebtedness that constitutes Company Senior
Indebtedness). Notwithstanding anything to the contrary in the foregoing,
Company Senior Indebtedness shall not include (w) the Company's 14.25%
Subordinated Debentures Due 2000, (x) any liability of the Company, any
Subsidiary or the Non-Recourse Subsidiary for state, local or other taxes, (y)
any Indebtedness between or among the Company, any Subsidiary or the Non-
Recourse Subsidiary, or (z) any Indebtedness of the Company, any Subsidiary or
the Non-Recourse Subsidiary incurred for the purchase of goods or materials or
for services obtained in the ordinary course of business (other than
Indebtedness incurred under any revolving credit facility under the New Credit
Agreement for such purpose).
"Consolidated Fixed Charge Coverage Ratio" of the Company for any period
means the ratio, on a pro forma basis, of (i) the sum of Consolidated Net
Income, Consolidated Fixed Charges and Consolidated Tax Expense, plus
depreciation, and without duplication, all amortization, in each case, for such
period, of the Company and its subsidiaries (other than the Non-Recourse
Subsidiary) on a consolidated basis, as determined in accordance with GAAP, to
(ii) Consolidated Fixed Charges; provided, that in calculating Consolidated
Fixed Charges on a pro forma basis, any Indebtedness bearing a floating interest
rate shall be computed as if the rate in effect on the date of computation has
been the applicable rate for the entire period and the aggregate amount of
available commitments under any revolving credit facility (excluding any letter
of credit facility) of the Company or any Subsidiary will be deemed to be
outstanding.
"Consolidated Fixed Charges" of the Company means, for any period, the sum
of: (i) the aggregate amount of interest which, in conformity with GAAP, would
be set opposite the caption "interest expense" or any like caption on an income
statement for the Company and its subsidiaries (other than the Non-
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Recourse Subsidiary) on a consolidated basis (including, without limitation,
imputed interest included on Capital Lease Obligations, all commissions,
discounts and other fees and charges owed with respect to letters of credit
and bankers' acceptance financing, the net costs associated with any Interest
Rate Agreement, foreign currency exchange agreement, option or futures
contract or other similar agreement or arrangement relating to interest rates
or foreign exchange rates); (ii) an amount equal to one-third of Consolidated
Operating Lease Payments; and (iii) dividends on Preferred Stock of the
Company or a Subsidiary held by Persons other than the Company or a Wholly
Owned Subsidiary which is a Guarantor. For purposes of clause (iii) of the
preceding sentence, dividends shall be deemed to be an amount equal to the
actual dividends paid divided by one minus the applicable combined federal,
state and local income tax rate of the Company (expressed as a decimal), on a
consolidated basis, for the fiscal year immediately preceding the date of the
transaction giving rise to the need to calculate Consolidated Fixed Charges.
"Consolidated Net Income" means, for the Company for any period, the net
income of the Company and its subsidiaries (other than, except as expressly
provided below, the Non-Recourse Subsidiary) determined on a consolidated basis
in accordance with GAAP; however, there will not be included in such
Consolidated Net Income: (i) subject to clause (iv) below, any net income of
the Non-Recourse Subsidiary or any Person which is not a Subsidiary, except that
(A) the Company's equity in the net income of the Non-Recourse Subsidiary or any
such Person for such period shall be included in such Consolidated Net Income up
to the aggregate amount of cash actually distributed by the Non-Recourse
Subsidiary (including as a result of sales by the Non-Recourse Subsidiary of
Capital Stock pledged or delivered by borrowers who are franchisees of
convenience stores of the Company or any Subsidiary) or any such Person during
such period to the Company or a Guarantor as a dividend or other distribution
(subject, in the case of a dividend or other distribution to a Guarantor, to the
limitations contained in clause (iii) below) and (B) the Company's equity in a
net loss of the Non-Recourse Subsidiary or any such Person for such period shall
be included in determining such Consolidated Net Income (ii) any net income (but
not net loss) of any Person acquired by the Company or a Subsidiary in a pooling
of interests transaction for any period prior to the date of such acquisition;
(iii) any net income of any Subsidiary if such Subsidiary is subject to
restrictions, directly or indirectly, on the payment of dividends or the making
of distributions by such Subsidiary, directly or indirectly, to the Company,
except that (A) the Company's equity in the net income of any such Subsidiary
for such period shall be included in such Consolidated Net Income up to the
aggregate amount of cash actually distributed by such Subsidiary during such
period to the Company or a Guarantor as a dividend or other distribution
(subject, in the case of a dividend or other distribution to another Subsidiary,
to the limitation contained in this clause) and (B) the Company's equity in a
net loss of any such Subsidiary for such period shall be included in determining
such Consolidated Net Income; (iv) any gain (but not loss) realized upon the
sale or other disposition of any property, plant or
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equipment of the Company or its consolidated subsidiaries (including the Non-
Recourse Subsidiary and including pursuant to any Sale-Leaseback Transaction)
which is not sold or otherwise disposed of in the ordinary course of business
and any gain (but not loss) realized upon the sale or other disposition of any
Capital Stock of any Person (except for sales by the Non-Recourse Subsidiary of
Capital Stock pledged or delivered by borrowers who are franchisees of
convenience stores of the Company or any Subsidiary up to the aggregate amount
of cash actually distributed by the Non-Recourse Subsidiary during such period
to the Company or a Guarantor as a dividend or other distribution); (v) any
gains or losses from currency exchange transactions not in the ordinary course
of business consistent with past practice; (vi) any gains (but not losses)
attributable to any extraordinary items; (vii) all extraordinary expenses,
including as a result of the write-off of deferred loan costs in connection with
the application of the proceeds from the sale of the Securities; (viii) the
amount of any premium payable on the Company's 14.25% Subordinated Debentures
Due 2000 as a result of prepayment of such Debentures with the proceeds of the
Securities in accordance with the Prospectus; and (ix) the cumulative effect of
a change in accounting principles.
"Consolidated Net Worth" of any Person means the total of the amounts shown
on the balance sheet of such Person and its consolidated subsidiaries
(including, with respect to the Company, the Non-Recourse Subsidiary),
determined on a consolidated basis in accordance with GAAP, as of the end of the
most recent fiscal quarter of such Person ending prior to the taking of any
action for the purpose of which the determination is being made, as (i) the par
or stated value of all outstanding Capital Stock of such Person plus (ii) paid-
in capital or capital surplus relating to such Capital Stock plus (iii) any
retained earnings or earned surplus less (A) any accumulated deficit, (B) any
amounts attributable to Redeemable Stock (only to the extent such amounts shall
be due prior to the final maturity of the Securities) and (C) any amounts
attributable to Exchangeable Stock.
"Consolidated Operating Lease Payments" means for any Reference Period: (i)
the aggregate amount of all rents paid or payable (net of sublease income) by
the Company or any of its consolidated subsidiaries (other than the Non-Recourse
Subsidiary) under all Operating Leases of the Company or any of its consolidated
subsidiaries, all as determined in accordance with GAAP; (ii) less $2.5 million.
"Consolidated Tax Expense" means, for the Company for any period, the
provision (benefit) for taxes based on income and profits (or losses) of the
Company and its subsidiaries (other than the Non-Recourse Subsidiary) on a
consolidated basis to the extent such income or profits (or losses) were
included in computing Consolidated Net Income of the Company for such period.
"Default" means any event which is, or after notice or passage of time, or
both, would be, an Event of Default.
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"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Exchangeable Stock" means any Capital Stock which is exchangeable or
convertible into another security (other than Capital Stock of the Company which
is neither Exchangeable Stock nor Redeemable Stock).
"Existing Indebtedness" means Indebtedness of the Company and each
Subsidiary in existence on the Issue Date.
"FINOP" means Financial Opportunities, Inc., a Kentucky corporation,
licensed as an SBIC by the SBA, all of the Capital Stock of which is owned by
the Company or a Wholly Owned Subsidiary.
"Fixed Assets" means assets of the Company, a Subsidiary or a Non-Recourse
Subsidiary which are "fixed assets" as defined in accordance with GAAP.
"Franchise Agreements" means franchise agreements entered into by the
Company or any Subsidiary in the ordinary course of business in connection with
the franchising of the Company's convenience retail stores.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as may be approved by a significant segment of the accounting
profession of the United States, which are applicable as of the date of
determination; provided, however, that these definitions and all ratios and
calculations contained in the covenants set forth in Sections 4.06, 4.07, 4.11
and 4.16 shall be determined in accordance with GAAP as in effect and applied by
the Company on the Issue Date, consistently applied.
"Guarantee" means the guarantee by a Guarantor of the Company's obligations
under the Securities.
"Guarantor" means each Subsidiary executing a signature page hereto on the
Issue date and any Person who becomes a Guarantor by execution of a supplement
to this Indenture pursuant to Section 4.14 hereof, and any of their respective
successors or assigns.
"Guarantor Subordinated Indebtedness" means, with respect to a specified
Guarantor, any Indebtedness of such Guarantor (whether outstanding on the Issue
Date or thereafter Incurred) which is subordinate or junior in right of payment
to the Guarantee of such Guarantor.
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"Holder" or "Securityholder" means a Person in whose name a Security is
registered on the Registrar's books.
"Incurrence" means the incurrence, creation, assumption, issuance,
guarantee of the payment of, or in any other manner becoming liable with respect
to, the payment of, any Indebtedness. "Incur" and "Incurred" shall have a
comparable meaning.
"Indebtedness" means, with respect to any Person, without duplication, (i)
the principal of and premium (if any) in respect of (A) indebtedness of such
Person for money borrowed and (B) indebtedness evidenced by Securities,
debentures, bonds or other similar instruments (including purchase money
obligations) for payment of which such Person is responsible or liable; (ii) all
Capital Lease Obligations of such Person; (iii) all obligations of such Person
issued or assumed as the deferred purchase price of property, all conditional
sale obligations of such Person and all obligations of such Person under any
title retention agreement (but excluding trade accounts payable arising in the
ordinary course of business); (iv) all obligations of such Person for the
reimbursement of any obligor on any letter of credit, banker's acceptance,
Securities purchase facility or similar credit transaction (other than
obligations with respect to letters of credit securing obligations (other than
obligations described in (i) through (iii) above) entered into in the ordinary
course of business of such Person to the extent such letters of credit are not
drawn upon or, if and to the extent drawn upon, such drawing is reimbursed no
later than the third business day following receipt by such Person of a demand
for reimbursement following payment on the letter of credit); (v) all
obligations of the type referred to in clauses (i) through (iv) of other Persons
and all dividends of other Persons for the payment of which, in either case,
such Person is responsible or liable as obligor, guarantor or otherwise; (vi)
all obligations of the type referred to in clauses (i) through (v) of other
Persons secured by any Lien on any property or asset of such Person (whether or
not such obligation is assumed by such Person), the amount of such obligation
being deemed to be the lesser of the value of such property or assets or the
amount of the obligation so secured; (vii) Redeemable Stock of such Person; and
(viii) with respect to the Company or any Subsidiary, Preferred Stock of any
Subsidiary (other than Preferred Stock held by the Company or any Wholly Owned
Subsidiary which is a Guarantor); provided, however, that Indebtedness will not
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include endorsements of negotiable instruments for collection in the ordinary
course of business.
"Indenture" means this Indenture, as amended or supplemented from time to
time in accordance with the terms hereof, including the provisions of the TIA
that are deemed to be a part hereof.
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"Interest Rate Agreement" means the obligation of any Person pursuant to
any interest rate swap agreement, interest rate collar agreement, currency
exchange agreement, or other similar agreement or arrangement entered into by
such Person in the ordinary course of business.
"Investment" in any Person means any loan or advance to, any acquisition of
Capital Stock of, equity interest in, obligation or other security of, or
capital contribution to or other investment in, such Person.
"Issue Date" means the date on which the Securities are originally issued.
"Lien" means any mortgage, lien, pledge, charge, security interest or
encumbrance of any kind, whether or not filed, recorded or otherwise perfected
under applicable law (including any conditional sale or other title retention
agreement, any lease in the nature thereof, any option or other agreement to
sell or give any security interest in and any filing or other agreement to give
any financing statement under the Uniform Commercial Code (or equivalent
statutes) of any jurisdiction).
"Net Available Cash Proceeds" from an Asset Disposition means cash payments
received (including any cash payments received by way of deferred payment of
principal pursuant to a Security or installment receivable or otherwise, but
only as and when received, but excluding any other consideration received in the
form of assumption by the acquiring Person of Indebtedness or other obligations
relating to such properties or assets or received in any other noncash form)
therefrom, in each case net of all legal, title and recording tax expenses,
commissions and other fees and expenses incurred, and all Federal, state,
provincial, foreign and local taxes required to be accrued as a liability under
GAAP, as a consequence of such Asset Disposition, and in each case net of all
payments made on any Indebtedness which is secured by any assets subject to such
Asset Disposition, in accordance with the terms of any Lien upon or other
security agreement of any kind with respect to such assets, or which must by its
terms, or in order to obtain a necessary consent to such Asset Disposition, or
by applicable law, be repaid out of the proceeds from such Asset Disposition,
and net of all distributions and other payments required to be made to minority
interest holders in Subsidiaries or joint ventures as a result of such Asset
Disposition.
"Net Proceeds" means, with respect to a specified transaction, total cash
proceeds net of all customary legal expenses, commissions and other fees and
expenses incurred and all Federal, state, provincial, foreign and local taxes
required to be accrued as a liability under GAAP as a consequence of, and in
connection with, such transaction.
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"New Credit Agreement" means the Credit Agreement dated as of ,
1994, among the Company, Fleet Bank, National Association and Society National
Bank, as such agreement may be amended, supplemented or otherwise modified from
time to time and any agreement evidencing any refunding, replacement,
refinancing or renewal, in whole or in part, of the Indebtedness permitted to be
borrowed thereunder on the date of execution thereof. The term New Credit
Agreement shall include all agreements executed in connection therewith on the
date hereof, including, without limitation, any agreement executed by the
Guarantors to evidence any guarantee by the Guarantors of the Company's
obligations under the New Credit Agreement and shall also include any agreements
evidencing amendments, supplements or modifications of such agreements.
"New Operating Leases" means Operating Leases entered into by the Company
or any of its consolidated subsidiaries (other than the Non-Recourse Subsidiary)
following the Issue Date for the purpose of leasing real property, gasoline
equipment or other equipment in connection with the operation of retail
convenience stores not owned, operated or franchised by the Company or any of
its consolidated subsidiaries on or prior to the Issue Date; provided, however,
that the term New Operating Leases shall not be deemed to include Acquired
Operating Leases.
"Non-Convertible Capital Stock" means, with respect to any corporation, any
nonconvertible Capital Stock of such corporation and any Capital Stock of such
corporation convertible solely into nonconvertible common stock of such
corporation which is not Redeemable Stock or Exchangeable Stock; provided,
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however, that Non-Convertible Capital Stock does not include any Redeemable
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Stock or Exchangeable Stock.
"Non-Recourse Subsidiary" means FINOP, provided that:
(a) no portion of FINOP's Indebtedness or any of its other obligations
(contingent or otherwise), (i) is guaranteed by the Company or any
Subsidiary, (ii) is recourse to or obligates the Company or any
Subsidiary in any way or (iii) subjects any property or asset of the
Company or any Subsidiary, directly or indirectly, contingently or
otherwise, to satisfaction thereof;
(b) neither the Company nor any Subsidiary has any contract, agreement,
arrangement, understanding with FINOP or is subject to an obligation
of any kind, written or oral, other than on terms no less favorable
to the Company or such Subsidiary than those that might be obtained
at the time from Persons who are not Affiliates of the Company;
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(c) neither the Company nor any Subsidiary has any obligation (i) to
subscribe for additional shares of Capital Stock or other equity
interests of FINOP or (ii) to maintain or preserve FINOP's financial
condition or to cause FINOP to achieve certain levels of operating
results;
(d) FINOP continues to be an SBIC, regulated and licensed as such by the
SBA, and performs no activities or engages in no business other than
as an SBIC;
(e) FINOP maintains a bank account or accounts separate from those of the
Company and each Subsidiary and does not otherwise commingle its
funds or any other properties or assets with those of the Company or
any Subsidiary;
(f) the Board of Directors of FINOP contains at least one independent
director who is not an officer, director, employee, shareholder
(other than a Shareholder owning less than 1% of the outstanding
Capital Stock of any class of the Company's or any Subsidiary's
Capital Stock) or Affiliate of the Company or any Subsidiary; and
(g) the sum of Indebtedness and aggregate liquidation preference of
Preferred Stock of FINOP does not exceed $20 million, unless at the
time of the Incurrence of additional Indebtedness or the issuance of
Preferred Stock by FINOP, the Consolidated Fixed Charge Coverage
Ratio for the Company is equal to or greater than 2.0 to 1.0.
At the time FINOP ceases to meet any of the requirements set forth above
for characterization as the Non-Recourse Subsidiary, FINOP shall be deemed to be
a Subsidiary for all purposes of the Indenture if, at such time, it is properly
characterized as such in accordance with the definition of "Subsidiary" set
forth below.
"Officer" means, with respect to any corporation, the Chairman of the
Board, the Chief Executive Officer, the President, any Vice President, the
Treasurer or the Secretary of such corporation.
"Officers' Certificate" means a written certificate containing the
information specified in Sections 12.04 and 12.05 herein, signed in the name of
the Company, any Guarantor or other obligor on the Securities, as the case may
be, by any two of its Officers, and delivered to the Trustee.
"Operating Lease" shall mean, as applied to any Person, any lease with
respect to which such Person is the lessee (including, without limitation,
leases which may be terminated by the lessee at any time) of any property
(whether real, personal or
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mixed) which is not a lease which is required to be classified and accounted for
as a capital lease on the face of the balance sheet of such Person prepared in
accordance with GAAP.
"Opinion of Counsel" means a written opinion containing the information
specified in Sections 12.04 and 12.05 hereof, rendered by legal counsel who is
reasonably acceptable to the Trustee.
"Permitted Holders" means Frank Colaccino and his Related Parties, or in
the event of the death or mental or physical incapacity of Frank Colaccino, any
of Gregory Landry, Robert Stein or Mitchell Kupperman and their respective
Related Parties.
"Permitted Indebtedness" means (i) Indebtedness incurred by the Company
under the New Credit Agreement as in effect on the Issue Date, provided that
such amount shall be permanently reduced by (x) the amount of any revolving loan
commitment reductions from time to time effected under the New Credit Agreement,
and (y) the amount of any prepayments of such Indebtedness which is not
reborrowed and invested as described in the first proviso set forth in Section
4.16 hereof, and provided further that the aggregate amount of all Indebtedness
permitted to be outstanding thereunder at any one time shall not exceed $30.0
million and the aggregate amount of Indebtedness evidenced by all letters of
credit permitted to be outstanding thereunder (including the outstanding
principal amount of any loans advanced for drawings thereunder) at any one time
shall not exceed $15.0 million); (ii) guarantees by Subsidiaries of the
Company's Indebtedness referred to in clause (i) of this paragraph; (iii)
Existing Indebtedness and Indebtedness represented by the Securities; (iv)
Indebtedness issued to repay, refund or refinance Indebtedness of the Company or
any Subsidiary permitted under clauses (i), (ii) and (iii) of this paragraph
(such Indebtedness being referred to herein as "Refinancing Indebtedness"),
provided such Refinancing Indebtedness (a) does not exceed the principal or
accreted amount of, (b) ranks in right of payment to the Securities no more than
to the same extent as, (c) has an Average Life and Stated Maturity equal to, or
greater than, and (d) shall not provide for any mandatory redemption,
amortization or sinking fund requirements in an amount greater than or at a time
prior to the amounts and times specified with respect to, the Indebtedness so
repaid, refunded or refinanced; (v) intercompany Indebtedness permitted under
Section 4.07 hereof; (vi) Indebtedness under Interest Rate Agreements; (vii)
guarantees by the Company or any Wholly Owned Subsidiary which is a Guarantor of
loans (other than loans made by the Non-Recourse Subsidiary) in the ordinary
course of business to franchisees of the Company's or any Subsidiary's
convenience retail stores for the purpose of financing costs of equipment,
leasehold improvements and/or inventory for such stores pursuant to a Franchise
Agreement, provided that the aggregate liability in respect of all such
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<PAGE>
Indebtedness shall not exceed $5.0 million at any one time under this clause
(vii); (viii) Capitalized Lease Obligations of the Company or any Subsidiary for
the purpose of purchasing or financing personal computers, equipment, software,
supplies and/or other assets necessary for the operation of the Company's POS
System, provided that the aggregate liability in respect of all such
Indebtedness shall not exceed $6.0 million at any time; (ix) Indebtedness
incurred by FINOP at a time when it satisfied the definition of Non-Recourse
Subsidiary; or (x) Indebtedness not otherwise permitted in an aggregate
principal amount not in excess of $7.5 million at any one time outstanding.
"Permitted Investments" means: (a) certificates of deposit with a maturity
of one year or less issued by U.S. commercial banks having capital and surplus
in excess of $100.0 million; (b) commercial paper with a minimum rating of A1
and/or P1 by Standard & Poor's Corporation and/or Moody's Investors Service,
Inc., respectively; (c) direct obligations of the United States or of a United
States agency with a maturity of one year or less; and (d) shares of money
market mutual or similar funds having assets in excess of $100.0 million.
"Permitted Liens" means with respect to any Person, (i) pledges or deposits
by such Person under workmen's compensation laws, unemployment insurance laws or
similar legislation, or good faith deposits in connection with bids, tenders,
contracts (other than for the payment of Indebtedness), utility services or
leases to which such Person is a party, or deposits to secure public or
statutory obligations of such Person or deposits of cash or U.S. Government
bonds to secure surety or appeal bonds to which such Person is a party, or
deposits as security for contested taxes or import duties or for the payment of
rent and incurred in the ordinary course of such Person's business; (ii) Liens
determined by law, such as carriers', warehousemen's, mechanics' and bankers'
Liens and incurred in the ordinary course of such Person's business; (iii) Liens
for taxes not yet subject to penalties for non-payment or which are being
contested in good faith and by appropriate proceedings, if adequate reserve, as
may be required by GAAP, shall have been made therefor; (iv) Liens in favor of
issuers of surety bonds (other than to satisfy any judgment or judgments) issued
pursuant to the request of and for the account of such Person in the ordinary
course of its business; and (v) survey exceptions, encumbrances, easements or
reservations of, or rights of others for, rights-of-way, sewers, electric lines,
telegraph and telephone lines and other similar purposes, or zoning or other
restrictions as to the use of real properties or Liens incidental to the conduct
of the business of such Person or to the ownership of its properties and
incurred in the ordinary course of such Person's business.
"Person" means any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization, government
or any agency or political subdivision thereof or any other entity.
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<PAGE>
"POS System" means the automated reporting system to be installed by the
Company in certain of its retail convenience stores for the purpose of entering
into a central data system maintained by the Company certain information with
respect to such stores through the use of personal computers, equipment,
software, supplies and/or other assets located at such stores.
"Preferred Stock", as applied to the Capital Stock of any corporation,
means Capital Stock of any class or classes (however designated) which is
preferred, as to the payment of dividends or as to the distribution of assets
upon any voluntary or involuntary liquidation or dissolution of such
corporation, over shares of Capital Stock of any other class of such
corporation.
"Prospectus" means the Company's Prospectus dated February 24, 1994 with
respect to the offer and sale of the Securities on the Issue Date.
"Public Equity Offering" means an underwritten public offering of common
stock of the Company (other than Redeemable Stock or Exchangeable Stock),
pursuant to an effective registration statement filed pursuant to the Securities
Act of 1933, as amended.
"Redeemable Stock" means any Capital Stock that by its terms or otherwise
is required to be redeemed prior to the first anniversary of the Stated Maturity
of the Securities or is redeemable at the option of the holder thereof any time
prior to the first anniversary of the Stated Maturity of the Securities.
"Redemption Date" or "redemption date" means the date specified for
redemption of Securities in accordance with the terms of the Securities and this
Indenture.
"Redemption Price" or "redemption price" shall have the meaning set forth
in paragraph 5 of the Securities.
"Reference Period" means, with respect to any computation of the
Consolidated Fixed Charge Coverage Ratio, the most recent four fiscal quarters
of the Company for which internal financial statements of the Company are
available prior to the date of determination of the Consolidated Fixed Charge
Coverage Ratio.
"Related Party" with respect to each Permitted Holder means (a) any spouse
or immediate family member of such Permitted Holder or (b) any trust,
corporation, partnership or other entity, all of the beneficiaries,
stockholders, partners, owners or Persons beneficially holding an 80% or more
controlling interest of which consist of Permitted Holders and/or such other
Persons referred to in the immediately preceding clause (a).
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<PAGE>
"Sale-Leaseback Transaction" means any arrangement relating to property now
owned or hereafter acquired whereby the Company or a Subsidiary transfers such
property to a Person and leases it back from such Person.
"SBA" means the Small Business Administration or any successor thereto
established by the Small Business Act (15 U.S.C., Section 633), or any successor
statute to carry out the policies of that Act.
"SBIC" means a small business investment company approved by the SBA to
operate under the provisions of the Small Business Investment Act of 1958, as
amended (15 U.S.C., Section 662), or any successor statute and issued a license
as provided in Section 681 of that Act.
"SEC" or "Commission" means the Securities and Exchange Commission.
"Securities" means any of the Company's 10 1/4% Senior Subordinated
Notes due 2004, issued under this Indenture.
"Securities Act" means the Securities Act of 1933, as amended.
"Securityholder" or "Holder" means a Person in whose name a Security is
registered on the Registrar's books.
"Stated Maturity" means, with respect to any security, the date specified
in such security as the fixed date on which the principal of such security is
due and payable, including pursuant to any mandatory redemption provision.
"Subordinated Indebtedness" means any Indebtedness of the Company (whether
outstanding on the Issue Date or thereafter Incurred) which is subordinated or
junior in right of payment to the Securities.
"Subsidiary" means any corporation, association, partnership or other
business entity of which more than 50% of the total voting power of shares of
Capital Stock or other interest (including partnership interests) entitled
(without regard to the occurrence of any contingency) to vote in the election of
directors, managers or trustees thereof is at the time owned or controlled,
directly or indirectly, by (i) the Company, (ii) the Company and one or more
Subsidiaries, or (iii) one or more Subsidiaries. Notwithstanding the foregoing,
the Non-Recourse Subsidiary shall not be deemed to be a Subsidiary.
"TIA" means the Trust Indenture Act of 1939 as amended and as in effect on
the date of this Indenture; provided, however, that in the event the TIA is
-------- -------
amended after such date, TIA means, to the extent required by any such
amendment, the TIA as so amended.
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<PAGE>
"Trust Officer", when used with respect to the Trustee, means the chairman
or vice-chairman of the Board of Directors, the chairman or vice-chairman of the
executive committee of the Board of Directors, the President, any vice
president, the secretary, any assistant secretary, the treasurer, any assistant
treasurer, the cashier, any assistant cashier, any trust officer or assistant
trust officer, the controller and any assistant controller or any other officer
of the Trustee customarily performing functions similar to those performed by
any of the above designated officers and also means, with respect to a
particular corporate trust matter, any other officer to whom such matter is
referred because of his knowledge of and familiarity with the particular
subject.
"Trustee" means the party named as the "Trustee" in the first paragraph of
this Indenture until a successor replaces it pursuant to the applicable
provisions of this Indenture and, thereafter, shall mean such successor.
"U.S. Government Obligations" means direct obligations (or certificates
representing an ownership interest in such obligations) of the United States of
America (including any agency or instrumentality thereof) for the payment of
which the full faith and credit of the United States of America is pledged and
which are not callable at the issuer's option.
"Voting Stock" means, with respect to a corporation, all classes of capital
stock then outstanding of such corporation normally entitled to vote in
elections of directors.
"Wholly Owned Subsidiary" means a Subsidiary all the Capital Stock of which
(other than directors' qualifying shares) is owned by the Company or another
Wholly Owned Subsidiary.
SECTION 1.02. Other Definitions.
-----------------
<TABLE>
<CAPTION>
Term Defined in Section
---- ------------------
<S> <C>
"Act"............................................ 1.05
"Bankruptcy Law"................................. 6.01
"Change of Control Offer"........................ 3.08
"Change of Control Purchase Date"................ 3.08
"Custodian"...................................... 6.01
"Disposition Purchase Date"...................... 3.09
"Disposition Offer".............................. 3.09
"Disposition Offer Amount"....................... 3.09
"Event of Default"............................... 6.01
"Excess Proceeds"................................ 4.16
</TABLE>
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<TABLE>
<CAPTION>
Term Defined in Section
---- ------------------
<S> <C>
"Existing Liens"................................. 4.09
"Guarantor Senior Indebtedness".................. 11.02
"Legal Holiday".................................. 12.08
"Notice of Default".............................. 6.01
"Participating Indebtedness"..................... 11.05
"Paying Agent"................................... 2.03
"Register"....................................... 2.03
"Registrar"...................................... 2.03
"Restricted Payment"............................. 4.07
"Significant Company Senior Indebtedness"........ 10.02
"Successor Person"............................... 5.01
</TABLE>
SECTION 1.03. Incorporation by Reference of Trust Indenture Act. Whenever
----------------------------------- -------------
this Indenture refers to a provision of the TIA, such provision is incorporated
by reference in and made a part of this Indenture. The following TIA terms used
in this Indenture have the following meanings:
"Commission" means the SEC.
"indenture securities" means the Securities.
"indenture security holder" means a Securityholder.
"indenture to be qualified" means this Indenture.
"indenture trustee" or "institutional trustee" means the Trustee.
"obligor" on the indenture securities means the Company and any other
obligor on the Securities; with respect to the requirements of Section 3.12 to
3.17, inclusive of the TIA, such terms shall include the Guarantors if the
Company fails to perform its obligations under such Securities.
All other TIA terms used in this Indenture that are defined by the TIA,
defined by TIA reference to another statute or defined by SEC rule have the
meanings assigned to them by such definitions.
SECTION 1.04 Rules of Construction. Unless the context otherwise requires:
---------------------
(1) A term has the meaning assigned to it;
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<PAGE>
(2) an accounting term not otherwise defined has the meaning assigned to
it in accordance with GAAP;
(3) "or" is not exclusive;
(4) "including" means including, without limitation;
(5) words in the singular include the plural, and words in the plural
include the singular; and
(6) "herein," "hereof" and other words of similar import refer to this
Indenture as a whole and not to any particular Article, Section or other
subdivision.
SECTION 1.05. Acts of Holders.
---------------
(1) Any request, demand, authorization, direction, notice, consent, waiver
or other action provided by this Indenture to be given or taken by Holders may
be embodied in and evidenced by one or more instruments of substantially similar
tenor signed by such Holders in person or by an agent duly appointed in writing;
and, except as herein otherwise expressly provided, such action shall become
effective when such instrument or instruments are delivered to the Trustee and,
where it is hereby expressly required, to the Company. Such instrument or
instruments (and the action embodied therein and evidenced thereby) are herein
sometimes referred to as the "Act" of Holders signing such instrument or
instruments. Proof of execution of any such instrument or of a writing
appointing any such agent shall be sufficient for any purpose of this Indenture
and conclusive in favor of the Trustee and the Company, if made in the manner
provided in this Section.
(2) The fact and date of the execution by any Person of any such
instrument or writing may be proved in any manner which the Trustee deems
sufficient.
(3) The ownership of Securities shall be proved by the Register.
(4) Any request, demand, authorization, direction, notice, consent, waiver
or other Act of the Holder of any Security shall bind every future Holder of the
same Security and the holder of every Security issued upon the registration of
transfer thereof or in exchange therefor or in lieu thereof in respect of
anything done, omitted or suffered to be done by the Trustee or the Company in
reliance thereon, whether or not notation of such action is made upon such
Security.
(5) If the Company shall solicit from the Holders any request, demand,
authorization, direction, notice, consent, waiver or other Act, the Company may,
at
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<PAGE>
its option, by or pursuant to a resolution of its Board of Directors, fix in
advance a record date for the determination of Holders entitled to give such
request, demand, authorization, direction, notice, consent, waiver or other Act,
but the Company shall have no obligation to do so. If such a record date is
fixed, such request, demand, authorization, direction, notice, consent, waiver
or other Act may be given before or after such record date, but only the Holders
of record at the close of business on such record date shall be deemed to be
Holders for the purposes of determining whether Holders of the requisite
proportion of outstanding Securities have authorized or agreed or consented to
such request, demand, authorization, direction, notice, consent, waiver or other
Act, and for that purpose the outstanding Securities shall be computed as of
such record date; provided that no such request, demand, authorization,
direction, notice or consent, waiver or other Act by the Holders on such record
date shall be deemed effective unless it shall become effective pursuant to the
provisions of this Indenture not later than six months after the record date.
ARTICLE 2
THE SECURITIES
SECTION 2.01 Form and Dating. The Securities, the notation thereon
---------------
relating to the Guarantees and the Trustee's certificate of authentication shall
be substantially in the form of Exhibit A attached hereto. The Securities may
have notations, legends or endorsements required by law, stock exchange rule or
usage. The form of the Securities and any notation, legend or endorsement shall
be in a form acceptable to the Company. Each Security shall be dated the date
of its authentication.
The terms and provisions contained in the Securities, annexed hereto as
Exhibit A, and the notation thereon relating to the Guarantees shall constitute,
and are hereby expressly made, a part of this Indenture. To the extent
applicable, the Company, the Guarantors and the Trustee by their execution and
delivery of this Indenture, expressly agree to such terms and provisions and to
be bound thereby.
SECTION 2.02. Execution and Authentication. The Securities shall be
----------------------------
executed on behalf of the Company by its Chief Executive Officer, its President
or one of its Vice Presidents, under its corporate seal reproduced thereon
attested by its Secretary or one of its Assistant Secretaries. The signature of
any such Officer on the Securities may be manual or facsimile.
Securities bearing the manual or facsimile signatures of individuals who
were at any time the proper Officers of the Company shall bind the Company,
notwithstanding that such individuals or any of them have ceased to hold such
offices prior to the authentication and delivery of such Securities or did not
hold such offices at the date of such Securities.
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<PAGE>
No Security shall be entitled to any benefit under this Indenture or be
valid or obligatory for any purpose unless there appears on such Security a
certificate of authentication substantially in the form provided for in Exhibit
I annexed hereto duly executed by the Trustee by manual signature of an
authorized officer, and such certificate upon any Security shall be conclusive
evidence, and the only evidence, that such Security has been duly authenticated
and made available for delivery hereunder.
The Trustee shall authenticate and make available for delivery Securities
for original issue in the aggregate principal amount of $75,000,000 upon a Board
of Directors resolution and a written order of the Company signed by two
Officers of the Company, but without any further action by the Company. Such
order shall specify the amount of the Securities to be authenticated and the
date on which the original issue of Securities is to be authenticated and
delivered. The aggregate principal amount of Securities outstanding at any time
may not exceed $75,000,000, except as provided in Section 2.07 hereof.
The Trustee shall act as the initial authenticating agent. Thereafter, the
Trustee may appoint an authenticating agent reasonably acceptable to the Company
to authenticate Securities. An authenticating agent may authenticate Securities
whenever the Trustee may do so. Each reference in this Indenture to
authentication by the Trustee includes authentication by such agent. An
authenticating agent has the same rights as a Paying Agent to deal with the
Company or an Affiliate of the Company.
The Securities shall be issuable only in registered form without coupons and
only in denominations of $1,000 and any integral multiple thereof.
SECTION 2.03. Registrar and Paying Agent. The Company shall maintain or
--------------------------
cause to be maintained an office or agency where Securities may be presented for
registration of transfer or for exchange ("Registrar"), an office or agency
where Securities may be presented or surrendered for purchase or payment
("Paying Agent") and an office or agency where notices and demands to or upon
the Company in respect of the Securities and this Indenture may be served. The
Registrar shall keep a register of the Securities and of their transfer and
exchange (the "Register"). The Company may have one or more co-Registrars and
one or more additional Paying Agents. The term Paying Agent includes any
additional paying agent.
The Company shall enter into an appropriate agency agreement with any
Registrar, Paying Agent or co-Registrar (if not the Trustee or the Company).
The agreement shall implement the provisions of this Indenture that relate to
such agent. The Company shall notify the Trustee of the name and address of any
such
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<PAGE>
agent. If the Company fails to maintain a Registrar, Paying Agent or agent for
service of notices or demands, the Trustee shall act as such and shall be
entitled to appropriate compensation therefor pursuant to Section 7.07 hereof.
The Company or any Subsidiary or an Affiliate of either of them may act as
Paying Agent, Registrar or co-Registrar or agent for service of notices and
demands.
The Company initially appoints the Trustee as Registrar and Paying Agent and
agent for service of notices and demands.
SECTION 2.04. Paying Agent to Hold Money in Trust. Except as otherwise
-----------------------------------
provided herein, prior to each due date of the principal, premium, if any, and
interest on any Security, the Company shall deposit with the Paying Agent a sum
of money sufficient to pay such principal, premium, if any, and interest so
becoming due. The Company shall require each Paying Agent (other than the
Trustee or the Company) to agree in writing that such Paying Agent shall hold in
trust for the benefit of Securityholders or the Trustee all money held by the
Paying Agent for the payment of principal, premium, if any, and interest on the
Securities (whether such money has been paid to it by the Company, any Guarantor
or any other obligor on the Securities) and shall notify the Trustee of any
default by the Company (or any Guarantor or other obligor on the Securities) in
making any such payment. At any time during the continuance of any such
default, the Paying Agent shall, upon the request of the Trustee, forthwith pay
to the Trustee all money so held in trust and account for any money disbursed by
it. The Company at any time may require a Paying Agent to pay all money held by
it to the Trustee and to account for any money disbursed by it. Upon doing so,
the Paying Agent shall have no further liability for the money so paid over to
the Trustee. If the Company, a Subsidiary or an Affiliate of either of them
acts as Paying Agent, it shall segregate the money held by it as Paying Agent
and hold it as a separate trust fund.
SECTION 2.05. Securityholder Lists. The Trustee shall preserve in as
--------------------
current a form as is reasonably practicable the most recent list available to it
of the names and addresses of Securityholders. If the Trustee is not the
Registrar, the Company shall cause to be furnished to the Trustee on or before
each interest payment date and at such other times as the Trustee may request in
writing, within five Business Days of such request, a list in such form as the
Trustee may reasonably require of the names and addresses of Securityholders.
SECTION 2.06. Transfer and Exchange. When Securities are presented to the
---------------------
Registrar or a co-Registrar with a request to register the transfer or to
exchange them for an equal principal amount of Securities of other authorized
denominations, the Registrar shall register the transfer or make the exchange as
requested if its requirements for such transactions are met. To permit
registrations of transfer and exchanges, the Company shall execute and the
Trustee shall authenticate Securities
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<PAGE>
and each Guarantor will execute its notation therein relating to its Guarantee
thereof, all at the Registrar's request.
Every Security presented or surrendered for registration of transfer or for
exchange shall (if so required by the Company or the Trustee) be duly endorsed,
or be accompanied by a written instrument of transfer in form satisfactory to
the Company and the Registrar duly executed by the Holder or his attorney duly
authorized in writing.
The Company shall not charge a service charge for any registration of
transfer or exchange, but the Company may require payment of a sum sufficient to
pay all taxes, assessments or other governmental charges that may be imposed in
connection with the transfer or exchange of the Securities from the
Securityholder requesting such transfer or exchange (other than any exchange of
a temporary Security for a definitive Security not involving any change in
ownership).
The Company shall not be required to make, and the Registrar need not
register, transfers or exchanges of (a) any Security for a period beginning at
the opening of business 15 days before the mailing of a notice of repurchase of
Securities and ending at the close of business on the day of such mailing, (b)
any Security selected, called or being called for redemption, except, in the
case of any Security to be redeemed in part, the portion thereof not to be
redeemed or (c) any Security between a record date and the next succeeding
interest payment date.
SECTION 2.07. Replacement Securities. If (a) any mutilated Security is
----------------------
surrendered to the Company or the Trustee, or (b) the Company and the Trustee
receive evidence to their satisfaction of the destruction, loss or theft of any
Security, and there is delivered to the Company and the Trustee such Security or
indemnity as may be required by them to save each of them harmless, then, in the
absence of notice to the Company or the Trustee that such Security has been
acquired by a bona fide purchaser, the Company shall execute in exchange for any
such mutilated Security or in lieu of any such destroyed, lost or stolen
Security, a new Security of like tenor and principal amount, bearing a number
not contemporaneously outstanding, each Guarantor shall execute the notation on
such new Security relating to its Guarantee thereof, and the Trustee shall
authenticate and make such new Security available for delivery.
In case any such mutilated, destroyed, lost or stolen Security has become or
is about to become due and payable, or is about to be purchased by the Company
pursuant to Article 3 hereof, the Company in its discretion may, instead of
issuing a new Security, pay or purchase such Security, as the case may be.
Upon the issuance of any new Securities under this Section 2.07, the Company
may require the payment of a sum sufficient to cover any tax or other
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<PAGE>
governmental charge that may be imposed in relation thereto and any other
expenses (including the fees and expenses of the Trustee) in connection
therewith.
Every new Security issued pursuant to this Section 2.07 in lieu of any
mutilated, destroyed, lost or stolen Security, and every Guarantee with respect
thereto, shall constitute an original additional contractual obligation of the
Company and each Guarantor thereunder, as the case may be, whether or not the
mutilated, destroyed, lost or stolen Security shall be at any time enforceable
by anyone, and shall be entitled to all benefits of this Indenture equally and
proportionately with any and all other Securities duly issued hereunder.
The provisions of this Section 2.07 are exclusive and shall preclude (to the
extent lawful) all other rights and remedies with respect to the replacement or
payment of mutilated, destroyed, lost or stolen Securities.
SECTION 2.08. Outstanding Securities; Determinations of Holders' Action.
---------------------------------------------------------
Securities outstanding at any time are all the Securities authenticated by the
Trustee except for those canceled by it, those delivered to it for cancellation,
those referred to in Section 2.07 hereof, or purchased by the Company pursuant
to Article 3 hereof and those described in this Section 2.08 as not outstanding.
A Security does not cease to be outstanding because the Company or an Affiliate
thereof holds the Security; provided, however, that in determining whether the
-------- -------
Holders of the requisite principal amount of Securities have given or concurred
in any request, demand, authorization, direction, notice, consent or waiver
hereunder, Securities owned by the Company, any Guarantor or other obligor upon
the Securities or any Affiliate of the Company or such other obligor shall be
disregarded and deemed not to be outstanding. Subject to the foregoing, only
Securities outstanding at the time of such determination shall be considered in
any such determination (including determinations pursuant to Articles 6 and 9).
If a Security is replaced pursuant to Section 2.07, it ceases to be
outstanding unless the Trustee receives proof satisfactory to it that the
replaced Security is held by a bona fide purchaser.
If the Paying Agent (other than the Company) holds, in accordance with this
Indenture, at maturity or on a Redemption Date, money sufficient to pay the
Securities payable on that date, then immediately on the date of maturity or
such Redemption Date, as the case may be, such Securities shall cease to be
outstanding and interest, if any, on such Securities shall cease to accrue.
SECTION 2.09. Temporary Securities. Until definitive Securities are ready
--------------------
for delivery, the Company may execute temporary Securities, each Guarantor shall
execute the notation thereon relating to its Guarantee thereof, and upon the
Company's written request, signed by two Officers of the Company, the Trustee
shall
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<PAGE>
authenticate and make such temporary Securities available for delivery.
Temporary Securities shall be printed, lithographed, typewritten, mimeographed
or otherwise produced, in any authorized denomination, substantially of the
tenor of the definitive Securities in lieu of which they are issued and with
such appropriate insertions, omissions, substitutions and other variations as
the Officers of the Company executing such Securities may determine, as
conclusively evidenced by their execution of such Securities.
If temporary Securities are issued, the Company will cause definitive
Securities to be prepared without unreasonable delay. After the preparation of
definitive Securities, the temporary Securities shall be exchangeable for
definitive Securities upon surrender of the temporary Securities at the office
or agency of the Company designated for such purpose pursuant to Section 2.03
hereof, without charge to the Holder. Upon surrender for cancellation of any
one or more temporary Securities, the Company shall execute a like principal
amount of definitive Securities of authorized denominations, each Guarantor
shall execute the notation thereon of its Guarantee thereof and the Trustee,
upon written request of the Company signed by two Officers of the Company, shall
authenticate and make such Securities available for delivery in exchange
therefor. Until so exchanged, the temporary Securities shall in all respects be
entitled to the same benefits under this Indenture as definitive Securities.
SECTION 2.10. Cancellation. All Securities surrendered for payment,
------------
purchase by the Company, redemption by the Company pursuant to Article 3 hereof,
or registration of transfer or exchange shall, if surrendered to any Person
other than the Trustee, be delivered to the Trustee and shall be promptly
canceled by the Trustee. The Company may at any time deliver to the Trustee for
cancellation any Securities previously authenticated and made available for
delivery hereunder which the Company may have acquired in any manner whatsoever,
and all Securities so delivered shall be promptly canceled by the Trustee. The
Company may not reissue, or issue new Securities to replace Securities it has
paid or delivered to the Trustee for cancellation. No Securities shall be
authenticated in lieu of or in exchange for any Securities canceled as provided
in this Section 2.10, except as expressly permitted by this Indenture. All
canceled Securities held by the Trustee shall be destroyed by the Trustee and
the Trustee shall deliver a certificate of destruction to the Company.
SECTION 2.11. CUSIP Numbers. The Company, in issuing the Securities may
-------------
use "CUSIP" numbers (if then generally in use), and the Trustee shall use CUSIP
numbers in notices of redemption or exchange as a convenience to Holders;
provided that any such notice shall state that no representation is made as to
the correctness of such numbers either as printed on the Securities or as
contained in any notice of redemption or exchange and that reliance may be
placed only on the
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<PAGE>
other identification numbers printed on the Securities and any redemption shall
not be affected by any defect in or omission of such numbers.
SECTION 2.12. Defaulted Interest. If the Company defaults in a payment of
------------------
interest on the Securities, it shall pay the defaulted interest, plus to the
extent lawful) any interest payable on the defaulted interest, to the Persons
who are Holders on a subsequent special record date, and such special record
date, as used in this Section 2.12 with respect to the payment of any defaulted
interest, shall mean the 15th day next preceding the date fixed by the Company
for the payment of defaulted interest, whether or not such day is a Business
Day. At least 15 days before the subsequent special record date, the Company
shall mail to each Holder and to the Trustee a notice that states the subsequent
special record date, the payment date and the amount of defaulted interest to be
paid. The Company may also pay defaulted interest in any other lawful manner.
ARTICLE 3
REDEMPTION AND REPURCHASE
SECTION 3.01. Right to Redeem; Notices to Trustee. Except as provided for
-----------------------------------
under Section 3.02 hereof, the Securities may not be redeemed at the option of
the Company prior to March 15, 1999. On or after such date, the Securities may
be redeemed at the option of the Company in whole, or from time to time in
part, at the following redemption prices (expressed in percentages of the
principal amount), plus accrued interest to the date of redemption, if
redeemed during the twelve-month period beginning March 15, of the years
indicated below.
Year Percentage
---- ----------
1999 104.750
2000 103.125
2001 101.500
2002 and thereafter 100.000
SECTION 3.02. Public Equity Offering Redemption. In addition to the
---------------------------------
optional redemption of the Securities provided for under Section 3.01 hereof,
up to $20.0 million aggregate principal amount of the Securities will be
redeemable, at the option of the Company in whole or in part, with the Net
Proceeds of a Public Equity Offering, at a redemption price equal to 110% of
the principal amount of the Securities to be redeemed, plus accrued and unpaid
interest to the date of redemption; provided, however, that no such optional
-------- -------
redemption pursuant to this Section 3.02 may be effected on or after the third
anniversary of the Issue Date. The New Credit Agreement may restrict the
Company's ability to redeem the Securities as described in sections 3.01 and
3.02 hereof.
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SECTION 3.03. Selection of Securities to be Redeemed. If less than all
--------------------------------------
the outstanding Securities are to be redeemed at any time, the Trustee shall
select the Securities to be redeemed in compliance with the rules of the
principal national securities exchange, if any, on which the Securities are
listed, or if the Securities are not listed on a national securities exchange,
on a pro rata basis, by lot or, any other method the Trustee considers fair and
appropriate. The Trustee shall make the selection at least 30 but not more than
60 days before the Redemption Date from outstanding Securities not previously
called for redemption. Securities and portions of them the Trustee selects
shall be in principal amounts of $1,000 or an integral multiple of $1,000.
Provisions of this Indenture that apply to Securities called for redemption also
apply to portions of Securities called for redemption. The Trustee shall notify
the Company promptly of the Securities or portions of Securities to be redeemed.
SECTION 3.04. Notice of Redemption. At least 30 days but not more than 60
--------------------
days before a Redemption Date (which may, in the case of redemption in
connection with a Public Equity Offering, be adjusted to the extent necessary
and appropriate under the circumstances and based solely on the timing of the
consummation of the Public Equity Offering), a notice of redemption shall be
mailed by first-class mail, postage prepaid, by the Company or, at the request
of the Company, the Trustee to each Holder of Securities to be redeemed at the
Holder's last address, as it shall appear on the registry book. A copy of such
notice shall be mailed to the Trustee on the same day the notice is mailed to
Holders of Securities.
The notice shall identify the Securities to be redeemed the provision of
the Securities or this Indenture pursuant to which the Securities called for
redemption are being redeemed and shall state:
(1) the Redemption Date;
(2) the Redemption Price;
(3) the CUSIP number (subject to the provisions of Section 2.11 hereof);
(4) the name and address of the Paying Agent;
(5) that Securities called for redemption must be surrendered to the
Paying Agent to collect the Redemption Price;
(6) if fewer than all the outstanding Securities are to be redeemed, the
identification and principal amounts of the particular Securities to be redeemed
and that, on and after the Redemption Date, upon surrender of such Securities, a
new Security or Securities in principal amount equal to the unredeemed portion
thereof will be issued; and
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(7) that, unless the Company defaults in making such redemption payment,
interest will cease to accrue on Securities called for redemption on and after
the Redemption Date.
At the Company's written request, the Trustee shall give the notice of
redemption in the Company's name and at the Company's expense.
SECTION 3.05. Effect of Notice of Redemption. Once notice of redemption
------------------------------
is given, Securities called for redemption become due and payable on the
Redemption Date and at the Redemption Price. Upon the later of the Redemption
Date and the date such Securities are surrendered to the Paying Agent, such
Securities called for redemption shall be paid at the Redemption Price plus
accrued interest to the Redemption Date, if money sufficient for that purpose
has been deposited as provided in Section 3.05 hereof.
Notice of redemption shall be deemed to be given when mailed, whether or
not the Holder receives such notice. In any event, failure to give such notice,
or any defect therein, shall not affect the validity of the proceedings for the
redemption of the Securities.
SECTION 3.06. Deposit of Redemption Price. Prior to the Redemption Date,
---------------------------
the Company shall deposit with the Paying Agent (or if the Company or a
Subsidiary or an Affiliate of either of them is the Paying Agent, shall
segregate and hold in trust) money sufficient to pay the Redemption Price of all
Securities to be redeemed on that date other than Securities or portions of
Securities called for redemption which prior thereto have been delivered by the
Company to the Trustee for cancellation.
SECTION 3.07. Securities Redeemed in Part. Upon surrender of a Security
---------------------------
that is redeemed in part, the Company shall execute a new Security in an
authorized denomination equal in principal amount to the unredeemed portion of
the Security surrendered, each Guarantor shall execute the notation thereon
relating to its Guarantee thereof and the Trustee shall authenticate and make
such new Security available for delivery to the Holder.
SECTION 3.08. Offer to Repurchase Upon Change of Control. (a) Upon a
-----------------------------------------
Change of Control, the Company shall promptly notify the Trustee thereof and
shall purchase Securities tendered by Securityholders pursuant to a tender offer
which shall be made by the Company for the Securities (a "Change of Control
Offer") at the purchase price in cash equal to 101% of the principal amount
thereof plus accrued interest, if any, to the Change of Control Purchase Date
(as defined in paragraph (b) of this Section 3.08), in accordance with the
procedures set forth in paragraph (b) of this Section 3.08.
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(b) Promptly, and in any event within 30 days, after each Change of
Control, the Company shall be obligated to deliver to the Trustee and send, by
first-class mail to each Holder, a written notice stating that, pursuant to this
Section 3.08:
(i) a Change of Control has occurred and the Holder may elect to
have his Securities purchased by the Company either in whole or in part, at a
purchase price in cash equal to 101% of the principal amount thereof plus
accrued and unpaid interest, if any, to the date of repurchase;
(ii) the repurchase date (which shall be no less than 30 days nor
more than 60 days after the date such notice is mailed) (the "Change of
Control Purchase Date");
(iii) the circumstances and relevant facts known to the Company
regarding such Change of Control (including, to the extent applicable,
information with respect to pro forma historical income, cash flow and
capitalization after giving effect to such Change of Control) which the Company
in good faith believes will enable such Holders to make an informed decision;
and
(iv) all instructions and materials necessary to tender Securities
pursuant to the Change of Control Offer, together with the information contained
in paragraph (c) below.
(c) Holders electing to have a Security purchased will be required to
surrender the Security, with an appropriate form duly completed, to the Company
at the address specified in the notice at least three Business Days prior to the
Change of Control Purchase Date. Holders will be entitled to withdraw their
election if the Corporate Trust Department of the Trustee or the Company
receives, not later than three Business Days prior to the Change of Control
Purchase Date, a telegram, telex, facsimile transmission or letter setting forth
the name of the Holder, the principal amount of the Security which was delivered
for purchase by the Holder and a statement that such Holder is withdrawing his
election to have such Security Purchased.
(d) On the Change of Control Purchase Date, all Securities purchased by
the Company under this Section shall be delivered by the Trustee for
cancellation, and the Company shall pay the purchase price plus accrued interest
to the Holders entitled thereto. In connection with Holders whose Securities
are purchased only in part, the Company shall execute new Securities equal in
principal amount to the unpurchased portion of the Securities surrendered, each
Guarantor shall execute the notation therein relating to its Guarantee thereof
and the Trustee (at the Company's expense) shall authenticate and make such new
Securities available for delivery to such Holders. At the time the Company
delivers Securities to the Trustee which are
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to be accepted for purchase, the Company will also deliver an Officers'
Certificate stating that such Securities are to be accepted by the Company
pursuant to and in accordance with the terms of this Section. A Security shall
be deemed to have been accepted for purchase at the time payment therefor is
mailed or delivered to the surrendering Holder.
SECTION 3.09. Offer to Repurchase With Net Cash Proceeds from Certain
-------------------------------------------------------
Asset Dispositions. (a) In the event of an Asset Disposition that requires the
- - ------------------
purchase of Securities pursuant to Section 4.16, the Company will be required to
make an offer for the Securities (a "Disposition Offer") and repurchase the
Securities tendered pursuant thereto in an amount equal to the aggregate amount
of Excess Proceeds, at a repurchase price in cash equal to 100% of their
principal amount plus accrued interest to the date of repurchase in accordance
with the procedures (including prorating in the event of oversubscription) set
forth in paragraph (b) below. Upon completion of the repurchase, if any, of
Securities pursuant to the Disposition Offer, the amount of Excess Proceeds
shall be reset to zero. If the aggregate repurchase price of Securities
tendered pursuant to the Disposition Offer is less than the Excess Proceeds
allotted to the repurchase of the Securities, the Company may use the remaining
Excess Proceeds for general corporate purposes.
(b) (1) Promptly, and in any event within 30 days, after the date the
Company must make a Disposition Offer for Securities pursuant to Section 4.16
hereof, the Company shall be obligated to deliver to the Trustee and send, by
first-class mail to each Holder, a written notice stating that, pursuant to this
Section, the Holder may elect to have his Securities purchased by the Company
either in whole or in part (subject to prorating as hereinafter described in the
event the Disposition Offer is oversubscribed) in integral multiples of $1,000
of principal amount, at the applicable purchase price. The notice shall specify
a purchase date not less than 30 days nor more than 60 days after the date of
such notice (the "Disposition Purchase Date") and shall contain information
concerning the business of the Company which the Company in good faith believes
will enable such Holders to make an informed decision (which will include (i)
the most recently filed Annual Report on Form 10-K (including audited
consolidated financial statements) of the Company, the most recent subsequently
filed Quarterly Report on Form 10-Q and any Current Report on Form 8-K of the
Company filed subsequent to such Quarterly Report, other than Current Reports
describing Asset Dispositions otherwise described in the offering materials (or
corresponding successor reports), or if the Company does not and is not required
to file such reports, information similar to that required by such reports; (ii)
a description of material developments in the Company's business subsequent to
the date of the latest of such Reports; and (iii) if material, appropriate pro
forma financial information) and all instructions and materials necessary to
tender Securities pursuant to the Disposition Offer, together with the
information contained in clause (3) below.
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(2) Not later than the date upon which written notice of a
Disposition Offer is delivered to the Trustee as provided above, the Company
shall deliver to the Trustee an Officers' Certificate as to (i) the amount of
Excess Proceeds applicable to the Disposition Offer (the "Disposition Offer
Amount"), (ii) the allocation of the Net Available Cash Proceeds from the Asset
Dispositions pursuant to which the Disposition Offer is being made, and (iii)
the compliance of such amount and allocation with the provisions of paragraph
(a) of this Section. Not later than one business day prior to the Disposition
Purchase Date, the Company shall also irrevocably deposit with the Paying Agent
for the Trustee (or, if the Company is acting as its own Paying Agent, segregate
and hold in trust) in immediately available funds an amount equal to the
Disposition Offer Amount to be held for payment in accordance with the
provisions of this Section. Upon the expiration of the period for which the
Disposition Offer remains open (the "Disposition Offer Period"), the Company
shall deliver to the Trustee the Securities or portions thereof which have been
properly tendered to and are to be accepted by the Company. The Trustee shall,
on the Disposition Purchase Date, instruct the Paying Agent to mail or deliver
payment to each tendering Holder in the amount of the purchase price with
respect to the Securities tendered by such Holder and accepted by the Company
from the funds provided by the Company for such payment. In the event that the
aggregate purchase price of the Securities delivered by the Company to the
Trustee is less than the Disposition Offer Amount, the Paying Agent shall
deliver the excess to the Company immediately after the expiration of the
Disposition Offer Period.
(3) Holders electing to have a Security purchased will be required to
surrender the Security, with an appropriate form duly completed, to the Company
at the address specified in the notice at least three Business Days prior to the
Disposition Purchase Date. Holders will be entitled to withdraw their election
if the Corporate Trust Department of the Trustee or the Company receives not
later than three Business Days prior to the Disposition Purchase Date a
telegram, telex, facsimile transmission or letter setting forth the name of the
Holder, the principal amount of the security which was delivered for purchase by
the Holder and a statement that such Holder is withdrawing his election to have
such Security purchased. If at the expiration of the Disposition Offer Period
the aggregate principal amount of Securities surrendered by Holders exceeds the
Disposition Offer Amount, the Company shall select the Securities to be
purchased on a pro rata basis (with such adjustments as may be deemed
appropriate by the Company so that only Securities in denominations of $1,000 or
integral multiples thereof shall be purchased). In connection with Holders
whose Securities are purchased only in part, the Company shall execute new
Securities equal in principal surrendered, each Guarantor shall execute the
notation therein relating to its Guarantee thereof and the Trustee, at the
Company's expense, shall authenticate and make such new Securities available for
delivery to such Holders.
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(4) At the time the Company delivers Securities to the Trustee which
are to be accepted for purchase, the Company will also deliver an Officers'
Certificate stating that such Securities are to be accepted by the Company
pursuant to and in accordance with the terms of this Section 3.09. A Security
shall be deemed to have been accepted for purchase at the time the Trustee,
directly or through an agent, mails or delivers payment therefor to the
surrendering Holder.
ARTICLE 4
COVENANTS
SECTION 4.01. Payment of Securities. The Company shall pay the principal
---------------------
of, premium, if any, and interest (including interest accruing on or after the
filing of a petition in bankruptcy or reorganization relating to the Company,
whether or not a claim for post-filing interest is allowed in such proceeding)
on the Securities on (or prior to) the dates and in the manner provided in the
Securities or pursuant to this Indenture. An installment of principal, premium,
if any, or interest shall be considered paid on the applicable date due if on
such date the Trustee or the Paying Agent holds, in accordance with this
Indenture, money sufficient to pay all of such installment then due. The
Company shall pay interest on overdue principal and premium, if any, and
interest on overdue installments of interest (including interest accruing on or
after the filing of a petition in bankruptcy or reorganization relating to the
Company, whether or not a claim for post-filing interest is allowed in such
proceeding), to the extent lawful, at the rate per annum borne by the
Securities, which interest on overdue interest shall accrue from the date such
amounts became overdue.
SECTION 4.02. SEC Reports. The Company and each Guarantor, shall file
-----------
with the Trustee and provide the Securityholders, within 15 days after it files
them with the SEC, copies of its annual report and of the information, documents
and other reports (or copies of such portions of any of the foregoing as the SEC
may by rules and regulations prescribe) which the Company or any Guarantor, is
required to file with the SEC pursuant to Section 13 or 15(d) of the Exchange
Act. Notwithstanding that the Company may not be required to remain subject to
the reporting requirements of Section 13 or 15(d) of the Exchange Act, the
Company shall continue to file with the SEC and provide the Trustee and the
Securityholders with such annual reports and such information, documents and
other reports (or copies of such portions of any of the foregoing as the SEC may
by rules and regulations prescribe) which are specified in Sections 13 or 15(d)
of the Exchange Act. The Company, and each Guarantor also shall comply with the
provisions of Section 314(a) of the TIA.
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SECTION 4.03. Compliance Certificates.
-----------------------
(1) The Company shall deliver to the Trustee within 90 days after the end
of each of the Company's fiscal years an Officers' Certificate executed by at
least two Officers of the Company, stating whether or not the signers know of
any Default or Event of Default. Such certificate shall contain a certification
from the principal executive officer, principal financial officer or principal
accounting officer of the Company as to his or her knowledge of the Company's
compliance with all conditions and covenants under this Indenture. For purposes
of this Section 4.03(1), such compliance shall be determined without regard to
any period of grace or requirement of notice provided under this Indenture. If
such Officers do know of such a Default or Event of Default, the certificate
shall describe any such Default or Event of Default, and its status. Such
Officers' Certificate need not comply with Sections 12.04 and 12.05 hereof.
(2) So long as not contrary to the then current recommendation of the
American Institute of Certified Public Accountants, the Company shall deliver to
the Trustee within 120 days after the end of each fiscal year a written
statement by the Company's independent certified pubic accountants stating (A)
that their audit examination has included a review of the terms of this
Indenture and the Securities as they relate to accounting matters, and (B))
whether, in connection with their audit examination, any Default has come to
their attention and, if such a Default has come to their attention, specifying
the nature and period of the existence thereof; provided, however, that the
-------- -------
independent certified public accountants delivering such statement shall not be
liable in respect of such statement by reason of any failure to obtain knowledge
of any such Default or Event of Default that would not be disclosed in the
course of an audit examination conducted in accordance with GAAP.
(3) The Company will, so long as any of the Securities are outstanding,
deliver to the Trustee, within five Business Days of any Officer becoming aware
of (i) any Default, Event of Default or default in the performance of any
covenant, agreement or condition contained in this Indenture or (ii) any event
of default under any other mortgage, indenture or instrument, an Officers'
Certificate specifying such Default, Event of Default, default or event of
default and what action the Company is taking or proposes to take with respect
thereto.
(4) The Company shall deliver to the Trustee any information reasonably
requested by the Trustee in connection with the compliance by the Trustee or the
Company with the TIA.
SECTION 4.04. Further Instruments and Acts. Upon request of the Trustee,
----------------------------
the Company, each Guarantor and any other obligor on the Securities will execute
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and deliver such further instruments and do such further acts as may be
reasonably necessary or proper to carry out more effectively the purposes of
this Indenture.
SECTION 4.05. Maintenance of Office or Agency. The Company will maintain
-------------------------------
or cause to be maintained, within or outside the State of New York, an office or
agency of the Trustee, Registrar and Paying Agent where Securities may be
presented or surrendered for payment, where Securities may be surrendered for
registration of transfer, exchange or redemption and where notices and demands
to or upon the Company in respect of the Securities and this Indenture may be
served. The corporate trust office of the Trustee at Society Trust Company of
New York, 5 Hanover Square, 10th Floor, New York, New York 10004 Attention:
Corporate Trust Department, shall initially be such office or agency for all of
the aforesaid purposes. The Company shall give prompt written notice to the
Trustee of any change of location of such office or agency. If at any time the
Company shall fail to maintain or cause to be maintained any such required
office or agency or shall fail to furnish the Trustee with the address thereof,
such presentations, surrenders, notices and demands may be made or served at the
address of the Trustee set forth in Section 12.02 hereof.
The Company may also from time to time designate one or more other offices
or agencies where the Securities may be presented or surrendered for any or all
such purposes and may from time to time rescind such designations. The Company
will give prompt written notice to the Trustee of any such designation or
rescission and of any change in location of any such other office or agency.
SECTION 4.06. Limitation on Additional Indebtedness and New Operating
-------------------------------------------------------
Leases. The Company may not, and may not permit any of its Subsidiaries to,
- - ------
Incur, directly or indirectly, any Indebtedness (including Acquired
Indebtedness) or enter into any New Operating Lease, unless the Consolidated
Fixed Charge Coverage Ratio for the Reference Period, determined on the date of
issuance of such Indebtedness or the date of execution of such New Operating
Lease, as the case may be, and after giving effect to: (i) Incurrence of such
Indebtedness and (if applicable) the application of the Net Proceeds thereof to
refinance other Indebtedness as if such Indebtedness was issued and the
application of such Net Proceeds occurred at the beginning of the Reference
Period; (ii) Incurrence and retirement of any other Indebtedness since the last
day of the most recent fiscal quarter of the Company contained in the Reference
Period as if such Indebtedness was Incurred or retired at the beginning of the
Reference Period; and (iii) the execution of such New Operating Lease and any
other New Operating Leases executed since the last day of the most recent fiscal
quarter of the Company contained in the Reference Period as if such New
Operating Lease and any such other New Operating Leases were executed at the
beginning of the Reference Period (it being understood that, for purposes of
determining the Consolidated Fixed Charge Coverage Ratio, New Operating Lease
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payments shall be included in Consolidated Operating Lease Payments), is equal
to or greater than the ratio of 2.0 to 1.0.
Notwithstanding the preceding paragraph, the Company and the Subsidiaries
may Incur Permitted Indebtedness.
SECTION 4.07. Limitation on Restricted Payments. The Company may not, and
---------------------------------
may not permit any Subsidiary, directly or indirectly, to (i) declare or pay any
dividend or make any distribution in respect of the Company's or any
Subsidiary's Capital Stock or to the direct or indirect holders of the Company's
or any Subsidiary's Capital Stock (except dividends or distributions payable
solely in the Company's Non-Convertible Capital Stock or in options, warrants or
other rights to purchase the Company's Non-Convertible Capital Stock and except
dividends or distributions payable from a Subsidiary to the Company or a Wholly
Owned Subsidiary which is a Guarantor); (ii) purchase, redeem or otherwise
acquire or retire for value, any Capital Stock of the Company or any Subsidiary;
(iii) purchase, repurchase, redeem, defease or otherwise acquire or retire for
value, prior to scheduled maturity, scheduled repayment or scheduled sinking
fund payment, any Subordinated Indebtedness of the Company or any Indebtedness
of a Subsidiary (other than Guarantor Senior Indebtedness and other than the
Company's 14.25% Subordinated Debentures due 2000); or (iv) make any Investment
in any Subsidiary (other than prepayments of leases of underperforming or
nonutilized convenience stores in the ordinary course of business), the Non-
Recourse Subsidiary (except as permitted by clause; (iii) of Section 4.08
hereof) or any other Affiliate of the Company (any such dividend, distribution,
purchase, redemption, repurchase, defeasance, other acquisition, retirement or
Investment being hereinafter referred to as a "Restricted Payment"), unless:
(A) no Default or Event of Default will have occurred and be continuing at the
time or as a consequence of such Restricted Payment; (B) at the time of such
Restricted Payment, the Company could incur an additional $1.00 of Indebtedness
(not including Permitted Indebtedness) under Section 4.06 hereof; and (C) such
Restricted Payment, together with the aggregate of all other Restricted Payments
made since May 1, 1993, would not exceed the sum of (x) 50% of Consolidated Net
Income (or if Consolidated Net Income is a deficit minus 100% of such deficit)
accrued on a cumulative basis from May 1, 1993 to the end of the most recent
fiscal quarter ending prior to the date of such proposed Restricted Payment,
calculated on a cumulative basis as if such period were a single accounting
period; (y) the aggregate Net Proceeds received by the Company from any Person
(other than a Subsidiary and the Non-Recourse Subsidiary) subsequent to the
Issue Date (1) as a result of the issuance of Capital Stock of the Company
(other than Redeemable Stock or Exchangeable Stock) or (2) as a result of a
capital contribution from its shareholders, but, with respect to any proceeds
received by the Company from an employee stock ownership plan that Incurs any
Indebtedness, only to the extent that any such proceeds are equal to any
increase in the Consolidated Net Worth of the Company resulting from principal
repayments made by such
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employee stock ownership plan with respect to the Indebtedness Incurred by it to
finance the purchase of such Capital Stock; and (z) the amount by which
Indebtedness of the Company is reduced on the Company's balance sheet upon the
conversion or exchange (other than by a Subsidiary) subsequent to the Issue Date
of any Indebtedness of the Company convertible into or exchangeable for Capital
Stock (other than Redeemable Stock or Exchangeable Stock) of the Company.
The foregoing provisions do not prohibit (i) the payment of any dividend in
respect of the Company's or any Subsidiary's Capital Stock within 60 days after
the date of declaration thereof, if on such date of declaration such payment
complied with the provisions of this Indenture and provided that at the time of
payment no other Default or Event of Default has occurred and is continuing;
(ii) the purchase, redemption, acquisition or retirement of any Indebtedness
with the Incurrence of Refinancing Indebtedness permitted under Section 4.06
hereof; (iii) any dividend on shares of the Company's or any Subsidiary's
Capital Stock payable in shares of the Company's or such Subsidiary's Capital
Stock (other than Redeemable Stock or Exchangeable Stock); and (iv) an
Investment by the Company in a Wholly-Owned Subsidiary which is a Guarantor or a
Person who will become a Wholly-Owned Subsidiary which is a Guarantor as a
result of such Investment.
SECTION 4.08. Limitation on Investments. The Company may not, and may not
-------------------------
permit any Subsidiary, directly or indirectly, to make any Investment other than
(i) Permitted Investments; (ii) an Investment constituting a Restricted Payment
if such Restricted Payment is permitted by Section 4.07; or (iii) Investments in
the Non-Recourse Subsidiary in an amount not to exceed $2.5 million.
SECTION 4.09. Limitation on Liens. The Company may not, and may not
-------------------
permit any Subsidiary, directly or indirectly, to create, incur, assume or
permit to exist any Lien upon any of its or any Subsidiary's property or assets
now owned or hereafter acquired, other than Liens that are: (i) outstanding
immediately prior to the issuance of the Securities; (ii) Liens securing
Indebtedness of a Subsidiary owing to the Company or a Wholly Owned Subsidiary
which is a Guarantor; (iii) Liens securing Senior Indebtedness of the Company
permitted to be Incurred under Section 4.06 hereof; (iv) Permitted Liens; (v)
Liens incurred in connection with a Sale-Leaseback Transaction permitted under
Section 4.11 hereof; (vi) Liens on property of a Person existing at the time
such Person is acquired by, merged into or consolidated with the Company or any
Subsidiary, (except to the extent such Liens were Incurred in connection with,
or in contemplation of, such acquisition, merger or consolidation), which Lien
is not applicable to any Person or the properties or assets of any Person, other
than the Person, or the property or asset of the Person, so acquired; and (vii)
any extension, renewal or replacement (including successive extensions, renewals
or replacements) of Liens permitted by any of clauses (i) through (vi) above
("Existing Liens"), so long as (A) the Lien does not extend beyond property or
assets of the Company and its Subsidiaries subject to the Existing Lien
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and improvements and construction on such property or assets, and (B) the
Indebtedness secured by the Lien does not exceed the Indebtedness secured at the
time by the Existing Lien.
SECTION 4.10. Limitation on Dividends and Other Payment Restrictions
------------------------------------------------------
Affecting Subsidiaries. The Company may not, and may not permit any Subsidiary
- - ----------------------
to, create or otherwise cause or permit to exist or become effective any
encumbrance or restriction of any kind which restricts the ability of any such
Subsidiary to: (i) pay dividends or make any other distributions on such
Subsidiary's Capital Stock or pay any Indebtedness or other obligation owed to
the Company or any Subsidiary; (ii) make any loans or advances to the Company or
any Subsidiary; (iii) guaranty the Securities or any renewals or refinancings
thereof; or (iv) transfer any of its property or assets to the Company or any
Subsidiary, except, in each case, for such encumbrances or restrictions existing
under or by reason of (1) applicable law, (2) this Indenture, (3) customary
nonassignment provisions of any lease governing a leasehold interest of the
Company or any Subsidiary, (4) any instrument governing Acquired Indebtedness
(except to the extent such Indebtedness was Incurred in connection with, or in
contemplation of, such acquisition) as in effect at the time of acquisition,
which encumbrance or restriction is not applicable to any Person, or the
properties or assets of any Person, other than the Person, or the property or
assets of the Person, so acquired, (5) Existing Indebtedness, or (6) permitted
Refinancing Indebtedness provided that the encumbrances or restrictions
contained in the agreements governing such Refinancing Indebtedness are no more
restrictive than those contained in the agreements governing the Indebtedness
being refinanced, as in effect on the Issue Date.
SECTION 4.11. Limitation on Sale-Leaseback Transactions. The Company will
-----------------------------------------
not, and will not permit any Subsidiary to, enter into any Sale-Leaseback
Transaction unless at least one of the following conditions is satisfied: (i)
under the provisions described under Section 4.09 hereof and Section 4.06 hereof
the Company or a Subsidiary could create a Lien on the property to secure
Indebtedness in an amount equal to the Attributable Indebtedness in connection
with such Sale-Leaseback Transaction; or (ii) the net proceeds of such Sale-
Leaseback Transaction are at least equal to the fair market value of such
property as determined in good faith by the Board of Directors of the Company.
SECTION 4.12. Limitation on Transactions with Affiliates. The Company
------------------------------------------
will not, and will not permit any Subsidiary to, directly or indirectly, enter
into or permit to exist any transaction or series of related transactions
(including the purchase, sale, lease or exchange of any property or the
rendering of any service) with any Affiliate of the Company or of any Subsidiary
(other than a Wholly Owned Subsidiary which is a Guarantor) on terms that are
less favorable to the Company or such Subsidiary, as the case may be, than those
which might be obtained at the time of such transaction from unrelated third
parties. This provision will not prohibit
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the payment of reasonable and customary directors' fees to directors who are not
employees of the Company or the payment of reasonable compensation to employees
of the Company in the ordinary course of business. Without in any way limiting
the foregoing restriction, the Company will not, and will not permit any
Subsidiary to, directly or indirectly, enter into or permit to exist any
transactions or series of related transactions (including the purchase, sale,
lease or exchange of any property or the rendering of any service) with any
Affiliate of the Company or of any Subsidiary (other than a Wholly Owned
Subsidiary which is a Guarantor) involving aggregate payments in excess of
$250,000 unless: (i) a committee of independent members of the Board of
Directors of the Company shall approve by resolution certifying that such
transaction or series of transactions comply with the first sentence of this
Section 4.12; and (ii) with respect to (A) a transaction or series of
transactions involving aggregate payments equal to or greater than $2,000,000,
the Company also receives a written opinion from a nationally-recognized
investment bank with total assets in excess of $1.0 billion that such
transaction or series of transactions is fair to the Company from a financial
point of view; or (B) any purchase, sale, lease or exchange of real property or
Fixed Assets involving aggregate payments equal to or greater than $2.0 million,
in lieu of the opinion referred to in clause (A), at the option of the Company,
the Company also receives an opinion from a qualified appraisal company, that
the value of the property sold, purchased, leased or exchanged by the Company or
any Subsidiary is substantially equal to (or more favorable to the Company than)
the value of the consideration provided by or to the Company, as the case may
be, in respect thereof.
SECTION 4.13. Limitation on Other Senior Subordinated Indebtedness. The
----------------------------------------------------
Company will not incur any Indebtedness which is senior in right of payment to
the Securities and is subordinate or junior in right of payment to the Company's
Senior Indebtedness. No Guarantor will incur any Indebtedness which is senior
in right of any payment to such Guarantor's obligations under its Guarantee and
this Indenture and which is subordinate or junior in right of payment to
Guarantor Senior Indebtedness of such Guarantor.
SECTION 4.14. Additional Guarantors. If the Company or any Subsidiary
---------------------
makes any Investment having a fair market value exceeding $1,000, in one or a
series of related transactions, in any Subsidiary which is not a Guarantor, or
any Subsidiary which is not a Guarantor holds property or assets (including,
without limitation, cash, businesses, divisions, real property, assets or
equipment) having a fair market value exceeding $1,000, the Company shall cause
such Subsidiary to (i) execute and deliver to the Trustee a supplemental
indenture in form reasonably satisfactory to the Trustee pursuant to which such
Subsidiary shall unconditionally guarantee all of the Company's obligations
under the Securities and the Indenture on the terms set forth in the Indenture
and (ii) deliver to the Trustee an Opinion of Counsel that such supplemental
indenture has been duly executed and delivered by
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such Subsidiary. Thereafter, such Subsidiary shall be a Guarantor for all
purposes of this Indenture.
SECTION 4.15. Use of Proceeds. The proceeds of the Securities will be
---------------
used by the Company in the manner described in the Prospectus. No part of such
proceeds 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. Neither
the issuance of any Security nor the use of the proceeds thereof will violate or
be inconsistent with the provisions of Regulations G, T, U or X of the Board of
Governors of the Federal Reserve System.
SECTION 4.16. Limitation on Sales of Assets. The Company will not, and
-----------------------------
will not permit any Subsidiary to, directly or indirectly, make any Asset
Disposition unless the Company (or such Subsidiary, as the case may be) receives
at the time of such Asset Disposition consideration which (x) is paid at least
85% in cash and (y) is at least equal to the fair market value (including the
value of all noncash consideration), as determined in good faith by, and
evidenced by a resolution of the Board of Directors, if the consideration to be
received by the Company is equal to or greater than $1 million (or, if the
consideration to be received by the Company is less than $1 million but greater
than $25,000 (except in the case of Asset Dispositions to franchisees in the
ordinary course of business), as certified in good faith by two Officers, one of
whom shall be the President, in an Officers' Certificate delivered to the
Trustee within 30 Business Days following such Asset Disposition (no certificate
being required for sales as to which the consideration is $25,000 or less), of
the shares and assets subject to such Asset Disposition; provided, however, that
-------- -------
the requirement set forth in clause (x) above shall not apply to any sale,
lease, sublease, transfer or other disposition of stores to franchisees in the
ordinary course of business or of individual underperforming, nonutilized or
obsolete assets by the Company, or any Subsidiary in the ordinary course of
business. Within 210 days from the date of such Asset Disposition (the
"Disposition Period"), the Company (or such Subsidiary, as the case may be) may
apply all or any portion of the Net Available Cash Proceeds from such Asset
Disposition to (x) the prepayment of Senior Indebtedness or (y) an investment in
Fixed Assets in the same or substantially similar line of business as the assets
that were the subject of such Asset Disposition, provided that, if such Net
Available Cash Proceeds are applied to the prepayment of Senior Indebtedness,
the related loan commitment, if any, shall be permanently reduced, except that
in the event the Company repays revolving loans outstanding under the New Credit
Agreement with such Net Available Cash Proceeds, the related loan commitment
need not be permanently reduced so long as the Company reborrows the full amount
of the amount so prepaid and invests such amount in Fixed Assets in the same or
substantially similar line of business as the assets that were the subject of
such Asset Disposition within the Disposition Period. Without limiting the
lines of business which are considered the same or substantially similar for the
purposes hereof, the sale of gasoline, the operation of
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convenience stores, the franchising of convenience stores, and the
manufacturing, processing, and distribution businesses currently conducted by
the Company will be deemed to qualify as the same or substantially similar lines
of business. Notwithstanding the foregoing, if the Company enters into a
written agreement within the Disposition Period pursuant to which the Company
commits to reinvest such Net Available Cash Proceeds in Fixed Assets in the same
or substantially similar line of business as the assets that were the subject of
such Asset Disposition, the Company shall be permitted to reinvest such Net
Available Cash Proceeds within 90 days from the date of termination of the
Disposition Period in accordance with such written agreement. Subject to the
provisions of the next succeeding sentence, any Net Available Cash Proceeds from
any such Asset Disposition that are not applied or invested as provided in the
preceding three sentences shall constitute and be referred to herein as "Excess
Proceeds." When (x) any Excess Proceeds arise from the sale, issuance or other
disposition of Capital Stock of a Subsidiary or the Non-Recourse Subsidiary
(except to a Wholly Owned Subsidiary which is a Guarantor) or the sale or other
disposition of all or substantially all of the assets of a Subsidiary or the
Non-Recourse Subsidiary in one transaction or a series of related transactions
(except to a Wholly Owned Subsidiary which is a Guarantor) or (y) the aggregate
amount of Excess Proceeds from all Asset Dispositions (other than those referred
to in clause (x) of this sentence) exceeds $5.0 million, the Company shall make
an Disposition Offer (as defined in Section 3.09 hereof) to purchase Securities
pursuant to and subject to the conditions of Section 3.09 hereof.
Notwithstanding the foregoing, (i) an aggregate of $1.0 million of Net Available
Cash Proceeds received by the Company and/or the Subsidiaries in any fiscal year
from Asset Dispositions, not involving the sale, issuance or other disposition
of Capital Stock of a Subsidiary or the Non-Recourse Subsidiary or the sale or
other disposition of all or substantially all of the assets of a Subsidiary or
the Non-Recourse Subsidiary, shall not be subject to this Section 4.16, and (ii)
the Company may not, and may not permit any Subsidiary to, directly or
indirectly, make any Asset Disposition of any of the Capital Stock of a
Subsidiary or the Non-Recourse Subsidiary except pursuant to an Asset
Disposition of all of the Capital Stock of such Subsidiary or the Non-Recourse
Subsidiary.
SECTION 4.17. Payment of Taxes and Other Claims. The Company shall pay or
---------------------------------
discharge or cause to be paid or discharged, before any penalty accrues thereon,
(i) all material taxes, assessments and governmental charges levied or imposed
upon the Company, any Subsidiary or the Non-Recourse Subsidiary upon the income,
profits or property of the Company, any Subsidiary or the Non-Recourse
Subsidiary and (ii) all material lawful claims for labor, materials and supplies
which, if unpaid, would by law become a Lien upon the property of the Company or
any Subsidiary; provided that none of the Company, any Subsidiary or the Non-
Recourse Subsidiary shall be required to pay or discharge or cause to be paid or
discharged any such tax, assessment, charge or claims the amount, applicability
or validity of which is being contested in good faith by appropriate proceedings
and for which adequate provision
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has been made or where the failure to effect such payment or discharge is not
adverse in any material respect to the Holders.
SECTION 4.18. Corporate Existence. Subject to Article 5 hereof, the
-------------------
Company will do or cause to be done all things necessary to preserve and keep in
full force and effect its corporate existence and the corporate, partnership or
other existence of any Subsidiary or the Non-Recourse Subsidiary in accordance
with the respective organizational documents of such Subsidiary or the Non-
Recourse Subsidiary and the rights (charter and statutory), licenses and
franchises of the Company and each Subsidiary and the Non-Recourse Subsidiary,
provided, however, that the Company shall not be required to preserve any such
- - -------- -------
right, license or franchise, or the corporate, partnership or other existence of
any Subsidiary or the Non-Recourse Subsidiary, if the Board of Directors of the
Company shall determine that the preservation thereof is no longer desirable in
the conduct of the business of the Company and its Subsidiaries taken as a
whole, and that the loss thereof is not adverse in any material respect to the
Holders.
SECTION 4.19. Maintenance of Properties and Insurance. (a) The Company
---------------------------------------
shall cause all material properties owned by or leased to it or any Subsidiary
or the Non-Recourse Subsidiary and used or useful in the conduct of its business
or the business of such Subsidiary to be maintained and kept in normal
condition, repair and working order and supplied with all necessary equipment
and shall cause to be made all necessary repairs, renewals, replacements,
betterments and improvements thereof, all as in the judgment of the Company may
be necessary so that the business carried on in connection therewith may be
properly and advantageously conducted at all times; provided, however, that
-------- -------
nothing in this Section 4.19 shall prevent the Company, any Subsidiary or the
Non-Recourse Subsidiary from discontinuing the maintenance of any such
properties, if such discontinuance is desirable in the conduct of its business
or the business of such Subsidiary or the Non-Recourse Subsidiary.
(b) The Company shall provide or cause to be provided, for itself any
Subsidiaries and the Non-Recourse Subsidiary, insurance (including appropriate
self-insurance) against loss or damage of the kinds customarily insured against
by corporations similarly situated and owning like properties, including, but
not limited to, public liability insurance, with reputable insurers in such
amounts with such deductibles and by such methods as shall be customary for
corporations similarly situated in the industry.
(c) The Company shall, and shall cause each Subsidiary and the Non-
Recourse Subsidiary to, keep true books of records and accounts in which full
and correct entries will be made of all its business transactions, in accordance
with sound business practices, and reflect in its financial statements adequate
accruals and appropriations to reserves, all in accordance with GAAP.
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(d) The Company, shall and shall cause each Subsidiary and the Non-
Recourse Subsidiary to, comply with all statutes, laws, ordinances, or
government rules and regulations to which it is subject, non-compliance with
which would materially adversely affect the prospects, earnings, properties,
assets or condition, financial or otherwise, of the Company and the
Subsidiaries, taken as a whole.
SECTION 4.20. Conflicting Agreements. The Company will not, and will not
----------------------
permit any Subsidiary or the Non-Recourse Subsidiary to, enter into any
agreement (other than the Credit Agreement as in effect on the date hereof) or
instrument that by its terms expressly prohibits the Company from repurchasing
the Securities in accordance with Sections 3.08 or 3.09 hereof or otherwise in
accordance with the terms of the Securities.
SECTION 4.21. Investment Company Act. The Company shall not become an
----------------------
investment company subject to registration under the Investment Company Act of
1940, as amended.
SECTION 4.22. Payments for Consents. Neither the Company nor any
---------------------
Subsidiary shall, directly or indirectly, pay or cause to be paid any
consideration, whether by way of interest, fee or otherwise, to any Holder of
any Securities for or as an inducement to any consent, waiver or amendment of
any of the terms or provisions of this Indenture or the Securities unless such
consideration is offered to be paid or agreed to be paid to all Holders of the
Securities which so consent, waive or agree to amend in the time frame set forth
in solicitation documents relating to such consent, waiver or agreement.
SECTION 4.23. Covenant to Comply with Securities Laws Upon Purchase of
--------------------------------------------------------
Securities. In connection with any offer to purchase or purchase of Securities
- - ----------
under Sections 3.02, 3.08 and 3.09 hereof, the Company shall (i) comply with
Rule 14e-1 under the Exchange Act, and any other applicable rules thereunder,
and (ii) otherwise comply with all federal and state securities laws so as to
permit the rights and obligations under Sections 3.02, 3.08 and 3.09 hereof to
be exercised in the time and in the manner specified in Sections 3.02, 3.08 and
3.09 hereof.
ARTICLE 5
SUCCESSOR CORPORATION
SECTION 5.01. When the Company or any Guarantor May Merge, Etc. Subject
------------------------------------------------
to the provisions set forth in Section 11.03 hereof, neither the Company nor any
Guarantor may consolidate with or merge with or into, or sell, convey, transfer
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or lease all or substantially all of its assets (either in one transaction or a
series of transactions) to, any Person unless:
(1) the Person formed by or surviving such consolidation or merger (if
other than the Company or such Guarantor, as the case may be) or to which such
sale, conveyance, transfer or lease shall have been made (the "Successor
Person") is organized and existing under the laws of the United States of
America or any State thereof or the District of Columbia and such entity
expressly assumes by a supplemental indenture, executed and delivered to the
Trustee, in form satisfactory to the Trustee, all the obligations of the Company
or such Guarantor, as the case may be, under the Securities or the Guarantees,
as the case may be, and the Indenture;
(2) immediately prior to and after giving effect to such transaction (and
treating any Indebtedness which becomes an obligation of the Successor Person or
any Subsidiary (including any Guarantor) as a result of such transaction as
having been incurred by such Person or such Subsidiary (including any Guarantor)
at the time of such transaction), no Default or Event of Default shall have
occurred and be continuing;
(3) except with respect to consolidations, mergers, sales, conveyances,
transfers and leases between Guarantors, immediately after giving effect to such
transaction, on a pro forma basis, the Successor Person would be able to incur
an additional $1.00 of Indebtedness (other than Permitted Indebtedness) in
accordance with Section 4.06 hereof;
(4) if the Company is a party to such consolidation, merger, sale,
conveyance, transfer and lease, immediately after giving effect to such
transaction, on a pro forma basis, the Successor Person has Consolidated Net
Worth in an amount which is not less than the Consolidated Net Worth of the
Company immediately prior to such transaction;
(5) if such Guarantor is a party to such consolidation, merger, sale,
conveyance, transfer or lease, immediately after giving effect to such
transaction, on a pro forma basis, the Company has Consolidated Net Worth in an
amount which is not less than its Consolidated Net Worth immediately prior to
such transaction; and
(6) the Company, or such Guarantor, as the case may be, delivers to the
Trustee an Officers' Certificate and an Opinion of Counsel, each stating that
such consolidation, merger, sale, conveyance, transfer or lease and such
supplemental indenture comply with this Indenture.
The Successor Person will be the successor Company, or a successor
Guarantor, as the case may be, but in the case of a sale, conveyance, transfer
or lease
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of all or substantially all of the assets of the Company or Guarantor (i) the
predecessor Company will not be released from its obligation to pay the
principal of, premium, if any, and interest on the Securities, and (ii) the
predecessor Guarantor will not be released from its obligation under its
Guarantee.
ARTICLE 6
DEFAULTS AND REMEDIES
SECTION 6.01. Events of Default. An "Event of Default" occurs if one of
-----------------
the following shall have occurred and be continuing:
(1) The Company defaults in the payment, when due and payable, of (i)
interest on any Security and the default continues for a period of 30 days, or
(ii) the principal of, or premium, if any, on any Securities when the same
becomes due and payable at maturity, acceleration, on any Redemption Date, on
any Change in Control Purchase Date, on any Disposition Offer Purchase Date or
otherwise;
(2) The Company or any Subsidiary fails to comply with Sections 4.16 or
5.01 hereof;
(3) The Company fails to comply with Section 4.15 hereof;
(4) The Company defaults in the performance of, fails to comply with, any
of its covenants or agreements in the Securities or this Indenture (other than
those referred to in clause (1), (2) or (3) above) and such failure continues
for 30 days after receipt by the Company of a Notice of Default;
(5) The Company, any Subsidiary (including any Guarantor) or the Non-
Recourse Subsidiary fails to pay the principal of any Indebtedness with a
principal amount then outstanding in excess of $500,000, individually or in the
aggregate, when the same becomes due and payable at its Stated Maturity and such
failure shall continue after any applicable grace period specified in the
mortgage, indenture, instrument or other agreement relating to such
Indebtedness; or a default on any such Indebtedness which results in such
Indebtedness becoming due and payable prior to its Stated Maturity;
(6) The Company, any Subsidiary (including any Guarantor) or the Non-
Recourse Subsidiary pursuant to or within the meaning of any Bankruptcy Law:
(A) commences a voluntary case or proceeding;
(B) consents to the entry of an order for relief against it in an
involuntary case or proceeding;
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(C) consents to the appointment of a Custodian of it or for all or
substantially all of its property;
(D) makes a general assignment for the benefit of its creditors; or
(E) admits in writing its inability to pay its debts generally as
they become due;
(7) A court of competent jurisdiction enters an order or decree under any
Bankruptcy Law that:
(A) is for relief against the Company, any Subsidiary (including any
Guarantor) or the Non-Recourse Subsidiary in an involuntary
case or proceeding;
(B) appoints a Custodian of the Company, any Subsidiary (including
any Guarantor) or the Non-Recourse Subsidiary for all or
substantially all of its properties;
(C) orders the liquidation of the Company, any Subsidiary (including
any Guarantor) or the Non-Recourse Subsidiary;
(D) and in each case the order or decree remains unstayed and in
effect for 60 days; or
(8) Any judgment or decree for the payment of money in excess of $500,000
(to the extent not covered by insurance) is rendered against the Company, a
Subsidiary (including any Guarantor) or the Non-Recourse Subsidiary and is not
discharged and either (A) an enforcement proceeding has been commenced by a
creditor upon such judgment or decree or (B) there is a period of 45 days
following such judgment or decree during which such judgment or decree is not
discharged, waived or the execution thereof stayed; or
(9) Any of the Guarantees shall be held in any judicial proceeding to be
unenforceable or invalid or shall cease for any reason to be in full force and
effect, or any Guarantor, or any person acting by or on behalf of any Guarantor,
shall deny or disaffirm its obligations under its Guarantee.
The foregoing will constitute Events of Default whatever the reason for any
such Event of Default and whether it is voluntary or involuntary or is effected
by operation of law or pursuant to any judgment, decree or order of any court or
any order, rule or regulation of any administrative or governmental body.
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The term "Bankruptcy Law" means Title 11, United States Code, or any
similar Federal or state law for the relief of debtors. "Custodian" means any
receiver, trustee, assignee, liquidator, sequestrator, custodian or similar
official under any Bankruptcy Law.
A Default under clause (4) above is not an Event of Default until the
Trustee notifies the Company or the Holders of at least 25% in aggregate
principal amount of the Securities at the time outstanding notify the Company
and the Trustee, of the Default and the Company does not cure such Default
within the time specified in clause (4) above after receipt of such notice. Any
such notice must specify the Default, demand that it be remedied and state that
such notice is a "Notice of Default."
SECTION 6.02. Acceleration. If any Event of Default, other than an Event
------------
of Default under clauses (6) or (7), occurs and is continuing, the Trustee may,
by notice to the Company, or the Holders of at least 25% in aggregate principal
amount of the Securities then outstanding may, by notice to the Company and the
Trustee (each, an "Acceleration Notice"), and the Trustee shall, upon the
request of such Holders, declare the principal of, and accrued but unpaid
interest on all of the Securities to be due and payable.
The Company shall deliver to the Trustee, within 10 days after it obtains
knowledge thereof, written notice in the form of an Officers' Certificate of any
event which with the giving of notice and the lapse of time would become an
Event of Default under clause (4), (5), or (8), its status and what action the
Company is taking or proposes to take with respect thereto. Upon such a
declaration, such principal and interest shall be due and payable immediately.
If an Event of Default specified in clause (6) or (7) with respect to the
Company, any Subsidiary (including any Guarantor) or the Non-Recourse Subsidiary
occurs and is continuing, the principal of and interest on all the Securities
shall ipso facto become and be immediately due and payable without any
declaration or other act on the part of the Trustee or any Securityholders. The
Holders of a majority in principal amount of the Securities by notice to the
Trustee may rescind an acceleration and its consequences if the rescission would
not conflict with any judgment or decree and if all existing Events of Default
have been cured or waived except nonpayment of principal or interest that has
become due solely because of acceleration. No such rescission shall affect any
subsequent Default or impair any right consequent thereto.
SECTION 6.03. Other Remedies. If an Event of Default occurs and is
--------------
continuing, the Trustee may pursue any available remedy by proceeding at law or
in equity to collect the payment of principal of, premium, if any, or interest
on the
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Securities or to enforce the performance of any provision of the Securities or
this Indenture.
The Trustee may maintain a proceeding even if the Trustee does not possess
any of the Securities or does not produce any of the Securities in the
proceeding. A delay or omission by the Trustee or any Securityholder in
exercising any right or remedy accruing upon an Event of Default shall not
impair the right or remedy or constitute a waiver of, or acquiescence in, the
Event of Default. No remedy is exclusive of any other remedy. All available
remedies are cumulative.
SECTION 6.04. Waiver of Past Defaults. The Holders of a majority in
-----------------------
aggregate principal amount of the Securities at the time outstanding, by notice
to the Trustee (and without notice to any other Securityholder), may waive an
existing Default or Event of Default and its consequences except (a) an Event of
Default described in Section 6.01(1) hereof, or (b) a Default in respect of a
provision that under Section 9.02 hereof cannot be amended without the consent
of each Securityholder affected. When a Default is waived, it is deemed cured
and shall cease to exist, but no such waiver shall extend to any subsequent or
other Default or impair any consequent right.
SECTION 6.05. Control by Majority. The Holders of a majority in aggregate
-------------------
principal amount of the Securities at the time outstanding may direct the time,
method and place of conducting any proceeding for any remedy available to the
Trustee or of exercising any trust or power conferred on the Trustee. However,
the Trustee may refuse to follow any direction that conflicts with law or this
Indenture or that the Trustee determines in good faith is unduly prejudicial to
the rights of other Securityholders or would involve the Trustee in personal
liability. The Trustee may take any other action deemed proper by the Trustee
which is not inconsistent with such direction.
SECTION 6.06. Limitation on Suits. Except as provided in Section 6.07
-------------------
hereof, a Securityholder may not pursue any remedy with respect to this
Indenture or the Securities unless:
(1) the Holder gives to the Trustee written notice stating that an Event
of Default is continuing;
(2) the Holders of at least 25% in aggregate principal amount of the
Securities at the time outstanding make a written request to the Trustee to
pursue the remedy;
(3) such Holder or Holders offer to the Trustee reasonable security or
indemnity against any loss, liability or expense satisfactory to the Trustee;
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(4) the Trustee does not comply with the request within 60 days after
receipt of the notice, the request and the offer of security or indemnity; and
(5) the Holders of a majority in aggregate principal amount of the
Securities at the time outstanding do not give the Trustee a direction
inconsistent with the request during such 60-day period.
A Securityholder may not use this Indenture to prejudice the rights of any
other Securityholder or to obtain a preference or priority over any other
Securityholder.
SECTION 6.07. Rights of Holders to Receive Payment. Notwithstanding any
------------------------------------
other provision of this Indenture, the right of any Holder to receive payment of
the principal amount, premium, if any, or interest, in respect of the Securities
held by such Holder, on or after the respective due dates expressed in the
Securities, any Redemption Date, any Change in Control Purchase Date, or any
Disposition Offer Purchase Date, or to bring suit for the enforcement of any
such payment on or after such respective dates shall not be impaired or affected
adversely without the consent of each such Holder.
SECTION 6.08. Collection Suit by Trustee. If an Event of Default
---------- ---------------
described in Section 6.01(1) hereof occurs and is continuing, the Trustee may
recover judgment in its own name and as trustee of an express trust against the
Company, each Guarantor or any other obligor on the Securities for the whole
amount owing with respect to the Securities and the amounts provided for in
Section 6.07 hereof.
SECTION 6.09. Trustee May File Proofs of Claim. In case of the pendency
--------------------------------
of any receivership, insolvency, liquidation, bankruptcy, reorganization,
arrangement, adjustment, composition or other judicial proceeding relative to
the Company, any Guarantor or other obligor on the Securities, or their
respective properties or assets, the Trustee shall be entitled and empowered, by
intervention in such proceeding or otherwise:
(1) to file and prove a claim for the whole amount of the principal
amount, premium, if any, and interest on the Securities and to file such other
papers or documents as may be necessary or advisable in order to have the claims
of the Trustee (including any claim for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel) and of the
Holders allowed in such judicial proceeding; and
(2) to collect and receive any moneys or other property payable or
deliverable on any such claims and to distribute the same;
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and any Custodian in any such judicial proceeding is hereby authorized by each
Holder to make such payments to the Trustee and, in the event that the Trustee
shall consent to the making of such payments directly to the Holders, to pay the
Trustee any amount due it for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel, and any other
amounts due the Trustee under Section 7.07 hereof.
Nothing herein contained shall be deemed to authorize the Trustee to
authorize or consent to or accept or adopt on behalf of any Holder any plan of
reorganization, arrangement, adjustment or composition affecting the Securities
or the rights of any Holder thereof, or to authorize the Trustee to vote in
respect of the claim of any Holder in any such proceeding.
SECTION 6.10. Priorities. If the Trustee collects any money pursuant to
----------
this Article 6, it shall pay out the money in the following order:
FIRST: to the Trustee for amounts due under Section 7.07 hereof;
SECOND: to Securityholders for amounts due and unpaid on the Securities
for the principal amount, Redemption Price or interest, if any, as the case may
be, ratably, without preference or priority of any kind, according to such
amounts due and payable on the Securities; and
THIRD: the balance, if any, to the Company.
The Trustee may fix a record date and payment date for any payment to
Securityholders pursuant to this Section 6.10.
SECTION 6.11. Undertaking for Costs. In any suit for the enforcement of
---------------------
any right or remedy under this Indenture or in any suit against the Trustee for
any action taken or omitted by it as Trustee, a court in its discretion may
require the filing by any party litigant (other than the Trustee) in the suit of
an undertaking to pay the costs of the suit, and the court in its discretion may
assess reasonable costs, including reasonable attorneys' fees and expenses,
against any party litigant in the suit, having due regard to the merits and good
faith of the claims or defenses made by the party litigant. This Section 6.11
does not apply to a suit by the Trustee, a suit by a Holder pursuant to Section
6.07 hereof or a suit by Holders of more than 10% in aggregate principal amount
of the Securities at the time outstanding.
SECTION 6.12. Waiver of Stay, Extension or Usury Laws. The Company and
---------------------------------------
each Guarantor covenants (to the extent that it may lawfully do so) that it will
not at any time insist upon, or plead or in any manner whatsoever claim or take
the benefit or advantage of, any stay or extension law or any usury or other law
wherever enacted, now or at any time hereafter in force, that would prohibit or
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forgive the Company or such Guarantor from paying all or any portion of the
principal or premium, if any, or interest on the Securities as contemplated
herein or affect the covenants or the performance by the Company of its
obligations under this Indenture or by such Guarantor of its obligations under
its Guarantee; and the Company and each Guarantor (to the extent that it may
lawfully do so) hereby expressly waives all benefit or advantage of any such
law, and covenants that it will not hinder, delay or impede the execution of any
power herein granted to the Trustee, but will suffer and permit the execution of
every such power as though no such law had been enacted.
ARTICLE 7
TRUSTEE
SECTION 7.01. Duties of Trustee.
-----------------
(1) If an Event of Default has occurred and is continuing, the Trustee
shall exercise the rights and powers vested in it by this Indenture and use the
same degree of care and skill in its exercise as a prudent man would exercise or
use under the circumstances in the conduct of his own affairs.
(2) Except during the continuance of an Event of Default:
(A) the Trustee need perform only those duties that are specifically
set forth in this Indenture and no others; and
(B) in the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the
correctness of the opinions expressed therein, upon
certificates or opinions furnished to the Trustee and
conforming to the requirements of this Indenture. However, in
the case of any such certificate or opinion which by any
provision hereof are specifically required to be furnished to
the Trustee, the Trustee shall examine the certificates and
opinions to determine whether or not they conform to the
requirements of this Indenture.
(3) The Trustee may not be relieved from liability for its own negligent
action, its own negligent failure to act or its own willful misconduct, except
that:
(A) this paragraph (3) does not limit the effect of paragraph (2) of
this Section 7.01;
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(B) the Trustee shall not be liable for any error of judgment made
in good faith by a Trust Officer unless it is proved that the
Trustee was negligent in ascertaining the pertinent facts; and
(C) the Trustee shall not be liable with respect to any action it
takes or omits to take in good faith in accordance with a
direction received by it pursuant to Section 6.05 hereof.
(4) Every provision of this Indenture that in any way relates to the
Trustee is subject to paragraphs (1), (2), (3) and (5) of this Section 7.01 and
Section 7.02.
(5) The Trustee may refuse to perform any duty or exercise any right or
power or extend or risk its own funds or otherwise incur any financial liability
unless it receives security or indemnity satisfactory to it against any loss,
liability or expense.
(6) Money held by the Trustee in trust hereunder need not be segregated
from other funds except to the extent required by law. The Trustee shall be
under no liability for interest on any money held by it hereunder.
SECTION 7.02. Rights of Trustee.
-----------------
(1) The Trustee may rely on any document believed by it to be genuine and
to have been signed or presented by the proper Person. The Trustee need not
investigate any fact or matter stated in the document.
(2) Before the Trustee acts or refrains from acting, it may require an
Officers' Certificate and an Opinion of Counsel. The Trustee shall not be
liable for any action it takes or omits to take in good faith in reliance on
such Officers' Certificate and Opinion of Counsel.
(3) The Trustee may act through agents and shall not be responsible for
the misconduct or negligence of any agent appointed with due care.
(4) The Trustee shall not be liable for any action it takes or omits to
take in good faith which it believes to be authorized or within its rights or
powers.
(5) The Trustee may consult with counsel of its selection and the advice
of such counsel or any Opinion of Counsel shall be full and complete
authorization and protection in respect of any action taken, suffered or omitted
by it hereunder in good faith and in reliance thereon.
(6) The Trustee shall be under no obligation to exercise any of the rights
or powers vested in it by this Indenture at the request or direction of any of
the Holders
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pursuant to this Indenture, unless such Holders shall have offered to the
Trustee reasonable security and indemnity against the costs, expenses and
liabilities which might be incurred by it in compliance with such request or
direction.
SECTION 7.03. Individual Rights of Trustee. The Trustee in its individual
----------------------------
or any other capacity may become the owner or pledgee of Securities and may
otherwise deal with the Company or its Affiliates with the same rights it would
have if it were not Trustee. Any Paying Agent, Registrar or co-registrar may do
the same with like rights. However, the Trustee must comply with Sections 7.10
and 7.11 hereof.
SECTION 7.04. Trustee's Disclaimer. The Trustee makes no representation
--------------------
as to the validity or adequacy of this Indenture or the Securities, it shall not
be accountable for the Company's use of the proceeds from the Securities, and it
shall not be responsible for any statement in the registration statement for the
Securities under the Securities Act (other than statements contained in the Form
T-l filed with the SEC under the TIA) or in this Indenture or the Securities
(other than its certificate of authentication), or the determination as to which
beneficial owners are entitled to receive any notices hereunder.
SECTION 7.05. Notice of Defaults. If a Default occurs and is continuing
------------------
and if it is known to the Trustee, the Trustee shall mail to each Securityholder
as their names and addresses appear on the Security Register notice of the
Default within 60 days after it becomes known to the Trustee unless such Default
shall have been cured or waived. Except in the case of a Default described in
Section 6.01(1) hereof, the Trustee may withhold such notice if and so long as a
committee of Trust Officers in good faith determines that the withholding of
such notice is in the interests of Securityholders. The second sentence of this
Section 7.05 shall be in lieu of the proviso to Section 315(b) of the TIA and
said proviso is hereby expressly excluded from this Indenture, as permitted by
the TIA.
SECTION 7.06. Reports by Trustee to Holders. Within 60 days after each
-----------------------------
May 15 beginning with May 15, 1994, the Trustee shall mail to each
Securityholder a brief report dated as of such reporting date in accordance
with and to the extent required under Section 313 of the TIA.
A copy of each report at the time of its mailing to Securityholders shall
be filed with the Company, the SEC and each stock exchange on which the
Securities are listed. The Company agrees to promptly notify the Trustee
whenever the Securities become listed on any stock exchange and of any delisting
thereof.
SECTION 7.07. Compensation and Indemnity. The Company and the Guarantors,
--------------------------
jointly and severally, agree:
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(1) To pay to the Trustee from time to time such compensation as shall be
agreed in writing between the Company and the Trustee for all services rendered
by it hereunder (which compensation shall not be limited by any provision of law
in regard to the compensation of a trustee of an express trust);
(2) To reimburse the Trustee upon its request for all reasonable expenses,
disbursements and advances incurred or made by the Trustee in accordance with
any provision of this Indenture (including the reasonable compensation and the
expenses, disbursements and advances of its agents and counsel), including all
reasonable expenses, disbursements and advances incurred or made by the Trustee
in connection with any membership on any creditor's committee, except any such
expense, disbursement or advance as may be attributable to its negligence or bad
faith; and
(3) To indemnify the Trustee, its officers, directors and shareholders,
for, and to hold it harmless against, any and all loss, liability or expense,
incurred without negligence or bad faith on its part, arising out of or in
connection with the acceptance or administration of this trust, including the
reasonable costs and expenses of defending itself against any claim or liability
in connection with the exercise or performance of any of its powers or duties
hereunder.
The Trustee shall have a claim and lien prior to the Securities as to all
property and funds held by it hereunder for any amount owing it or any
predecessor Trustee pursuant to this Section 7.07, except with respect to funds
held in trust for the payment of principal of, premium, if any, or interest on
particular Securities.
The Company's payment obligations pursuant to this Section 7.07 are not
subject to Article 10 of this Indenture and shall survive the discharge of this
Indenture. When the Trustee renders services or incurs expenses after the
occurrence of a Default specified in Section 6.01 hereof, the compensation for
services and expenses are intended to constitute expenses of administration
under any Bankruptcy Law.
SECTION 7.08. Replacement of Trustee. The Trustee may resign by so
----------------------
notifying the Company in writing at least 30 days prior to the date of the
proposed resignation; provided, however, no such resignation shall be effective
until a successor Trustee has accepted its appointment pursuant to this Section
7.08. The Holders of a majority in aggregate principal amount of the Securities
at the time outstanding may remove the Trustee by so notifying the Trustee in
writing and may appoint a successor Trustee subject to the consent of the
Company. The Trustee shall resign if:
(1) the Trustee fails to comply with Section 7.10 hereof;
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(2) the Trustee is adjudged bankrupt or insolvent;
(3) a receiver or public officer takes charge of the Trustee or its
property; or
(4) the Trustee otherwise becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in the office
of Trustee for any reason, the Company shall promptly appoint, by resolution of
its Board of Directors, a successor Trustee.
A successor Trustee shall deliver a written acceptance of its appointment
to the retiring Trustee and to the Company. Thereupon the resignation or
removal of the retiring Trustee shall become effective, and the successor
Trustee shall have all the rights, powers and duties of the Trustee under this
Indenture. The successor Trustee shall mail a notice of its succession to
Securityholders. Subject to payment of all amounts owing to the Trustee under
Section 7.07 hereof and subject further to its lien under Section 7.07, the
retiring Trustee shall promptly transfer all property held by it as Trustee to
the successor Trustee.
If a successor Trustee does not take office within 30 days after the
retiring Trustee resigns or is removed, the retiring Trustee, the Company or the
Holders of a majority in aggregate principal amount of the Securities at the
time outstanding may petition any court of competent jurisdiction for the
appointment of a successor Trustee.
If the Trustee fails to comply with Section 7.10 hereof, any Securityholder
may petition any court of competent jurisdiction for the removal of the Trustee
and the appointment of a successor Trustee.
SECTION 7.09. Successor Trustee by Merger. If the Trustee consolidates
---------------------------
with, merges or converts into, or transfers all or substantially all its
corporate trust business or assets (including this Trusteeship) to, another
corporation, the resulting, surviving or transferee corporation without any
further act shall be the successor Trustee.
SECTION 7.10. Eligibility; Disqualification. (a) There will at all times
-----------------------------
be a Trustee hereunder which will (i) be a corporation organized and doing
business under the laws of the United States, any state thereof or the District
of Columbia, authorized under such laws to exercise corporate trust power; (ii)
be subject to supervision or examination by federal or state (or the District of
Columbia) authority; and (iii) have a combined capital and surplus of at least
$150 million as set forth in its most recent published annual report of
condition.
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(b) This Indenture will always have a Trustee who satisfies the
requirements of TIA (S)(S) 310(a)(1) and 310(a)(2). The Trustee is subject to
TIA (S) 310(b). If at any time the Trustee ceases to be eligible in accordance
with the provisions of this section 7.10, it will resign immediately in the
manner and with the effect specified in Section 7.08 hereof.
SECTION 7.11. Preferential Collection of Claims Against the Company. The
--------------------------------- -------------------
Trustee is subject to TIA (S) 311(a), excluding any creditor relationship listed
in TIA (S) 311(b). A Trustee who has resigned or been removed will be subject
to TIA (S) 311(a) to the extent indicated therein.
ARTICLE 8
SATISFACTION AND DISCHARGE OF INDENTURE;
DEFEASANCE OF CERTAIN OBLIGATIONS;
UNCLAIMED MONEYS
SECTION 8.01. Satisfaction and Discharge of Indenture. (a) If at any
---------------------------------------
time (i) the Company shall have paid or caused to be paid the principal of and
interest on all the Securities outstanding hereunder, as and when the same
shall have become due and payable, or (ii) the Company shall have delivered to
the Trustee for cancellation all Securities theretofore authenticated (other
than any Securities which shall have been destroyed, lost or stolen and which
shall have been replaced or paid as provided in Section 2.07 hereof) or (iii)
(A) all such Securities not theretofore delivered to the Trustee for
cancellation shall have become due and payable or are by their terms to become
due and payable within one year or are to be called for redemption under
arrangements satisfactory to the Trustee for the giving of notice of
redemption, and (B) the Company shall have irrevocably deposited or caused to
be deposited with the Trustee, as trust funds, (i) the entire amount in cash,
(ii) U.S. Government Obligations maturing as to principal and interest at such
times and in such amounts as will insure the availability of cash or (iii) a
combination thereof sufficient to pay at maturity or upon redemption, in the
opinion of a nationally-recognized firm of independent public accountants
expressed in a written certification thereof delivered to the Trustee, all
such Securities not theretofore delivered to the Trustee for cancellation,
including principal and interest due or to become due to such date of
maturity, as the case may be, and if, in any such case, the Company shall also
pay or cause to be paid all other sums payable hereunder by the Company, then
this Indenture shall cease to be of further effect (except as to (1) rights of
registration of transfer and exchange of Securities, (2) replacement of
apparently mutilated, defaced, destroyed, lost or stolen Securities, (3)
rights of Holders to receive payments of principal thereof and interest
thereon, (4) rights of the Holders as beneficiaries hereof with respect to the
property so deposited with the Trustee payable to all or any of them,
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(5) the obligation of the Company to maintain an office or agency for payments
on and registration of transfer of the Securities and (6) the rights,
obligations and immunities of the Trustee hereunder), and the Trustee, on demand
of the Company shall execute proper instruments acknowledging such satisfaction
of and discharging this Indenture, if:
(A) such deposit will not result in a breach or violation of, or
constitute a default under, any agreement or instrument to which the
Company is a party or by which it is bound; and
(B) the Company has delivered to the Trustee an Officer's Certificate
and an Opinion of Counsel, each stating that all conditions
precedent relating to the defeasance contemplated by this provision
have been complied with.
The Company agrees to reimburse the Trustee for any costs or expenses
thereafter reasonably and properly incurred and to compensate the Trustee for
any services thereafter reasonably and properly rendered by the Trustee in
connection with this Indenture or the Securities.
(b) The Company shall be deemed to have paid and discharged the entire
indebtedness on all Securities outstanding on the 91st day after the date of the
deposit referred to in subparagraph (A) below, and the provisions of this
Indenture with respect to the Securities shall no longer be in effect (except as
to (1) rights of registration of transfer, substitution and exchange of
Securities, (2) replacement of apparently mutilated, defaced, destroyed, lost or
stolen Securities, (3) rights of Holders to receive payments of principal
thereof and interest thereon, (4) rights of the Holders as beneficiaries hereof
with respect to the property so deposited with the Trustee payable to all or any
of them, (5) the obligation of the Company to maintain an office or agency for
payments on and registration of transfer of the Securities and (6) the rights,
obligations and immunities of the Trustee hereunder) rights, obligations, duties
and immunities of the Trustee hereunder and the Trustee, at the expense of the
Company, shall at the Company's request, execute proper instruments
acknowledging the same, if:
(A) with reference to this provision, the Company has irrevocably
deposited or caused to be irrevocably deposited with the Trustee as
trust funds in trust, specifically pledged as security for, and
dedicated solely to, the benefit of the Holders (i) cash in an
amount, or (ii) U.S. Government Obligations, maturing as to
principal and interest at such times and in such amounts as will
insure the availability of cash or (iii) a combination thereof,
sufficient, in the opinion of a nationally-recognized firm of
independent public accountants expressed in a written certification
thereof delivered to the Trustee, to pay the
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principal of (and premium if any) and interest on all Securities
outstanding on each date that such principal or interest is due and
payable, together with all other amounts payable by the Company
hereunder;
(B) no Default or Event of Default with respect to the Securities has
occurred and is continuing on the date of such deposit or occurs as
a result of such deposit or at any time during the period ending on
the 91st day after the date of such deposit;
(C) such deposit will not result in a breach or violation of, or
constitute a default under, any agreement or instrument to which the
Company or such Guarantor, as the case may be, is a party or by
which it is bound;
(D) the Company or such Guarantor, as the case may be, has delivered to
the Trustee an Officer's Certificate and an Opinion of Counsel, each
stating that all conditions precedent relating to the defeasance
contemplated by this provision have been complied with; and
(E) the Company or such Guarantor, as the case may be, has delivered to
the Trustee (i) either a private Internal Revenue Service ruling or
an Opinion of Counsel based on a ruling of the Internal Revenue
Service or other change in Federal income tax law to the effect that
the Holders will not recognize income, gain or loss for federal
income tax purposes as a result of such deposit, defeasance and
discharge and will be subject to federal income tax on the same
amount and in the manner and at the same times as would have been
the case if such deposit, defeasance and discharge had not occurred,
and (ii) an Opinion of Counsel to the effect that (A) the deposit
shall not result in the Company, the Trustee or the trust being
deemed to be an "investment company" under the Investment Company
Act of 1940, as amended, and (B) such deposit creates a valid trust
in which the Holders of the Securities who are not "insiders" for
purposes of any Bankruptcy Law have the sole beneficial ownership
interest or that the Holders of the Securities have a nonavoidable
first priority security interest in such trust. Notwithstanding the
foregoing, the Company's obligations to pay principal, premium, if
any, and interest on the Securities, and the Guarantors' obligations
under the Guarantees and this Indenture, shall continue until the
Internal Revenue Service ruling or Opinion of Counsel referred to in
clause (i) above is provided with regard to and without reliance
upon such obligations continuing to be obligations of the Company
and the Guarantors, respectively.
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(c) The Company shall be released from its obligations under Sections
3.08, 3.09 and 4.06 through 4.14, 4.16 and 5.01 hereof with respect to the
Securities outstanding on and after the date the conditions set forth below are
satisfied (hereinafter, "covenant defeasance"). For this purpose, such covenant
defeasance means that, with respect to the Securities outstanding, the Company
may omit to comply with and shall have no liability in respect of any term,
condition or limitation set forth in such Section, whether directly or
indirectly by reason of any reference elsewhere herein to such Sections or by
reason of any reference in such Sections to any other provision herein or in any
other document, and such omission to comply shall not constitute an Event of
Default under Section 6.01, but the remainder of this Indenture and the
Securities shall be unaffected thereby. The following shall be the conditions
to application of this subsection (c) of this Section 8.01:
(A) The Company has irrevocably deposited or caused to be deposited with
the Trustee as trust funds in trust for the purposes of making the
following payments, specifically pledged as security for, and
dedicated solely to, the benefit of the Holders (i) cash in an
amount, or (ii) U.S. Government Obligations maturing as to principal
and interest at such times and in such amounts as will insure the
availability of cash or (iii) a combination thereof, sufficient, in
the opinion of a nationally-recognized firm of independent public
accountants expressed in a written certification thereof delivered
to the Trustee, to pay the principal of (and premium, if any) and
interest on all Securities outstanding on each date that such
principal or interest is due and payable, together with all other
amounts payable by the Company hereunder;
(B) No Default or Event of Default shall have occurred and be continuing
on the date of such deposit;
(C) Such covenant defeasance shall not cause the Trustee to have
conflicting interest as defined in Section 310 of the Trust
Indenture Act of 1939 with respect to any securities of the Company;
(D) Such covenant defeasance shall not result in a breach or violation
of, or constitute a Default under, this Indenture or any other
agreement or instrument to which the Company is a party or by which
it is bound;
(E) The Company shall have delivered to the Trustee an Officer's
Certificate and Opinion of Counsel to the effect that the Holders
will not recognize income, gain or loss for Federal income tax
purposes as a result of such covenant defeasance and will be subject
to Federal income tax on the same amounts, in the same manner and at
the same
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time as would have been the case if such covenant defeasance had not
occurred; and
(F) The Company shall have delivered to the Trustee an Officer's
Certificate and an Opinion of Counsel, each stating that all
conditions precedent relating to the covenant defeasance
contemplated by this provision have been complied with.
SECTION 8.02. Application by Trustee of Funds Deposited for Payment of
--------------------------------------------------------
Securities. Subject to Section 8.04 hereof, and to the subordination provision
- - ----------
of this Indenture, all moneys deposited with the Trustee pursuant to Section
8.01 hereof shall be held in trust and applied by it to the payment, either
directly or through any Paying Agent (including the Company acting as its own
Paying Agent), to the Holders of the particular Securities for the payment or
redemption of which such moneys have been deposited with the Trustee, of all
sums due and to become due thereon for principal and interest; but such money
need not be segregated from other funds except to the extent required by law.
SECTION 8.03. Repayment of Moneys Held by Paying Agent. In connection
----------------------------------------
with the satisfaction and discharge of this Indenture, all moneys then held by
any Paying Agent under the provisions of this Indenture shall, upon demand of
the Company, be repaid to it or paid to the Trustee and thereupon such Paying
Agent shall be released from all further liability with respect to such moneys.
SECTION 8.04. Return of Moneys Held by Trustee and Paying Agent Unclaimed
-----------------------------------------------------------
for Three Years. Any moneys deposited with or paid to the Trustee or any Paying
- - ---------------
Agent for the payment of the principal, premium, if any, or interest on any
Security and not applied but remaining unclaimed for three years after the date
upon which such principal, premium, if any, or interest shall have become due
and payable shall, upon the written request of the Company and unless otherwise
required by mandatory provisions of applicable escheat or abandoned or unclaimed
property law, be repaid to the Company by the Trustee or such Paying Agent, and
the Holder of such Security shall, unless otherwise required by mandatory
provisions of applicable escheat or abandoned or unclaimed property laws,
thereafter look only to the Company for any payment which such Holder may be
entitled to collect, and all liability of the Trustee or any Paying Agent with
respect to such moneys shall thereupon cease.
ARTICLE 9
AMENDMENTS
SECTION 9.01. Without Consent of Holders. From time to time, when
--------------------------
authorized by a resolution of their respective Boards of Directors, the Company
and the Guarantors, and the Trustee, without notice to or the consent of the
holders of
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the Securities issued hereunder, may amend or supplement this Indenture as
follows:
(1) to cure any ambiguity, omission, defect or inconsistency; or
(2) to comply with Article 5 hereof; or
(3) to provide for uncertificated Securities in addition to or in place of
certificated Securities (so long as such uncertificated Securities are issued in
registered form for purposes of Section 163(f) of the Internal Revenue Code of
1986, as amended, or in manner such that the uncertificated Securities are
described in Section 163(f)(2)(B) of the Code); or
(4) to make any other change that does not adversely affect the rights of
any Securityholder; or
(5) to comply with any requirement of the SEC in connection with the
qualification of this Indenture under the TIA; or
(6) to add additional Guarantees of the Securities or to release a
Guarantor in accordance with the terms of this Indenture; or
(7) to add security for the Securities; or
(8) to add to the covenants of the Company for the benefit of the Holders;
or
(9) to surrender any right or power conferred upon the Company.
SECTION 9.02. With Consent of Holders. With the written consent of the
-----------------------
Holders of at least a majority in aggregate principal amount of the Securities
at the time outstanding, the Company, the Guarantors, and the Trustee may amend
this Indenture or the Securities or may waive future compliance by the Company
with any provisions of this Indenture or the Securities. However, without the
consent of each Securityholder of an outstanding note, a waiver or an amendment
to this Indenture or the Securities may not:
(1) reduce the percentage of principal amount of the Securities whose
Holders must consent to an amendment or waiver; or
(2) make any change to the Stated Maturity of the principal of, premium,
if any, or any interest on the Securities or any Redemption Price thereof or
impair the right to institute suit for the enforcement of any such payment or
make any Security payable in currency or securities other than that stated in
the Security; or
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(3) make any change in Article 10 hereof that adversely affects the rights
of any Holder of Securities or any change to any other Section hereof that
adversely affects the rights, under Article 10 hereof, of any Holder of
Securities; or
(4) waive a default in the payment of the principal of, premium, if any,
or interest on, any Security; or
(5) make any change in the provisions of Sections 4.15, 6.04 or 6.07
hereof; or
(6) make any change to Article 11 hereof that adversely affects the rights
of any Holder of Securities or any change to any other Section hereof that
adversely affects the rights, under Article 11 hereof, of any Holder of
Securities.
It shall not be necessary for the consent of the Holders under this Section
9.02 to approve the particular form of any proposed amendment, but it shall be
sufficient if such consent approves the substance thereof.
In the event that certain Holders are willing to defer or waive certain
obligations of the Company hereunder with respect to Securities held by them,
such deferral or waiver shall not be deemed to affect any other Holder who
receives the subject payment or performance in a timely manner.
After an amendment or waiver under this Section 9.02 becomes effective, The
Company shall mail to each Holder a notice briefly describing the amendment or
waiver. Any failure of the Company to mail such notices, or any defect therein,
shall not, however, in any way impair or affect the validity of any such
amendment or waiver.
SECTION 9.03. Compliance with Trust Indenture Act. Every supplemental
-----------------------------------
indenture executed pursuant to this Article 9 shall comply with the TIA.
SECTION 9.04. Revocation and Effect of Consents, Waivers and Actions.
------------------------------------------------------
Until an amendment, waiver or other action by Holders becomes effective, a
consent to it or any other action by a Holder of a Security hereunder is a
continuing consent by the Holder and every subsequent Holder of that Security or
portion of the Security that evidences the same obligation as the consenting
Holder's Security, even if notation of the consent, waiver or action is not made
on the Security. However, any such Holder or subsequent Holder may revoke the
consent, waiver or action as to such Holder's Security or portion of the
Security if the Trustee receives the notice of revocation before the consent of
the requisite aggregate principal amount of the Securities then outstanding has
been obtained and not revoked.
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After an amendment, waiver or action becomes effective, it shall bind every
Securityholder, except as provided in Section 9.02 hereof.
The Company may, but shall not be obligated to, fix a record date for the
purpose of determining the Holders entitled to consent to any amendment or
waiver. If a record date is fixed, then, notwithstanding the first two
sentences of the immediately preceding paragraph, those Persons who were Holders
at such record date (or their duly designated proxies), and only those Persons,
shall be entitled to consent to such amendment, supplement or waiver or to
revoke any consent previously given, whether or not such Persons continue to be
Holders after such record date. No such consent shall be valid or effective for
more than 90 days after such record date.
SECTION 9.05. Notation on or Exchange of Securities. Securities
-------------------------------------
authenticated and made available for delivery after the execution of any
supplemental indenture pursuant to this Article 9 may, and shall, if required by
the Trustee, bear a notation in form approved by the Trustee as to any matter
provided for in such supplemental indenture. If the Company shall so determine,
new Securities so modified as to conform, in the opinion of the Trustee and the
Board of Directors, to any such supplemental indenture may be prepared and
executed by the Company, with the notation thereon executed by each Guarantor
with respect to its Guarantee thereof, and authenticated and made available for
delivery by the Trustee in exchange for outstanding Securities.
SECTION 9.06. Trustee to Sign Supplemental Indentures. The Trustee shall
---------------------------------------
sign any supplemental indenture authorized pursuant to this Article 9 if the
supplemental indenture does not adversely affect the rights, duties, liabilities
or immunities of the Trustee. If it does, the Trustee may, but need not, sign
it. In signing such amendment the Trustee shall be entitled to receive, and
shall be fully protected in relying upon, an Officers' Certificate and Opinion
of Counsel stating that such supplemental indenture is authorized or permitted
by this Indenture.
SECTION 9.07. Effect of Supplemental Indentures. Upon the execution of
---------------------------------
any supplemental indenture under this Article 9, this Indenture shall be
modified in accordance therewith, and such supplemental indenture shall form a
part of this Indenture for all purposes; and every Holder of Securities
theretofore or thereafter authenticated and made available for delivery
hereunder shall be bound thereby.
ARTICLE 10
SUBORDINATION
SECTION 10.01. Securities Subordinated to Company Senior Indebtedness.
------------------------------------------------------
Notwithstanding the provisions of Section 6.01 hereof or any other provision
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herein or in the Securities, the Company covenants and agrees, and the Trustee
and each Holder by his acceptance thereof likewise (a) covenants and agrees,
that all payments of the principal, premium, if any, of and interest on the
Securities by the Company shall be subordinated in accordance with the
provisions of this Article Ten to the prior payment in full, in cash or cash
equivalents, of all amounts payable on, under or in connection with Company
Senior Indebtedness and (b) acknowledges that holders of Company Senior
Indebtedness are or shall be relying on the provisions of this Article Ten.
SECTION 10.02. Priority and Payment Over of Proceeds in Certain Events.
-------------------------------------------------------
(a) Upon any payment or distribution of assets or securities of the
Company, as the case may be, of any kind or character, whether in cash, property
or securities, in any dissolution, winding up, total or partial liquidation or
reorganization of the Company, whether voluntary or involuntary, or in
bankruptcy, insolvency, receivership or other proceedings, all amounts payable
on, under or in connection with Company Senior Indebtedness (including any
interest accruing on such Company Senior Indebtedness subsequent to the
commencement of a bankruptcy, insolvency or similar proceeding) shall first be
paid in full in cash, or payment provided for in cash or cash equivalents,
before the Holders or the Trustee on behalf of the Holders shall be entitled to
receive from the Company any payment of principal of or interest on or any other
amounts in respect of the Securities or distribution of any assets or
securities. Before any payment may be made by the Company of the principal of
or interest on the Securities and upon any such dissolution or winding up or
liquidation or reorganization, any payment or distribution of assets or
securities of the Company of any kind or character, whether in cash, property or
securities to which the Holders or the Trustee on their behalf would be
entitled, except for the provisions of this Article Ten, shall be made by the
Company or by any receiver, trustee, in bankruptcy, liquidating trustee, agent
or other Person making such payment or distribution first to the holders of all
Company Senior Indebtedness or their representatives to the extent necessary to
pay all Company Senior Indebtedness in full after giving effect to any
concurrent payment or distribution to the holders of Company Senior
Indebtedness.
(b) (i) No direct or indirect payment by or on behalf of the Company of
principal of or interest on the Securities whether pursuant to the terms of the
Securities or upon acceleration or otherwise shall be made if, at the time of
such payment there exists a default in the payment of all or any portion of any
Company Senior Indebtedness (and the Trustee has received written notice thereof
from the Company, one or more holders of Company Senior Indebtedness or from any
trustee, representative or agent therefor), and such default shall not have been
cured or waived or the benefits of this sentence waived by or on behalf of the
holders of such Company Senior Indebtedness; and (ii) during the continuance of
a default (other than a default of the nature described in clause (i) of this
subsection (b))
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pursuant to which the maturity of Company Senior Indebtedness under the New
Credit Agreement ("Significant Company Senior Indebtedness") may be accelerated,
upon the earlier to occur of (A) receipt by the Trustee of written notice from
the trustee or representative for the holders of any Significant Company Senior
Indebtedness (or the holders of at least a majority in principal amount of the
Significant Company Senior Indebtedness then outstanding) or (B) if such non-
payment event of default results from the acceleration of the Securities, the
date of such acceleration, no such payment may be made by the Company upon or in
respect of the Securities for a period ("Payment Blockage Period") commencing on
the earlier of the date of receipt of such notice or the date of such
acceleration and ending 179 days thereafter unless such Payment Blockage Period
shall be earlier terminated by written notice to the Trustee from any trustee,
representative or agent for the holders of the Significant Company Senior
Indebtedness (or the holders of at least a majority in principal amount of the
Significant Company Senior Indebtedness then outstanding). Not more than one
Payment Blockage Period with respect to the Securities may be commenced during
any period of 360 consecutive days. For all purposes of this Section 10.02(b)
and subject to the foregoing, no event of default that existed or was continuing
on the date of the commencement of any Payment Blockage Period with respect to
the Significant Company Senior Indebtedness initiating such Payment Blockage
Period shall be, or be made, the basis for the commencement of a second Payment
Blockage Period by the representative for or the holders of such Significant
Company Senior Indebtedness whether or not within a period of 360 consecutive
days.
(c) In the event that, notwithstanding the foregoing provision prohibiting
such payment or distribution, the Trustee or any Holder shall have received any
payment on account of the principal of or interest on the Securities (other than
as permitted by subsections (a) and (b) of this Section 10.02) at a time when
such payment is prohibited by this Section 10.02 and before all amounts payable
on, under or in connection with Company Senior Indebtedness is paid in full in
cash or cash equivalents, then and in such event (subject to the provisions of
Section 10.08) such payment or distribution shall be received and held in trust
for the holders of Company Senior Indebtedness and shall be paid over or
delivered first to the holders of the Significant Company Senior Indebtedness
remaining unpaid to the extent necessary to pay in full in cash or cash
equivalents such Significant Company Senior Indebtedness and second to the
holders of all other Company Senior Indebtedness to the extent necessary to pay
in full such other Company Senior Indebtedness both in accordance with their
respective terms after giving effect to any concurrent payment or distribution
to such holders.
Nothing contained in this Article Ten shall limit the right of the Trustee
or the Holders of Securities to take any action to accelerate the maturity of
the Securities pursuant to Section 6.02 hereof or to pursue any rights or
remedies hereunder against the Company; provided that all Company Senior
--------
Indebtedness
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shall first be paid in accordance with this Article Ten before the Holders or
the Trustee are entitled to receive any payment from the Company of principal of
or interest on the Securities.
Upon any payment or distribution of assets or securities referred to in
this Article Ten, the Trustee and the Holders shall be entitled to rely upon any
order or decree of a court of competent jurisdiction in which such dissolution,
winding up, liquidation or reorganization proceedings are pending, and upon a
certificate of the receiver, trustee in bankruptcy, liquidating trustee, agent
or other Person making any such payment or distribution, delivered to the
Trustee for the purpose of ascertaining the Persons entitled to participate in
such distribution, the holders of Company Senior Indebtedness and other
Indebtedness of the Company, the amount thereof or payable thereon, the amount
or amounts paid or distributed thereon and all other facts pertinent thereto or
to this Article Ten.
SECTION 10.03. Payments to Be Made Prior to Dissolution. Nothing
----------------------------------------
contained in this Article 10 or elsewhere in this Indenture shall prevent (i)
the Company, except under the conditions described in Section 10.02 hereof, from
making payments at any time for the purpose of making such payments of principal
of and interest on the Securities or from depositing with the Trustee any monies
for such payments, or (ii) the application by the Trustee of any monies
deposited with it for the purpose of making such payments of principal of and
interest on the Securities, to the Holders entitled thereto, unless at least one
day prior to the date upon which such payment would otherwise (except for the
prohibitions contained in Section 10.02 hereof) become due and payable, the
Trustee shall have received the written notice provided for in Section
10.02(b)(ii). The Company shall give prompt notice to the Trustee of any
dissolution, winding up, liquidation or reorganization of the Company and, for
purposes of Section 10.02(b) hereof, acceleration of the Securities is deemed to
be sufficient notice to the Trustee for all purposes of this Article Ten.
SECTION 10.04. Rights of Holders of Company Senior Indebtedness Not to Be
----------------------------------------------------------
Impaired. No right of any present or future holder of any Company Senior
- - --------
Indebtedness to enforce subordination as herein provided shall at any time or in
any way be prejudiced or impaired by any act or failure to act in good faith by
any such holder, or by any noncompliance by the Company with the terms and
provisions and covenants herein regardless of any knowledge thereof any such
holder may have or otherwise be charged with.
The provisions of this Article Ten are intended to be for the benefit of,
and shall be enforceable directly by, the holders of Company Senior
Indebtedness.
Notwithstanding anything to the contrary in this Article Ten, to the extent
the Holders or the Trustee have paid over or delivered to any holder of Company
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Senior Indebtedness any payment or distribution received on account of the
principal of or interest on the Securities to which any other holder of Company
Senior Indebtedness shall be entitled to share in accordance with Section 10.02
hereof, no holder of Company Senior Indebtedness shall have a claim or right
against the Holders or the Trustee with respect to any such payment or
distribution or as a result of the failure to make payments or distributions to
such other holder of Company Senior Indebtedness.
SECTION 10.05. Authorization to Trustee to Take Action to Effectuate
-----------------------------------------------------
Subordination. Each Holder by his acceptance thereof authorizes and directs the
- - -------------
Trustee on his behalf to take such action as may be necessary or appropriate to
effectuate, as between the holders of Company Senior Indebtedness and the
Holders, the subordination as provided in this Article Ten and appoints the
Trustee his attorney-in-fact for any and all such purposes.
SECTION 10.06. Subrogation. Upon the payment in full, in cash or cash
-----------
equivalents, of all Company Senior Indebtedness, the Holders shall be subrogated
to the rights of the holders of such Company Senior Indebtedness to receive
payments or distributions of assets of the Company made on such Company Senior
Indebtedness until the Securities shall be paid in full; and for the purposes of
such subrogation, no payments or distributions to holders of such Company Senior
Indebtedness of any cash, property or securities to which Holders of the
Securities would be entitled except for the provisions of this Article Ten, and
no payment pursuant to the provisions of this Article Ten to holders of such
Company Senior Indebtedness by the Holders, shall, as between the Company, its
creditors other than holders of such Company Senior Indebtedness and the
Holders, be deemed to be a payment by the Company to or on account of such
Company Senior Indebtedness, it being understood that the provisions of this
Article Ten are solely for the purpose of defining the relative rights of the
holders of such Company Senior Indebtedness, on the one hand, and the Holders,
on the other hand.
If any payment or distribution to which the Holders would otherwise have
been entitled but for the provisions of this Article Ten shall have been
applied, pursuant to the provisions of this Article Ten, to the payment of all
Company Senior Indebtedness, then and in such case, the Holder shall be entitled
to receive from the holders of such Company Senior Indebtedness at the time
outstanding any payments or distributions received by such holders of Company
Senior Indebtedness in excess of the amount sufficient to pay in cash or cash
equivalents all such Company Senior Indebtedness due in full.
SECTION 10.07. Obligations of Company Unconditional. Nothing contained in
------------------------------------
this Article Ten or elsewhere in this Indenture or in any Security is intended
to or shall impair, as between the Company and the Holders, the obligations of
the Company, which are absolute and unconditional, to pay to the Holders the
principal
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of and interest on the Securities as and when the same shall become due and
payable in accordance with their terms, or is intended to or shall affect the
relative rights of the Holders and creditors of the Company other than the
holders of the Company Senior Indebtedness, nor shall anything herein or therein
prevent the Trustee or any Holder from exercising all remedies otherwise
permitted by applicable law upon Default under this Indenture, subject to the
rights, if any, under this Article Ten of the holders of such Company Senior
Indebtedness in respect of cash, property or securities of the Company received
upon the exercise of any such remedy.
The failure to make a payment on account of principal of, premium, if any,
or interest on the Securities by reason of any provision of this Article Ten
shall not be construed as preventing the occurrence of an Event of Default under
Section 6.01 hereof.
SECTION 10.08. Trustee Entitled to Assume Payments Not Prohibited in
-----------------------------------------------------
Absence of Notice. The Trustee or Paying Agent shall not at any time be charged
- - -----------------
with the knowledge of the existence of any facts which would prohibit the making
of any payment to or by the Trustee or Paying Agent, unless and until the
Trustee or Paying Agent shall have received written notice thereof at its notice
address set forth in Section 12.02 hereof from the Company or one or more
holders of Company Senior Indebtedness or from any trustee or agent therefor or
unless the Trustee or Paying Agent otherwise had actual knowledge thereof; and,
prior to the receipt of any such written notice or actual knowledge, the Trustee
or Paying Agent shall be entitled to assume conclusively that no such facts
exist. Unless at least one day prior to the date on which by the terms of this
Indenture any monies are to be deposited by the Company with the Trustee or any
Paying Agent for any purpose (including, without limitation, the payment of the
principal or the interest on any Security), the Trustee or Paying Agent shall,
except where no notice is necessary or where notice is deemed given in Sections
10.02 and 10.03 hereof, have received with respect to such monies the notice
provided for in the preceding sentence, the Trustee or Paying Agent shall have
full power and authority to receive such monies and to apply the same to the
purpose for which they were received, and shall not be affected by any notice to
the contrary, which may be received by it on or after such date, except for an
acceleration of the Securities prior to such application. The foregoing shall
not apply to the Paying Agent if the Company is acting as Paying Agent. Nothing
contained in this Section 10.08 shall limit the right of the holders of Company
Senior Indebtedness to recover payments as contemplated by Section 10.02 hereof.
The Trustee or paying agent shall be entitled to rely on the delivery to it of a
written notice by a Person representing himself or itself to be a holder of such
Company Senior Indebtedness (or a trustee on behalf of, or other representative
of, such holder) to establish that such notice has been given by a holder of
such Company Senior Indebtedness or a trustee or representative on behalf of any
such holder. The
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Trustee shall not be deemed to have any duty to the holders of Company Senior
Indebtedness.
SECTION 10.09. Right of Trustee to Hold Company Senior Indebtedness. The
----------------------------------------------------
Trustee and any Paying Agent shall be entitled to all of the rights set forth in
this Article Ten in respect of any Company Senior Indebtedness at any time held
by it to the same extent as any other holder of such Company Senior
Indebtedness, and nothing in this Indenture shall be construed to deprive the
Trustee or any Paying Agent of any of its rights as such holder.
ARTICLE 11
GUARANTEE OF SECURITIES
SECTION 11.01. Guarantees. Subject to the provisions of this Article 11,
----------
each Guarantor hereby unconditionally, jointly and severally, guarantees, as a
primary obligor and not as a surety, to each Holder of a Security authenticated
and delivered by the Trustee and to the Trustee, its successor and assigns (i)
the due and punctual payment of the principal of, premium, if any, and interest
(including without limitation, interest that, but for the filing of a petition
in bankruptcy with respect to the Company or any Guarantor, would have accrued,
whether or not a claim is allowed against such Person for such interest in any
such bankruptcy proceeding) on such Security, when and as the same shall become
due and payable, whether at maturity, by acceleration or otherwise, the due and
punctual payment of interest on the overdue principal of, and interest on
(including amounts that would become due but for the operation of the automatic
stay under Section 362(a) of the Bankruptcy Code, 11 U.S.C. (S) 362(a)), the
Securities, to the extent lawful, and the due and punctual performance of all
other obligations of the Company to the Holders or the Trustee all in accordance
with the terms of such Security and of this Indenture, and (ii) in the case of
any extension of time of payment or renewal of any Securities or any of such
other obligations, that the same will be promptly paid in full when due or
performed in accordance with the terms of the extension or renewal, at Stated
Maturity, by acceleration or otherwise. In case of the failure of the Company
punctually to make any such payment of principal or interest, each Guarantor
hereby agrees to cause any such payment to be made punctually when and as the
same shall become due and payable, whether at maturity, by acceleration or
otherwise, and as if such payment were made by the Company.
Each Guarantor hereby agrees that its obligations hereunder shall be
absolute and unconditional, irrespective of, and shall be unaffected by, any
invalidity, irregularity or unenforceability of any such Security or this
Indenture, any failure to enforce the provisions of any such Security or this
Indenture, any waiver, modification or indulgence granted to the Company with
respect thereto, by the Holder of such Security or the Trustee, any extension,
renewal, settlement, compromise, waiver or release in respect of any obligation
of the Company under
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this Indenture or any Security by operation of law or otherwise; any
modification or amendment of or supplement to this Indenture or any Security or
any release, non-perfection or invalidity of any direct or indirect security for
any obligation of the Company under this Indenture or any Security; any change
in the corporate existence, structure or ownership of the Company, or any
insolvency, bankruptcy, reorganization or other similar proceeding affecting the
Company or its assets or any resulting release or discharge of any obligation of
the Company contained in this Indenture or any Security; the existence of any
claim, set-off or other rights which such Guarantor may have at any time against
the Company, the Trustee, any Securityholder or any other Person, whether in
connection herewith or any unrelated transactions; provided that nothing herein
--------
shall prevent the assertion of any such claim by separate suit or compulsory
counterclaim; any invalidity or unenforceability relating to or against the
Company for any reason of this Indenture, any Security, or any provision of
applicable law or regulation purporting to prohibit the payment by the Company
of the principal of or interest on any Security or any other amount payable by
the Company under this Indenture; or any other act or omission to act or delay
of any kind by the Company, the Trustee, any Securityholder or any other Person
or any other circumstance whatsoever which might, but for the provisions of this
paragraph, constitute a legal or equitable discharge of such Guarantor's
obligation hereunder. Each Guarantor hereby waives diligence, presentment,
filing of claims with a court in the event of merger or bankruptcy of the
Company, any right to require a proceeding first against the Company, the
benefit of discussion, protest or notice with respect to any such Security or
the Indebtedness evidenced thereby and all demands whatsoever, and covenants
that the Guarantees will not be discharged as to any such Security except by
payment in full of the principal thereof and interest thereon and as provided in
Sections 8.01, 11.03 and 11.04 hereof. Each Guarantor's obligations hereunder
shall remain in full force and effect until this Indenture shall have terminated
and the principal of and interest on the Securities and all other amounts
payable by the Company under this Indenture shall have been paid in full. If at
any time any payment of the principal of or interest on any Security or any
other amount payable by the Company under this Indenture is rescinded or must be
otherwise restored or returned upon the insolvency, bankruptcy or reorganization
of the Company or otherwise, such Guarantor's obligations hereunder with respect
to such payment shall be reinstated as though such payment had been due but not
made at such time, and this Article 11, to the extent theretofore discharged,
shall be reinstated in full force and effect. Each Guarantor further agrees
that, as between such Guarantor, on the one hand, and the Holders and the
Trustee, on the other hand, (i) the maturity of the obligations guaranteed
hereby may be accelerated as provided in Article 6 hereof for the purposes of
the Guaranties, notwithstanding any stay, injunction or other prohibition
preventing such acceleration in respect of the obligations guaranteed hereby,
and (ii) in the event of any declarations of acceleration of such obligations as
provided in Article 6 hereof, such obligations (whether or not due and payable)
shall forthwith become due and payable by such Guarantor for the purpose
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of the Guaranties. In addition, without limiting the foregoing provisions, upon
the effectiveness of an acceleration under Article 6, the Trustee shall promptly
make a demand for payment on the Securities under each Guaranty provided for in
this Article 11 and not discharged. The obligations of each Guarantor hereby
shall be joint and several.
The Guarantor shall be subrogated to all rights of the Holders against the
Company in respect of any amounts paid by the Guarantor pursuant to the
provisions of the Guarantees or this Indenture; provided, however, that the
-------- -------
Guarantor shall not be entitled to enforce or to receive any payments arising
out of, or based upon, such right of subrogation until the principal of and
interest on all Securities issued hereunder shall have been indefeasibly paid in
full.
SECTION 11.02. Agreement to Subordinate. Each Guarantor agrees, and each
------------------------
Securityholder by accepting a Security agrees, that all payments pursuant to the
Guaranties by such Guarantor are subordinated in right of payment to the prior
payment in full of all Guarantor Senior Indebtedness, to the same extent and
manner that all payments pursuant to the Securities are subordinated in right of
payment to the prior payment in full of all Company Senior Indebtedness of the
Company. This Section 11.02 is intended to be for the benefit of the holders of
Guarantor Senior Indebtedness.
"Guarantor Senior Indebtedness" means all Indebtedness of the specified
-----------------------------
Guarantor under: (i) its guarantee of the Company's obligations under the New
Credit Agreement and (ii) all additional Indebtedness that is permitted to be
incurred by such Guarantor under the Indenture that is not by its terms
subordinated to or pari passu with the obligations of such Guarantor under this
Guarantee (it being understood that Indebtedness permitted to be incurred by
such Guarantor under the Indenture that is not by its terms subordinated to or
pari passu with the obligations of such Guarantor under its Guarantee shall not
in any event constitute Guarantor Senior Indebtedness if such Indebtedness is
subordinated by its terms to any other Indebtedness that constitutes Guarantor
Senior Indebtedness). Notwithstanding anything to the contrary in the
foregoing, Guarantor Senior Indebtedness shall not include (w) any liability of
such Guarantor for state, local or other taxes, (x) any Indebtedness between or
among such Guarantor, the Company, any other Subsidiary or the Non-Recourse
Subsidiary, (y) any Indebtedness of such Guarantor incurred for the purchase of
goods or materials or for services obtained in the ordinary course of business
or (z) the Company's 14.25% Subordinated Debentures Due 2000.
SECTION 11.03. Release of Guarantor. In the event of a sale or other
--------------------
disposition of all or substantially all of the assets of any Guarantor, by way
of merger, consolidation or otherwise, or all of the Capital Stock of any
Guarantor, then such Guarantor (in the event of a sale or other disposition of
all of the Capital Stock of such Guarantor) or the corporation acquiring the
property (in the event of a sale or other disposition by way of a merger,
consolidation or otherwise of all or
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substantially all of the assets of such Guarantor) shall be released and
relieved of its obligations under its Guarantee provided that (i) after giving
effect thereto, no Event of Default shall have occurred and be continuing, (ii)
the Company shall agree in writing to apply, and shall thereafter apply, the Net
Cash Proceeds of such sale or other disposition in accordance with Section 4.16
hereof and (iii) such Guarantor has been unconditionally and fully released in
writing from all obligations under guarantees of Indebtedness of the Company,
each Subsidiary and Non-Recourse Subsidiary (including without limitation
Indebtedness under the New Credit Agreement).
Upon delivery by the Company to the Trustee of an Officers' Certificate and
an Opinion of Counsel to the effect that such sale or other disposition was made
by the Company in accordance with the provisions of this Indenture, the Trustee
shall execute any documents reasonably required in order to evidence the release
of the specified Guarantor from its obligations under its Guarantee. Any
Guarantor not released from its obligations under its Guarantee shall remain
liable for the full amount of principal of and interest on the Securities and
for the other obligations of any Guarantor under the Indenture as provided in
this Article 11.
SECTION 11.04. Guarantor May Consolidate, etc., on Certain Terms. Except
-------------------------------------------------
as set forth in Articles 4 and 5 and Section 11.03 hereof, nothing contained in
this Indenture or in any of the Securities shall prevent any consolidation or
merger of any Guarantor with or into the Company or shall prevent any sale or
conveyance of the property of such Guarantor as an entirety or substantially as
an entirety, to the Company. Upon any such consolidation, merger, sale or
conveyance, the Guaranty given by such Guarantor shall no longer have any force
or effect.
Section 11.05. Limitation on Guarantee. Notwithstanding the other
-----------------------
provisions of this Article 11, each Guarantor and by its acceptance hereof, each
beneficiary hereof, hereby confirms that it is its intention that the guarantee
by such Guarantor pursuant to its Guarantee, together with each other guarantee
by such Guarantor of Participating Indebtedness, not constitute a fraudulent
transfer or conveyance for the purposes of the Bankruptcy Law, the Uniform
Fraudulent Conveyance Act, the Uniform Fraudulent Transfer Act or any similar
Federal or state law. To effectuate the foregoing intention, each such Person
hereby irrevocably agrees that the obligations of such Guarantor under its
Guarantee and each other guarantee by such Guarantor or Participating
Indebtedness shall be limited, collectively, to the maximum amount as will,
after giving effect to such maximum amount and all other (contingent or
otherwise) liabilities of such Guarantor that are relevant under such laws, and
after giving effect to any rights to contribution of such Guarantor pursuant to
any agreement providing for an equitable contribution among such Guarantor and
other Affiliates of the Company of payments made by guarantees by such parties,
such maximum amount shall result in the obligations of such Guarantor in respect
of such maximum amount not constituting a fraudulent transfer or conveyance.
Each beneficiary under the Guarantees by the Guarantors, by accepting the
benefits hereof, confirms its intention that, in the event of a
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bankruptcy, reorganization or other similar proceeding of the Company or any
Guarantor in which concurrent claims are made upon such Guarantor hereunder and
under any other guarantee of Participating Indebtedness, to the extent such
claims will not be fully satisfied, each such claimant with a valid claim
against the Company shall be entitled to a ratable share of all payments by such
Guarantor in respect of such concurrent claims. "Participating Indebtedness"
means any Indebtedness of the Company that (i) is permitted to be incurred or to
exist hereunder and guaranteed by a Guarantor pursuant to a Guarantee; (ii) is
not prohibited by the terms of, or is permitted as a result of a consent or
waiver under, the New Credit Agreement and all agreements governing any other
Participating Indebtedness then outstanding; and (iii) contains a limitation of
liability and confirmation of intention regarding ratability of payments on
substantially the terms set forth above.
SECTION 11.06. Execution and Delivery of Guarantees. To evidence its
------------------------------------
Guarantee set forth in this Article 11, each Guarantor hereby agrees that a
notation of such Guarantee substantially in the form of Exhibit II hereto shall
be endorsed on each Security authenticated and delivered by the Trustee on or
after the date such Guarantor becomes a Guarantor and that this Indenture shall
be executed on behalf of the Guarantor by an Officer of such Guarantor by manual
or facsimile signature.
Each Guarantor hereby agrees that its Guarantee set forth in Section
11.01 shall remain in full force and effect notwithstanding any failure to
endorse on each Security a notation of such Guarantee.
If an Officer whose signature is on this Indenture no longer holds
that office at the time the Trustee authenticates the Security on which a
Guarantee is endorsed, the Guarantee shall be valid nevertheless.
The delivery of any Security by the Trustee, after the authentication
thereof hereunder, shall constitute due delivery of the Guarantee set forth in
this Indenture on behalf of the Guarantor.
SECTION 11.07. Successors. The Guaranties shall be binding upon each
----------
Guarantor and its successors and assigns and shall inure to the benefit of the
successors and assigns of the Holders and, in the event of any transfer or
assignment of rights by any Holder, the rights and privileges herein conferred
upon the party shall automatically extend to and be vested in such transferee or
assignee, all subject to the terms and conditions hereof.
SECTION 11.08. Waiver of Subrogation. Each Guarantor hereby irrevocably
---------------------
waives any claim or other rights which it may now or hereafter acquire
against the Company or any of its Subsidiaries which is not a Guarantor that
arise from the existence, payment, performance or enforcement of such
Guarantor's obligations under this Guarantee and this Indenture, including
without limitation, any right of subrogation, reimbursement, exoneration,
indemnification, and any right to participate in any claim or remedy of any
Holder of Securities against the Company or any of its Subsidiaries which is
not a Guarantor, whether or not such claim, remedy or right arises in equity,
or under contract, statute or common law, including, without limitation, the
right to take or receive from the Company or any of its Subsidiaries which is
not a Guarantor, directly or indirectly, in cash or other property or by set-
off or in any other manner, payment or security on account of such claim or
other rights. If any amount shall be paid to any Guarantor in violation of the
preceding sentence and the Securities shall not have been paid in full, such
amount shall have been deemed to have been paid to such Guarantor for the
benefit of, and held in trust for the benefit of, the Holders of the
Securities, and shall forthwith be paid to the Trustee for the benefit of such
Holders to be credited and applied upon the Securities, whether matured or
unmatured, in accordance with the terms of this Indenture. Each Guarantor
acknowledges that it will receive direct and indirect benefits from the
financing arrangements contemplated by this Indenture and that the waiver set
forth in this Section 11.08 is knowingly made in contemplation of such
benefits.
-71-
<PAGE>
ARTICLE 12
MISCELLANEOUS
SECTION 12.01. Trust Indenture Act Controls. If any provision of this
----------------------------
Indenture limits, qualifies or conflicts with the duties imposes by operation of
subsection (c) of Section 318 of the TIA, the imposed duties shall control. The
provisions of Sections 310 to 317, inclusive, of the TIA that impose duties on
any Person (including provisions automatically deemed included in an indenture
unless the indenture provides that such provisions are excluded) are a part of
and govern this Indenture, except as, and to the extent, expressly excluded from
this Indenture, as permitted by the TIA.
SECTION 12.02. Notices. Any notice or communication shall be in writing
-------
and delivered in Person or mailed by first-class mail, postage prepaid, or
recognized overnight delivery service, addressed as follows:
if to the Company or any Guarantor:
Dairy Mart Convenience Stores, Inc.
One Vision Drive
Enfield, Connecticut 06082
Attention: Greg Landry
Executive Vice President and Chief Financial Officer
if to the Trustee:
Society National Bank
127 Public Square
15th Floor
Society Center
Cleveland, Ohio 44114-1306
Attention: Corporate Trust Division
The Company or the Trustee by notice to the other may designate additional
or different addresses for subsequent notices of communications. The Company
shall notify the holder, if any, of Significant Company Senior Indebtedness of
any such additional or different addresses of which the Company receives notice
from the trustee.
Any notice or communication given to a Securityholder shall be mailed to
the Securityholder at the Securityholder's address as it appears on the
registration
-72-
<PAGE>
books of the Registrar and shall be sufficiently given if mailed within the time
prescribed.
Failure to mail a notice or communication to a Securityholder or any defect
in it shall not affect its sufficiency with respect to other Securityholders.
If a notice or communication if mailed in the manner provided above, it is duly
given, whether or not received by the addressee.
If the Company mails a notice or communication to the Securityholders, it
shall mail a copy to the Trustee and each Registrar, Paying Agent or co-
Registrar.
SECTION 12.03. Communication by Holders with Other Holders.
-------------------------------------------
Securityholders may communicate pursuant to TIA Section 312(b) with other
Securityholders with respect to their rights under this Indenture or the
Securities. The Company, the Trustee, the Registrar, the Paying Agent and
anyone else shall have the protection of TIA Section 312(c).
SECTION 12.04. Certificate and Opinion as to Conditions Precedent. Upon
--------------------------------------------------
any request or application by the Company to the Trustee to take any action
under this Indenture, the Company shall furnish to the Trustee, and the Trustee
may rely upon, as conclusive evidence:
(1) an Officers' Certificate (which will include the statements set forth
in Section 12.05 hereof) stating that, in the opinion of the signers, all the
conditions precedent and covenants, if any, provided for in this Indenture
relating to the proposed action have been complied with; and
(2) an Opinion of Counsel (which will include the statements set forth in
Section 12.05 hereof) stating that, in the opinion of such counsel, all such
conditions precedent and covenants, if any, provided for in this Indenture
relating to the proposed action have been complied with.
SECTION 12.05. Statements Required in Certificate or Opinions. Each
----------------------------------------------
Officers' Certificate and Opinion of Counsel with respect to compliance with a
covenant or condition provided for in this Indenture shall include:
(1) a statement that each Person making such Officers' Certificate or
Opinion of Counsel has read such covenant or condition;
(2) a brief statement as to the nature and scope of the examination or
investigation upon which the statements or opinions contained in such Officers'
Certificate or Opinion of Counsel are based;
-73-
<PAGE>
(3) a statement that, in the opinion of each such Person, he has made such
examination or investigation as is necessary to enable such Person to express an
informed opinion as to whether or not such covenant or condition has been
complied with; and
(4) a statement that, in the opinion of such Person, such covenant or
condition has been complied with; provided, however, that with respect to
-------- -------
matters of fact not involving any legal conclusion, an Opinion of Counsel may
rely on an Officers' Certificate or certificates of public officials.
SECTION 12.06. Severability Clause. In case any provision in this
-------------------
Indenture or in the Securities shall be invalid, illegal or unenforceable, the
validity, legality and enforceability of the remaining provisions shall not in
any way be affected or impaired thereby.
SECTION 12.07. Rules by Trustee, Paying Agent and Registrar. The Trustee
---------------------------------- ---------
may make reasonable rules for action by or a meeting of Securityholders. The
Registrar and Paying Agent may make reasonable rules for their functions.
SECTION 12.08. Legal Holidays. A "Legal Holiday" is any day other than a
--------------
Business Day. If any specified date (including a date for giving notice) is a
Legal Holiday, the action shall be taken on the next succeeding day that is not
a Legal Holiday, and, if the action to be taken on such date is a payment in
respect of the Securities, no principal, premium, if any, or interest
installment shall accrue for the intervening period.
SECTION 12.09. GOVERNING LAW. THIS INDENTURE AND THE SECURITIES SHALL BE
-------------
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK,
AS APPLIED TO CONTRACTS MADE AND PERFORMED WITHIN THE STATE OF NEW YORK, WITHOUT
REGARD TO PRINCIPLES OF CONFLICTS OF LAWS.
SECTION 12.10. No Recourse Against Others. A director, officer, employee
--------------------------
or stockholder, as such, of the Company shall not have any liability for any
obligations of the Company under the Securities or this Indenture or for any
claim based on, in respect of or by reason of such obligations or their
creation. By accepting a Security, each Securityholder shall waive and release
all such liability. The waiver and release shall be part of the consideration
for the issue of the Securities.
SECTION 12.11. Successors. All agreements of The Company in this
----------
Indenture and the Securities shall bind its successors. All agreements of the
Trustee in this Indenture shall bind its successor.
-74-
<PAGE>
SECTION 12.12. Multiple of Originals. The parties may sign any number of
---------------------
copies of this Indenture. Each signed copy shall be an original, but all of
them together represent the same agreement.
SECTION 12.13. No Adverse Interpretation of Other Agreements. This
---------------------------------------------
Indenture may not be used to interpret another indenture, loan or debt agreement
of the Company or any Subsidiary. Any such indenture, loan or debt agreement
may not be used to interpret this Indenture.
SECTION 12.14. Table of Contents, Headings, etc. The Table of Contents,
--------------------------------
Cross-Reference Table, and headings of the Articles and Sections of this
Indenture have been inserted for convenience of reference only, are not to be
considered a part hereof, and shall in no way modify or restrict any of the
terms or provisions hereof.
SECTION 12.15. Benefits of Indenture. Except as expressly provided in
---------------------
Article 10 hereof, nothing in this Indenture or in the Securities, express or
implied, shall give to any Person, other than the parties hereto and their
successors hereunder and the Holders, any benefit or any legal or equitable
right, remedy or claim under this Indenture.
-75-
<PAGE>
SIGNATURES
IN WITNESS WHEREOF, the undersigned, being duly authorized, have executed
this Indenture on behalf of the respective parties hereto as of the date first
above written.
DAIRY MART CONVENIENCE STORES, INC.
By : /s/ Jeffrey Jones
-------------------------------
Name: Jeffrey Jones
Title: Vice President-Controller
GUARANTORS:
DAIRY MART EAST, INC.
By : /s/ Gregory Wozniak
-------------------------------
Name: Gregory Wozniak
Title: Vice President
DAIRY MART FARMS, INC.
By : /s/ Gregory Wozniak
-------------------------------
Name: Gregory Wozniak
Title: Vice President
DAIRY MART, INC.
By : /s/ Gregory Wozniak
-------------------------------
Name: Gregory Wozniak
Title: Vice President
-76-
<PAGE>
CONNA CORPORATION
By : /s/ Gregory Wozniak
-------------------------------
Name: Gregory Wozniak
Title: Vice President
THE LAWSON COMPANY
By : /s/ Gregory Wozniak
-------------------------------
Name: Gregory Wozniak
Title: Vice President
D.M. INSURANCE LIMITED
By : /s/ Gregory Wozniak
-------------------------------
Name: Gregory Wozniak
Title: Vice President
LMC, INC.
By : /s/ Gregory Wozniak
-------------------------------
Name: Gregory Wozniak
Title: Vice President
SNG OF SOUTHERN MINNESOTA, INC.
By : /s/ Gregory Wozniak
-------------------------------
Name: Gregory Wozniak
Title: Vice President
-77-
<PAGE>
THE LAWSON MILK COMPANY
By : /s/ Gregory Wozniak
-------------------------------
Name: Gregory Wozniak
Title: Vice President
GOLDEN STORES, INC.
By : /s/ Gregory Wozniak
-------------------------------
Name: Gregory Wozniak
Title: Vice President
LAKESIDE WHOLESALE, INC.
By : /s/ Gregory Wozniak
-------------------------------
Name: Gregory Wozniak
Title: Vice President
QUIK SHOPS, INC.
By : /s/ Gregory Wozniak
-------------------------------
Name: Gregory Wozniak
Title: Vice President
OPEN PANTRY PROPERTIES, INC.
By : /s/ Gregory Wozniak
-------------------------------
Name: Gregory Wozniak
Title: Vice President
-78-
<PAGE>
REMOTE SERVICES, INC.
By : /s/ Gregory Wozniak
-------------------------------
Name: Gregory Wozniak
Title: Vice President
CONVENIENT INDUSTRIES OF
AMERICA, INC.
By : /s/ Gregory Wozniak
-------------------------------
Name: Gregory Wozniak
Title: Vice President
OSCAR EWING, INC.
By : /s/ Gregory Wozniak
-------------------------------
Name: Gregory Wozniak
Title: Vice President
CONVENIENT GASOLINE, INC.
By : /s/ Gregory Wozniak
-------------------------------
Name: Gregory Wozniak
Title: Vice President
JACKSON COUNTY GROCERY CO., INC.
By : /s/ Gregory Wozniak
-------------------------------
Name: Gregory Wozniak
Title: Vice President
-79-
<PAGE>
GREENWELL GROCERY CO., INC.
By : /s/ Gregory Wozniak
-------------------------------
Name: Gregory Wozniak
Title: Vice President
CIA FOOD MARTS, INC.
By : /s/ Gregory Wozniak
-------------------------------
Name: Gregory Wozniak
Title: Vice President
FOOD MERCHANDISERS, INCORPORATED
By : /s/ Gregory Wozniak
-------------------------------
Name: Gregory Wozniak
Title: Vice President
DAIRY MART CONVENIENCE STORES
OF OHIO, INC.
By : /s/ Gregory Wozniak
-------------------------------
Name: Gregory Wozniak
Title: Vice President
SOCIETY NATIONAL BANK
By : /s/ Clive M. Nagy
-------------------------------
Name: Clive M. Nagy
Title: Vice President
-80-
<PAGE>
EXHIBIT I
[FORM OF FACE OF SECURITY]
10 1/4% Senior Subordinated Note due 2004
No. _________ $____________________ CUSIP__________________
Dairy Mart Convenience Stores, Inc., a Delaware corporation (the
"Company"), which term includes any successor corporation under the Indenture
hereinafter referred to promises to pay to ______________________ or registered
assigns, the principal amount of
________________________________________ Dollars on ___________, 2004.
Interest Payment Dates; March 15 and September 15, commencing September
15, 1994.
Record Dates: March 1 and September 1.
Reference is hereby made to the further provisions of this Security set
forth on the reverse hereof which further provisions shall for all purposes have
the same effect as if set forth at this place.
IN WITNESS WHEREOF, the Company has caused this Security to be signed
manually or by facsimile by its duly authorized officers and a facsimile of its
corporate seal to be affixed hereto or imprinted hereon.
DIARY MART CONVENIENCE
STORES, INC.
By__________________________
[SEAL] Name:_______________________
Title:
Dated: ____________
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Securities referred
to in the within-mentioned Indenture.
SOCIETY NATIONAL BANK
By __________________________________
Name: _______________________________
Title:
A-1
<PAGE>
[FORM OF REVERSE SIDE OF SECURITY]
10 1/4% Senior Subordinated Note due 2004
1. Principal
---------
The Company hereby promises to pay to the Holder of this Security,
subject to the provisions of paragraph 7 hereof, the principal amount of this
Security on March 15, 2004, or if such date is not a Business Day, on the next
succeeding Business Day.
2. Interest
--------
Dairy Mart Convenience Stores, Inc., a Delaware corporation ("the
Company"), promises to pay interest on the principal amount of this Security
at the rate per annum shown above. Interest will be payable semi-annually on
each interest payment date, commencing September 15, 1994. Interest on the
Securities will accrue from the most recent date to which interest has been
paid, or if no interest has been paid, from March 3, 1994; provided that, if
there is no existing event of Default in the payment of interest and if this
Security is authenticated between a record date referred to on the face hereof
and the next succeeding interest payment date, interest shall accrue from such
interest payment date. Interest will be computed on the basis of a 360-day
year of twelve 30-day months.
The Company shall pay interest on overdue principal and interest on overdue
installments of interest, to the extent lawful, at the rate per annum borne by
the Securities.
3. Method of Payment
-----------------
The Company will pay interest on the Securities (except defaulted
interest) to the persons who are registered Holders at the close of business
on March 1 and September 1 immediately preceding the interest payment date
even if the Security is canceled on registration of transfer or registration
of exchange (other than with respect to the purchase of Securities pursuant to
an offer to purchase Securities made in connection with Sections 3.08 or 3.09
of the Indenture after such record date). Holders must surrender Securities to
a Paying Agent to collect principal payments. The Company will pay principal,
premium, if any, and interest in money of the United States that at the time
of payment is legal tender for payment of public and private debts. However,
the Company may pay principal and interest by its check payable in such money.
It may mail an interest payment to a Securityholder's registered address.
4. Paying Agent and Registrar
--------------------------
Initially, the Trustee will act as Paying Agent and Registrar. The Company
may appoint and change any Paying Agent or Registrar without notice, other than
notice to the Trustee. The Company or any Subsidiary or an Affiliate of either
of them may act as Paying Agent, Registrar or co-Registrar.
A-2
<PAGE>
5. Indenture
---------
The Company issued the Securities under an Indenture, dated as of
March 3, 1994 (the "Indenture"), between the Company and the Trustee. The
terms of the Securities include those stated in the Indenture and those made
part of the Indenture by reference to the Trust Indenture Act of 1939, as
amended and as in effect on the date of the Indenture (the "TIA") and as
provided in the Indenture. Capitalized terms used herein and not defined herein
have the meanings ascribed thereto in the Indenture. The Securities are subject
to all such terms, and Securityholders are referred to the Indenture and the TIA
for a statement of those terms.
The Securities are general obligations of the Company limited to
$75,000,000 aggregate principal amount.
6. Guarantee.
---------
This Security is entitled to the benefit of the Guarantees of the
Guarantors on a senior subordinated unsecured basis, which Guarantees are
subject to release. Reference is hereby made to Article 11 of the Indenture and
to the Guarantees endorsed on this Security for a statement of the respective
rights, limitations of rights, duties and obligations thereunder of each of the
Guarantors, the Trustee and the Holders, and to the release of the Guarantees
under specified conditions.
7. Optional Redemption
-------------------
The Securities are redeemable as a whole, or from time to time in part, at
any time on and after March 15, 1999 at the option of the Company at the
following redemption prices (expressed as a percentage of principal) together
with accrued and unpaid interest to the Redemption Date if redeemed in the
twelve-month period March 15 of the years indicated below:
Percentage
----------
1999 104.750
2000 103.125
2001 101.500
2002 and thereafter 100.000
In addition to the optional redemption of the Securities provided for
above, the Company may redeem all or any portion of the Securities, in an
aggregate principal amount thereof not to exceed $20,000,000, upon the
occurrence of Public Equity Offering at a redemption price equal to 110% of
the principal amount of the Securities to be redeemed plus accrued and unpaid
interest to the Redemption Date;
A-3
<PAGE>
provided, however, that no such optional redemption in connection with an
- - -------- -------
Initial Public Equity Offering may be effected on or after the third anniversary
of the Issue Date.
8. Notice of Redemption
--------------------
Notice of redemption will be mailed at least 30 days but not more than 60
days before the Redemption Date which may, in the case of a redemption in
connection with Public Equity Offering, be adjusted based solely upon the
timing of the consummation of the Public Equity Offering) to each Holder of
Securities to be redeemed at the Holder's registered address. Securities in
denominations larger than $l,000 of principal amount may be redeemed in part
but only in integral multiples of $1,000 of principal amount.
9. Requirement that the Company Offer to Purchase Securities under Certain
-----------------------------------------------------------------------
Circumstances
- - -------------
Subject to the terms and conditions of the Indenture, the Company shall
become immediately obligated to offer to purchase the Securities pursuant to
Section 3.08 of the Indenture after the occurrence of a Change in Control of the
Company at a price equal to 101% of aggregate principal amount plus accrued and
unpaid interest, if any, to the date of purchase. In addition, to the extent
that there are Excess Proceeds from Asset Dispositions which are not applied or
reinvested in accordance with Section 4.16 of the Indenture, the Company will be
obliged to offer to purchase Securities at 100% of principal amount plus accrued
and unpaid interest, if any, in accordance with and to the extent provided in
Section 3.09 of the Indenture.
10. Subordination
-------------
The Securities are subordinated to Company Senior Indebtedness (as defined
in the Indenture). To the extent provided in the Indenture, Company Senior
Indebtedness must be paid before the Securities may be paid. The Company
agrees, and each Securityholder by accepting a Security agrees, to such
subordination and authorizes the Trustee to give it effect.
11. Denominations: Transfer: Exchange
---------------------------------
The Securities are in registered form, without coupons, in denominations of
$1,000 of principal amount and integral multiples of $l,000. A Holder may
transfer or exchange Securities in accordance with the Indenture. The Registrar
may require a Holder, among other things, to furnish appropriate endorsements
and transfer documents and to pay any taxes and fees required by law or
permitted by the Indenture. The Registrar need not transfer or exchange any
Securities selected for
A-4
<PAGE>
redemption (except, in the case of a Security to be redeemed in part, the
portion of the Security not to be redeemed) or any Securities for a period of 15
days before a selection of Securities to be redeemed.
12. Persons Deemed Owners
---------------------
The registered Holder of this Security may be treated as the owner of this
Security for all purposes.
13. Amendment: Waiver
-----------------
Subject to certain exceptions set forth in the Indenture, (i) the Indenture
or the Securities may be amended with the written consent of the Holders of at
least a majority in aggregate principal amount of the Securities at the time
outstanding; and (ii) certain defaults or noncompliance with certain provisions
may be waived with the written consent of the Holders of a majority in aggregate
principal amount of the Securities at the time outstanding. Subject to certain
exceptions set forth in the Indenture, without the consent of any
Securityholder, the Company and the Trustee may amend the Indenture or the
Securities to cure any ambiguity, defect or inconsistency, or to comply with
Article 5 of the Indenture, or to provide for uncertificated Securities in
addition to certificated Securities, or to comply with any requirements of the
Securities and Exchange Commission in connection with the qualification of the
Indenture under the TIA or to reflect a Guarantor ceasing to be liable under its
Guarantee because it is no longer a Subsidiary, or to make any change that does
not adversely affect the rights of any Securityholder.
14. Defaults and Remedies
---------------------
Under the Indenture, Events of Default include (i) default in payment of
the principal amount, premium if any, or interest, in respect of the Securities
when the same becomes due and payable, subject, in the case of interest, to the
grace period contained in the Indenture; (ii) failure by the Company to comply
with other agreements in the Indenture or the Securities, subject to notice and
lapse of time; (iii) certain events of acceleration prior to maturity of certain
indebtedness; (iv) certain final judgments which remain undischarged; or (v)
certain events of bankruptcy or insolvency. If an Event of Default occurs and
is continuing, the Trustee, or the Holders of at least 25% in aggregate
principal amount of the Securities at the time outstanding, may declare all the
Securities to be due and payable immediately. Certain events of bankruptcy or
insolvency are Events of Default which will result in the Securities becoming
due and payable immediately upon the occurrence of such Events of Default.
Securityholders may not enforce the Indenture or the Securities except as
provided in the Indenture. The Trustee may refuse to enforce the Indenture or
the
A-5
<PAGE>
Securities unless it receives reasonable indemnity or security. Subject to
certain limitations, Holders of a majority in aggregate principal amount of the
Securities at the time outstanding may direct the Trustee in its exercise of any
trust or power. The Trustee may withhold from Securityholders notice of any
continuing Default (except a Default in payment of amounts specified in clause
(i) above) if it determines that withholding notice is in their interests.
15. Trustee Dealings with the Company
---------------------------------
Subject to certain limitations implored by the TIA, the Trustee under the
Indenture, in its individual or any other capacity, may become the owner or
pledgee of Securities and may otherwise deal with and collect obligations owed
to it by The Company or its Affiliates and may otherwise deal with The Company
or its Affiliates with the same rights it would have if it were not Trustee.
16. No Recourse Against Others
--------------------------
A director, officer, employee or stockholder, as such, of the Company shall
not have any liability for any obligations of The Company under the Securities
or the Indenture or for any claim based on, in respect of or by reason of such
obligations or their creation. By accepting a Security, each Securityholder
waives and releases all such liability. The waiver and release are part of the
consideration for the issue of the Securities.
17. Authentication
--------------
This Security shall not be valid until an authorized officer of the Trustee
manually signs the Trustee's Certificate of Authentication on the other side of
this Security.
18. Abbreviations
-------------
Customary abbreviations may be used in the name of a Securityholder or an
assignee, such as TEN COM (=tenants in common), TBN ENT (=tenants by the
entireties), JT TEN (=joint tenants with right of survivorship and not as
tenants in common), CUST (=custodian), and U/G/M/A (=Uniform Gift to Minors
Act).
19. Unclaimed Money
---------------
If money for the payment of principal or interest remains unclaimed for
three years, the Trustee or Paying Agent will pay the money back to the Company
at its request. After that, Holders entitled to money must look to the Company
for payment.
A-6
<PAGE>
20. Discharge Prior to Maturity
---------------------------
If the Company deposits with the Trustee or Paying Agent money or U.S.
Government Obligations sufficient to pay the principal of and interest on the
Securities to maturity, the Company will be discharged from the Indenture except
for certain Sections thereof.
21. Successor
---------
When a Successor Person to the Company assumes all the obligations of its
predecessor under the Securities and the Indenture such predecessor shall be
released from those obligations.
22. GOVERNING LAW
-------------
THIS INDENTURE AND THIS SECURITY SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AS APPLIED TO CONTRACTS MADE
AND PERFORMED WITHIN THE STATE OF NEW YORK WITHOUT REGARD TO PRINCIPLES OF
CONFLICTS OF LAWS.
A-7
<PAGE>
ASSIGNMENT FORM
To assign this Security, fill in the form below: (I) or (we) assign
and transfer this Security to:
- - --------------------------------------------------------------------------------
(Insert assignee's social security or tax I.D. number)
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
(print or type assignee's name, address and zip code)
and irrevocably appoint
agent to transfer this Security on the books of the Company. The agent may
substitute another to act for him.
Dated: ______________________ Signature:_____________________________
(Sign exactly as your name
appears on the other side of
this Security)
Signature
Guarantee:
A-8
<PAGE>
OPTION TO HOLDER TO ELECT PURCHASE
If you wish to elect to have all or any portion of this Security
purchased by the Company pursuant to section 3.08 ("Change of Control Offer") or
Section 3.09 ("Disposition Offer") of the Indenture, check the applicable boxes:
[_] Change of Control Offer: [_] Disposition Offer:
in whole [_] in whole [_]
in part [_] in part [_]
Amount to be Amount to be
purchased: $___________ purchased: $__________
Dated: ____________ Signature: ____________________________________
(Sign exactly as your name appears on
the other side of this Security)
Signature
Guarantee: _____________________________
Social Security Number or
Taxpayer Identification Number:
A-9
<PAGE>
EXHIBIT II
NOTATION OF GUARANTEE
Each of Dairy Mart East, Inc., Dairy Mart Farms, Inc., Dairy Mart, Inc.,
CONNA Corporation, The Lawson Company, D.M. Insurance Limited, LMC, Inc., SNG of
Southern Minnesota, Inc., The Lawson Milk Company, Golden Stores, Inc., Lakeside
Wholesale, Inc., Quik Shops, Inc., Open Pantry Properties, Inc., Remote
Services, Inc., Convenient Industries of America, Inc., Oscar Ewing, Inc.,
Convenient Gasoline, Inc., Jackson County Grocery Co., Inc., Greenwell Grocery
Co., Inc., CIA Food Marts, Inc., Food Merchandisers, Incorporated, and Dairy
Mart Convenience Stores of Ohio, Inc. (collectively, the "Guarantors"), jointly
and severally (subject to, with respect to the joint and several nature of each
Guarantor's obligations hereunder the provisions of Section 11.01 of the
Indenture) guarantee (i) the due and punctual payment of the principal of,
premium, if any, and interest on the Securities whether at maturity, by
acceleration or otherwise, the due and punctual payment of interest on the
overdue principal of, premium and interest, if any, on the Securities, to the
extent lawful, and the due and punctual performance of all other obligations of
the Company to the Holders or the Trustee, all in accordance with the terms set
forth in the Indenture; and (ii) in case of any extension of time of payment or
renewal of any Securities or any of such other obligations, that the same will
be promptly paid in full when due or performed in accordance with the terms of
the extension or renewal, whether at stated maturity, by acceleration or
otherwise. In case of the failure of the Company punctually to make any such
payment of principal, premium or interest, each Guarantor hereby agrees to cause
any such payment to be made punctually when and as the same shall become due and
payable, whether at maturity, by acceleration or otherwise, and as if such
payment were made by the Company.
The obligations of each Guarantor to the Holders of the Securities and to
the Trustee pursuant to the Guarantees and the Indenture are expressly set forth
and are expressly subordinated and subject in right of payment to the prior
payment in full of all Guarantor Senior Indebtedness, to the extent and in the
manner provided in Article 11 of the Indenture and reference is hereby made to
such Indenture for the precise terms of the Guarantees and the subordination
thereof therein made. In addition, the obligations of the Guarantors pursuant
to the Guarantees and the Indenture may be released in certain circumstances set
forth in Article 11 of the Indenture. Each Guarantor agrees, and each
Securityholder by accepting a Security agrees, to such subordination and, to the
extent applicable, authorizes the Trustee to give it effect.
B-1
<PAGE>
No stockholder, officer, director or incorporator, as such, past, present
or future, of any Guarantor shall have any personal liability under this
Guarantee by reason of his or its status as such stockholder, officer, director
or incorporator. Each Securityholder by accepting a Security waives and
releases all such liability. The waiver and release are part of the
consideration for the issuance of the Guarantee.
This Guaranty shall not be valid or obligatory for any purpose until the
certificate of authentication on the Security upon which this Guaranty is noted
shall have been executed by the Trustee under the Indenture by the manual
signature of one of its authorized representatives.
DAIRY MART EAST, INC.
/s/ Frank Colaccino
By :__________________________________
Name: Frank Colaccino
Title: President
DAIRY MART FARMS, INC.
/s/ Frank Colaccino
By :__________________________________
Name: Frank Colaccino
Title: President
DAIRY MART, INC.
/s/ Frank Colaccino
By :__________________________________
Name: Frank Colaccino
Title: President
B-2
<PAGE>
CONNA CORPORATION
/s/ Frank Colaccino
By :__________________________________
Name: Frank Colaccino
Title: President
THE LAWSON COMPANY
/s/ Frank Colaccino
By :__________________________________
Name: Frank Colaccino
Title: President
D.M. INSURANCE LIMITED
/s/ Frank Colaccino
By :__________________________________
Name: Frank Colaccino
Title: President
LMC, INC.
/s/ Frank Colaccino
By :__________________________________
Name: Frank Colaccino
Title: President
SNG OF SOUTHERN MINNESOTA, INC.
/s/ Frank Colaccino
By :__________________________________
Name: Frank Colaccino
Title: President
B-3
<PAGE>
THE LAWSON MILK COMPANY
/s/ Frank Colaccino
By :__________________________________
Name: Frank Colaccino
Title: President
GOLDEN STORES, INC.
/s/ Frank Colaccino
By :__________________________________
Name: Frank Colaccino
Title: President
LAKESIDE WHOLESALE, INC.
/s/ Frank Colaccino
By :__________________________________
Name: Frank Colaccino
Title: President
QUIK SHOPS, INC.
/s/ Frank Colaccino
By :__________________________________
Name: Frank Colaccino
Title: President
OPEN PANTRY PROPERTIES, INC.
/s/ Frank Colaccino
By :__________________________________
Name: Frank Colaccino
Title: President
B-4
<PAGE>
REMOTE SERVICES, INC.
/s/ Frank Colaccino
By :__________________________________
Name: Frank Colaccino
Title: President
CONVENIENT INDUSTRIES OF
AMERICA, INC.
/s/ Frank Colaccino
By :__________________________________
Name: Frank Colaccino
Title: President
OSCAR EWING, INC.
/s/ Frank Colaccino
By :__________________________________
Name: Frank Colaccino
Title: President
CONVENIENT GASOLINE, INC.
/s/ Frank Colaccino
By :__________________________________
Name: Frank Colaccino
Title: President
JACKSON COUNTY GROCERY CO., INC.
/s/ Frank Colaccino
By :__________________________________
Name: Frank Colaccino
Title: President
B-5
<PAGE>
GREENWELL GROCERY CO., INC.
/s/ Frank Colaccino
By :__________________________________
Name: Frank Colaccino
Title: President
CIA FOOD MARTS, INC.
/s/ Frank Colaccino
By :__________________________________
Name: Frank Colaccino
Title: President
FOOD MERCHANDISERS,
INCORPORATED
/s/ Frank Colaccino
By :__________________________________
Name: Frank Colaccino
Title: President
DAIRY MART CONVENIENCE STORES
OF OHIO, INC.
/s/ Frank Colaccino
By :__________________________________
Name: Frank Colaccino
Title: President
B-6
<PAGE>
===============================================================================
CREDIT AGREEMENT
AMONG
DAIRY MART CONVENIENCE STORES, INC.,
THE BANKS
FROM TIME TO TIME PARTIES HERETO
AND
FLEET BANK, NATIONAL ASSOCIATION
as Agent
$30,000,000 Joint Revolving Credit Facility
Dated as of February 25, 1994
===============================================================================
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
-----------------
Page
----
<C> <S> <C>
SECTION 1. DEFINITIONS..................................................... 1
1.1 Defined Terms.................................................. 1
1.2 Other Definitional Provisions.................................. 14
1.3 Change in Accounting Principles................................ 14
SECTION 2. AMOUNT AND TERMS OF COMMITMENTS................................. 14
2.1 Revolving Credit Commitments................................... 14
2.2 Designation of Interest Rates; LIBOR Interest Periods......... 14
2.3 Interest Rates and Payment Dates............................... 15
2.4 Procedure for Borrowing........................................ 16
2.5 Conversion and Continuation Options............................ 16
2.6 Minimum Amounts and Maximum Number of Tranches................. 17
2.7 Revolving Credit Notes......................................... 17
2.8 Fees........................................................... 17
2.9 Termination or Reduction of Revolving Credit Commitments....... 17
2.10 Optional Prepayments........................................... 18
2.11 Mandatory Prepayments; Cash Collateralizations................. 18
2.12 Computation of Interest and Fees............................... 19
2.13 Inability to Determine Interest Rate........................... 19
2.14 Pro Rata Treatment and Payments................................ 20
2.15 Extension of Termination Date.................................. 21
2.16 Annual Clean-Down of Revolving Credit Loans.................... 21
2.17 Illegality..................................................... 21
2.18 Requirements of Law............................................ 21
2.19 Taxes.......................................................... 22
2.20 Indemnity...................................................... 24
SECTION 3. LETTERS OF CREDIT............................................... 24
3.1 L/C Commitment........................... ..................... 24
3.2 Procedure for Issuance of Letters of Credit.................... 25
3.3 Fees, Commissions and Other Charges............................ 25
3.4 Reimbursement Obligation of the Company........................ 26
3.5 L/C Draws and Reimbursements................................... 26
3.6 Obligations Absolute........................................... 27
3.7 Letter of Credit Payments...................................... 27
3.8 Application.................................................... 28
SECTION 4. REPRESENTATIONS AND WARRANTIES.................................. 28
4.1 Financial Condition............................................ 28
4.2 No Change...................................................... 29
4.3 Corporate Existence; Compliance with Law....................... 29
4.4 Corporate Power; Authorization; Enforceable Obligations........ 29
4.5 No Legal Bar................................................... 30
</TABLE>
i
<PAGE>
<TABLE>
<C> <S> <C>
4.6 No Material Litigation........................................ 30
4.7 No Default.................................................... 30
4.8 Ownership of Property; Liens.................................. 30
4.9 Intellectual Property......................................... 30
4.10 No Burdensome Restrictions.................................... 30
4.11 Taxes......................................................... 30
4.12 Federal Regulations........................................... 31
4.13 ERISA......................................................... 31
4.14 Investment Company Act; Other Regulations..................... 31
4.15 Subsidiaries.................................................. 31
4.16 Purpose of Loans.............................................. 32
4.17 Environmental Matters......................................... 32
4.18 Security Documents............................................ 33
4.19 Senior Debt................................................... 33
SECTION 5. CONDITIONS PRECEDENT........................................... 33
5.1 Conditions to Initial Extension of Credit..................... 33
5.2 Conditions to Each Extension of Credit........................ 36
SECTION 6. AFFIRMATIVE COVENANTS.......................................... 37
6.1 Financial Statements.......................................... 37
6.2 Certificates; Other Information............................... 38
6.3 Payment of Obligations........................................ 39
6.4 Conduct of Business and Maintenance of Existence.............. 39
6.5 Maintenance of Property; Insurance............................ 39
6.6 Inspection of Property; Books and Records; Discussions........ 39
6.7 Notices....................................................... 40
6.8 Environmental Laws............................................ 41
6.9 Additional Designated Subsidiaries............................ 41
SECTION 7. NEGATIVE COVENANTS............................................. 42
7.1 Financial Condition Covenants................................. 42
7.2 Limitation on Indebtedness.................................... 43
7.3 Limitation on Liens 43
7.4 Limitation on Guarantee Obligations........................... 44
7.5 Limitations on Fundamental Changes............................ 45
7.6 Limitation on Sale of Assets.................................. 45
7.7 Limitation on Dividends....................................... 45
7.8 Limitation on Capital Expenditures............................ 46
7.9 Limitation on Investments, Loans and Advances................. 46
7.10 Limitation on Optional Payments and Modifications of Debt
Instruments.................................................. 48
7.11 Transactions with Affiliates.................................. 48
7.12 Sale and Leaseback............................................ 48
7.13 Corporate Documents........................................... 48
7.14 Fiscal Year................................................... 49
7.15 Limitation on Negative Pledge Clauses......................... 49
SECTION 8. EVENTS OF DEFAULT.............................................. 49
</TABLE>
ii
<PAGE>
<TABLE>
<C> <S> <C>
SECTION 9. THE AGENT...................................................... 52
9.1 Appointment................................................... 52
9.2 Delegation of Duties.......................................... 52
9.3 Exculpatory Provisions........................................ 52
9.4 Reliance by Agent............................................. 53
9.5 Notice of Default............................................. 53
9.6 Non-Reliance on Agent and Other Banks......................... 53
9.7 Indemnification............................................... 54
9.8 Agent in Its Individual Capacity.............................. 54
9.9 Successor Agent............................................... 54
SECTION 10. MISCELLANEOUS.................................................. 55
10.1 Amendments and Waivers........................................ 55
10.2 Notices....................................................... 55
10.3 No Waiver; Cumulative Remedies................................ 56
10.4 Survival of Representations and Warranties.................... 56
10.5 Payment of Expenses and Taxes................................. 56
10.6 Successors and Assigns; Participations; Purchasing Banks...... 57
10.7 Adjustments; Set-off.......................................... 59
10.8 Counterparts.................................................. 60
10.9 Severability.................................................. 60
10.10 Integration................................................... 60
10.11 GOVERNING LAW................................................. 60
10.12 Submission To Jurisdiction; Waivers........................... 60
10.13 Acknowledgements.............................................. 61
10.14 WAIVERS OF JURY TRIAL......................................... 61
10.15 PREJUDGMENT REMEDY WAIVER..................................... 61
</TABLE>
iii
<PAGE>
<TABLE>
<CAPTION>
SCHEDULES
- - ---------
<C> <S>
SCHEDULE I Commitments; Addresses
SCHEDULE II Long-Term Commitments
SCHEDULE III Recent Acquisitions
SCHEDULE IV Recent Distributions
SCHEDULE V ERISA Matters
SCHEDULE VI Subsidiaries
SCHEDULE VIIA Environmental Matters
SCHEDULE VIIB Litigation
SCHEDULE VIII UCC Filing Locations
SCHEDULE IX Indebtedness
SCHEDULE X Liens
SCHEDULE XI Management Loans and Advances
SCHEDULE XII Tax Audits
<CAPTION>
EXHIBITS
- - --------
<C> <S>
EXHIBIT A Form of Revolving Credit Note
EXHIBIT B Form of Subsidiary Guarantee
EXHIBIT C Form of Company Pledge Agreement
EXHIBIT D Form of Subsidiary Pledge Agreement
EXHIBIT E Form of Company Security Agreement
EXHIBIT F Form of Closing Certificate
EXHIBIT G Form of Assignment and Acceptance
EXHIBIT H Form of Opinions of Counsel to the Company and its
Subsidiaries
</TABLE>
iv
<PAGE>
CREDIT AGREEMENT
CREDIT AGREEMENT dated as of February 25, 1994 by and among DAIRY MART
CONVENIENCE STORES, INC., a Delaware corporation (the "Company"), the banks and
other financial institutions listed on Schedule I to this Agreement
(collectively, together with any banks or financial institutions from time to
time parties to this Agreement, the "Banks") and FLEET BANK, NATIONAL
ASSOCIATION, a national banking association organized under the laws of the
United States of America, as agent for the Banks hereunder (in such capacity,
the "Agent");
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the Company has requested the Banks severally to extend credit to
the Company in an aggregate principal amount not to exceed $30,000,000 at any
time outstanding, the proceeds of which will be used for the purposes
hereinafter set forth;
WHEREAS, of the $30,000,000 of aggregate extensions of credit to be made
available to the Company hereunder, up to $15,000,000 of such extensions of
credit shall be available under the L/C Commitments (as hereinafter defined);
and
WHEREAS, the Banks are willing to extend such credit upon the terms and
subject to the conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
herein contained, the parties hereto hereby agree as follows:
SECTION 1. DEFINITIONS
1.1 Defined Terms. As used in this Agreement, the following terms shall
-------------
have the following meanings:
"Affiliate": of a Person (the "Primary Person"), (a) any other Person
---------
(other than a Subsidiary) which, directly or indirectly, is in control of, is
controlled by, or is under common control with, the Primary Person or (b) any
Person who is a director or officer (i) of the Primary Person, (ii) of any
Subsidiary of the Primary Person or (iii) of any Person described in clause (a)
above. For purposes of this definition, control of a Person shall mean the
power, directly or indirectly, (i) to vote 10% or more of the securities having
ordinary voting power for the election of directors of such Person or (ii) to
direct or cause the direction of the management and policies of such Person
whether by contract or otherwise.
"Aggregate Outstanding Extensions of Credit": as to any Bank at any time,
------------------------------------------
an amount equal to the sum of (a) the aggregate principal amount of all
Revolving Credit Loans made by such Bank then outstanding, and (b) the product
of such Bank's Commitment Percentage times the L/C Obligations then outstanding.
1
<PAGE>
"Agreement": this Credit Agreement, as amended, supplemented or otherwise
---------
modified from time to time.
"Applicable Margin": (i) for each Prime Rate Loan, at any time, a rate per
-----------------
annum equal to one quarter of one percent (1/4%) and (ii) for each LIBOR Loan,
at any time, a rate per annum equal to the rate set forth below opposite the
applicable classification of the ratio of Consolidated Indebtedness to
Consolidated EBITDA as of the FQED immediately preceding such time:
<TABLE>
<CAPTION>
==============================================================================
Ratio of Consolidated Indebtedness to Applicable Margin:
Consolidated EBITDA:
- - ------------------------------------------------------------------------------
<S> <C>
Equal to or greater than 3.50:1.00 2-1/2%
- - ------------------------------------------------------------------------------
3.25:1.00 up to but not including 3.50:1.00 2-1/4%
- - ------------------------------------------------------------------------------
Less than 3.25:1.00 2.00%
==============================================================================
</TABLE>
"Application": an application in such form as the Issuing Bank may specify
-----------
from time to time, requesting the Issuing Bank to issue a Letter of Credit.
"Assignment and Acceptance": an Assignment and Acceptance, substantially
-------------------------
in the form of Exhibit G.
"Available Revolving Credit Commitment": as to any Bank at any time, an
-------------------------------------
amount equal to the excess, if any, of (a) the amount of such Bank's Revolving
Credit Commitment over (b) such Bank's Aggregate Outstanding Extensions of
Credit.
"Borrowing Date": any Business Day specified in a notice pursuant to
--------------
subsection 2.4 as a date on which the Company requests the Banks to make Loans
hereunder.
"Business Day": a day other than a Saturday, Sunday or other day on which
------------
commercial banks in Hartford, Connecticut are authorized or required by law to
close.
"Capital Expenditures": any payment made directly or indirectly for the
--------------------
purpose of acquiring, constructing or improving fixed assets, real property or
equipment which in accordance with GAAP would be added as a net debit (after
giving effect to any credits) to the fixed asset account of the Person making
such expenditure, including, without limitation, amounts paid or payable under
any conditional sale or other title retention agreement.
"Capital Stock": any and all shares, interests, participations or other
-------------
equivalents (however designated) of capital stock of a corporation, any and all
equivalent ownership interests in a Person (other than a corporation) and any
and all warrants or options to purchase any of the foregoing.
"Cash Equivalents": (a) securities issued or directly and fully guaranteed
----------------
or insured by the United States Government or any agency or instrumentality
thereof having maturities of not more than one year from the date of
acquisition, (b) certificates of deposit and eurodollar time deposits with
maturities of six months or less from the date of acquisition, bankers'
acceptances
2
<PAGE>
with maturities not exceeding six months and overnight bank deposits, in each
case, with any Bank or with any domestic commercial bank having capital and
surplus in excess of $100,000,000, (c) repurchase obligations with a term of not
more than seven days for underlying securities of the types described in clauses
(a) and (b) entered into with any financial institution meeting the
qualifications specified in clause (b) above, and (d) commercial paper issued by
any Bank or the parent corporation of any Bank and commercial paper of any other
issuer rated at least A-1 or the equivalent thereof by Standard & Poor's
Corporation or at least P-1 or the equivalent thereof by Moody's Investors
Service, Inc. and in each case maturing within six months after the date of
acquisition.
"Cash Collateral Account": as defined in Section 8.
-----------------------
"Change of Control": the occurrence of any of the following events: (i)
-----------------
any "person" or "group" (as such terms are used in Section 13(d) and 14(d) of
the Securities Exchange Act of 1934, as amended), other than one or more
Permitted Holders or any Person or Persons controlled by one or more Permitted
Holders, is or becomes the beneficial owner, directly or indirectly, of more
than 50% of the total voting power of the Voting Stock of the Company; (ii)
during any period of two consecutive years, individuals who at the beginning of
such period constituted the Board of Directors of the Company (together with any
new directors whose election by such Board of Directors or whose nomination for
election by the shareholders of the Company was approved by the directors then
still in office who either were directors at the beginning of such period or
whose election or nomination for director was previously so approved) cease for
any reason to constitute a majority of the Board of Directors of the Company
then in office; (iii) the direct or indirect, sale, lease, exchange or other
transfer of all or substantially all of the assets of the Company to any
"person" or "group" (as such terms are used in Section 13(d) or 14(d) of the
Securities Exchange Act of 1934, as amended), provided that the foregoing shall
not include the granting of liens permitted by this Agreement; (iv) the
Permitted Holders cease to control at least 10% of the total voting power of the
Company; or (v) the Company consolidates with or merges into another corporation
or any Person consolidates with or merges into the Company, in either event
pursuant to a transaction in which either (A) the outstanding Voting Stock of
the Company is changed into or exchanged for cash, securities or other property
(other than any such transaction where the outstanding Voting Stock of the
Company is changed into or exchanged for Voting Stock of the surviving
corporation) or (B) the holders of a majority of the voting power of the Voting
Stock of the Company immediately prior to such transaction own, directly or
indirectly, less than a majority of voting power of the Voting Stock of the
surviving corporation immediately after such transaction.
"Clean-Down Period": the period commencing on August 1 and ending on
-----------------
November 1 of each year during the Commitment Period.
"Closing Date": February 25, 1994.
------------
"Code": the Internal Revenue Code of 1986, as amended from time to time.
----
"Collateral": the collective reference to the Collateral, as such term is
----------
defined in each of the Company Security Agreement, the Company Pledge Agreement
and the Subsidiary Pledge Agreement.
3
<PAGE>
"Commitment Percentage": as to any Bank at any time, the percentage set
---------------------
forth opposite such Bank's name on Schedule I of this Agreement with respect to
such Bank.
"Commitment Period": the period from and including the date hereof to but
-----------------
not including the Termination Date or such earlier date on which the Commitments
shall terminate as provided herein.
"Commitments": the collective reference to the Revolving Credit
-----------
Commitments and the L/C Commitments.
"Commonly Controlled Entity": an entity, whether incorporated or not,
--------------------------
which is under common control with the Company within the meaning of Section
4001 of ERISA or is part of a group which includes the Company and which is
treated as a single employer under Section 414 of the Code.
"Company Pledge Agreement": the Pledge Agreement, substantially in the
------------------------
form of Exhibit C, made by the Company in favor of the Agent for the ratable
benefit of the Banks, as the same may be amended, supplemented or otherwise
modified from time to time.
"Company Security Agreement": the Security Agreement, substantially in the
--------------------------
form of Exhibit E, to be executed and delivered by the Company, as the same may
be amended, supplemented or otherwise modified from time to time.
"Consolidated EBIRT": for any period, Consolidated Net Income for such
------------------
period plus the aggregate amounts deducted in determining such Consolidated Net
Income in respect of (a) income taxes for such period, (b) Consolidated Interest
Expense for such period, (c) Consolidated Rent Expense for such period and (d)
depreciation and/or amortization expense with respect to Financing Leases.
"Consolidated EBITDA": for any period, Consolidated Net Income for such
-------------------
period plus the aggregate amounts deducted in determining such Consolidated Net
Income in respect of (a) income taxes, (b) Consolidated Interest Expense, (c)
depreciation expense and (d) the expense associated with amortization of
intangible and other assets.
"Consolidated Indebtedness": at a particular date, all Indebtedness of the
-------------------------
Company and its consolidated Subsidiaries which by its terms matures more than
one year after the date of calculation, and any other Indebtedness of the
Company and its consolidated Subsidiaries maturing within one year from such
date which is renewable or extendable at the option of the obligor to a date
more than one year from such date, including, in any event, the Revolving Credit
Loans, but excluding any Financing Leases entered into by the Company or its
consolidated Subsidiaries after the Closing Date.
"Consolidated Interest Expense": for any period, interest expense of the
-----------------------------
Company and its Subsidiaries for such period, determined on a consolidated basis
in accordance with GAAP.
"Consolidated Net Income": for any period, the consolidated net income (or
-----------------------
loss) of the Company and its Subsidiaries for such period determined in
accordance with GAAP; provided that there shall be excluded from the calculation
thereof any non-operating gains or losses
4
<PAGE>
(including, without limitation, extraordinary or unusual gains or losses, gains
or losses from discontinuance of operations, gains or losses arising from the
sale or disposition by the Company or any Subsidiary of any asset (including,
without limitation, the issuance of any debt or equity securities, but excluding
the sale or disposition of any Franchise Asset or any inventory of the Company
or any Subsidiary) and other non-recurring gains or losses) during such period;
and provided further that there shall be excluded from the calculation of
Consolidated Net Income any net income or loss arising with respect to any
Permitted Joint Venture Investment, except that the aggregate amount of cash
actually distributed to the Company in respect of such Permitted Joint Venture
Investment during such period as a dividend or other distribution shall be
included in the calculation thereof.
"Consolidated Net Worth": at a particular date, all amounts which would be
----------------------
included under shareholders' equity on a consolidated balance sheet of the
Company and its Subsidiaries determined on a consolidated basis in accordance
with GAAP as at such date.
"Consolidated Rent Expense": for any period, the aggregate rental
-------------------------
obligations of the Company and its Subsidiaries determined on a consolidated
basis payable in respect of such period under leases of real and/or personal
property (net of principal receipts from sub-leases thereof, and excluding
taxes, insurance, maintenance and similar expenses which the lessee is obligated
to pay under the terms of said leases), regardless of whether such obligations
are reflected as liabilities or commitments on a consolidated balance sheet of
the Company and its consolidated Subsidiaries or in the notes thereto;
provided, that with respect to Financing Leases, the rental obligations referred
- - --------
to herein shall be limited to the principal portion of the payments in respect
of such obligations.
"Contractual Obligation": as to any Person, any provision of any security
----------------------
issued by such Person or of any agreement, instrument or other undertaking to
which such Person is a party or by which it or any of its property is bound.
"Default": any of the events specified in Section 8, regardless of whether
-------
any requirement for the giving of notice, the lapse of time, or both, or any
other condition, has been satisfied.
"Designated Subsidiary": a Subsidiary listed on Part A of Schedule VI.
---------------------
"DM Associates": DM Associates Limited Partnership, a Connecticut limited
-------------
partnership.
"Dollars" and "$": dollars in lawful currency of the United States of
------- -
America.
"Environmental Laws": any and all Federal, state, local or municipal laws,
------------------
rules, orders, regulations, statutes, ordinances, codes, decrees or requirements
of any Governmental Authority regulating, relating to or imposing liability or
standards of conduct concerning environmental protection matters, including
without limitation, Hazardous Materials, as now or may at any time hereafter be
in effect.
"ERISA": The Employee Retirement Income Security Act of 1974, as amended
-----
from time to time.
5
<PAGE>
"Event of Default": any of the events specified in Section 8, provided
---------------- --------
that any requirement for the giving of notice, the lapse of time, or both, or
any other condition, has been satisfied.
"Extension": as defined in subsection 2.15.
---------
"Federal Funds Effective Rate": at any time and with respect to any Bank,
----------------------------
shall mean the rate of interest charged to such Bank in the interbank market at
such time for excess reserve balances.
"Financing Lease": any lease of property, real or personal, the
---------------
obligations of the lessee in respect of which are required in accordance with
GAAP to be capitalized on a balance sheet of the lessee.
"FinOp": Financial Opportunities, Inc., a Kentucky corporation that is a
-----
Subsidiary and a small business investment company licensed by the SBA.
"Fleet": Fleet Bank, National Association, a national banking association
-----
organized and existing under the laws of the United States of America.
"FQED": the end date of any fiscal quarter in any fiscal year of the
----
Company.
"Franchise Assets": all real and personal property of the Company or any
----------------
Subsidiary sold or otherwise transferred to any franchisee of the Company or
such Subsidiary pursuant to the Company's on-going franchise program, in the
ordinary course of such program and pursuant to customary documentation of the
Company or such Subsidiary for such purpose.
"Franchisee Guarantees": Guarantee Obligations of the Company or any
---------------------
Subsidiary guaranteeing Indebtedness of a franchisee of the Company with respect
to the Company's on-going franchise program, which Guarantee Obligations are
reflected on the consolidated financial statements of the Company and its
consolidated Subsidiaries or in the notes thereto.
"FYED": the end date of the Company's fiscal year designated with such
----
term, being the Saturday closest to January 31 in the calendar year designated
with such term; thus FYED 1995 shall mean the Saturday closest to January 31,
1995, which shall be the date on which the Company's 1995 fiscal year shall end.
"GAAP": generally accepted accounting principles in the United States of
----
America in effect from time to time.
"Governmental Authority": any nation or government, any state or other
----------------------
political subdivision thereof and any entity exercising executive, legislative,
judicial, regulatory or administrative functions of or pertaining to government.
"Guarantee Obligation": as to any Person (the "guaranteeing person"), any
--------------------
obligation of (a) the guaranteeing person or (b) another Person (including,
without limitation, any bank under any letter of credit), to induce the creation
of which obligation the guaranteeing person has issued a reimbursement,
counterindemnity or similar obligation, in either case guaranteeing or in effect
guaranteeing any Indebtedness, leases, dividends or other obligations (the
"primary
6
<PAGE>
obligations") of any other third Person (the "primary obligor") in any manner,
whether directly or indirectly, including, without limitation, any obligation of
the guaranteeing person, whether contingent or not, (i) to purchase any such
primary obligation or any property constituting direct or indirect security
therefor, (ii) to advance or supply funds (A) for the purchase or payment of any
such primary obligation or (B) to maintain working capital or equity capital of
the primary obligor or otherwise to maintain the net worth or solvency of the
primary obligor, (iii) to purchase property, securities or services primarily
for the purpose of assuring the owner of any such primary obligation of the
ability of the primary obligor to make payment of such primary obligation or
(iv) otherwise to assure or hold harmless the owner of any such primary
obligation against loss in respect thereof; provided, however, that the term
-------- -------
"Guarantee Obligation" shall not include endorsements of instruments for deposit
or collection in the ordinary course of business. The amount of any Guarantee
Obligation of any guaranteeing person shall be deemed to be the lower of (x) an
amount equal to the stated or determinable amount of the primary obligation in
respect of which such Guarantee Obligation is made and (y) the maximum amount
for which such guaranteeing person may be liable pursuant to the terms of the
instrument embodying such Guarantee Obligation, unless such primary obligation
and the maximum amount for which such guaranteeing person may be liable are not
stated or determinable, in which case the amount of such Guarantee Obligation
shall be such guaranteeing person's maximum reasonably anticipated liability in
respect thereof as determined by the Company in good faith.
"Hazardous Materials": any hazardous materials, hazardous wastes,
-------------------
hazardous constituents, hazardous or toxic substances, petroleum products
(including crude oil or any fraction thereof), defined or regulated as such in
or under any Environmental Law.
"Indebtedness": of any Person at any date, (a) all indebtedness of such
------------
Person for borrowed money or for the deferred purchase price of property or
services (other than current trade liabilities incurred in the ordinary course
of business and payable in accordance with customary practices) or which is
evidenced by a note, bond, debenture or similar instrument, (b) all obligations
of such Person under Financing Leases, (c) all obligations of such Person in
respect of acceptances issued or created for the account of such Person, and (d)
all liabilities secured by any Lien on any property owned by such Person even
though such Person has not assumed or otherwise become liable for the payment
thereof.
"Initial Funding Date": as defined in subsection 2.1.
--------------------
"Insolvency": with respect to any Multiemployer Plan, the condition that
----------
such Plan is insolvent within the meaning of Section 4245 of ERISA.
"Insolvent": pertaining to a condition of Insolvency.
---------
"Insurance Subsidiary": D.M. Insurance, Ltd., a Bermuda corporation.
--------------------
"Interest Payment Date": (a) as to any Prime Rate Loan, the last day of
---------------------
each March, June, September and December to occur while such Loan is
outstanding, (b) as to any LIBOR Loan having a LIBOR Interest Period of three
months or less, the last day of such LIBOR Interest Period, and (c) as to any
LIBOR Loan having a LIBOR Interest Period longer than three months, each day
which is three months or a whole multiple thereof, after the first day of such
LIBOR Interest Period and the last day of such LIBOR Interest Period.
7
<PAGE>
"Interest Rate Agreement": any interest rate swap agreement, interest rate
-----------------------
collar agreement, currency exchange agreement, or other similar agreement or
arrangement entered into by the Company, in order to hedge or minimize risk with
respect to the fluctuation of interest rates, with (i) either of the initial
Banks parties hereto or (ii) a financial institution with a minimum long-term
indebtedness rating of at least A- by Standard & Poor's Corporation and at least
A3 by Moody's Investors Service, Inc.
"Issuing Bank": Society National Bank, in its capacity as issuer of any
------------
Letter of Credit.
"L/C Commitment": $15,000,000.
--------------
"L/C Fee": as defined in subsection 3.3(a).
-------
"L/C Obligations": at any time, an amount equal to the sum of (a) the
---------------
aggregate then undrawn and unexpired amount of the then outstanding Letters of
Credit and (b) the aggregate amount of drawings under Letters of Credit which
have not then been reimbursed pursuant to subsection 3.5.
"L/C Participants": the collective reference to all the Banks other than
----------------
the Issuing Bank.
"Letters of Credit": as defined in subsection 3.1(a).
-----------------
"Letter of Credit Rate": for each Letter of Credit, at any time, a rate
---------------------
per annum equal to the rate set forth below opposite the applicable
classification of the ratio of Consolidated Indebtedness to Consolidated EBITDA
as of the FQED immediately preceding such time:
<TABLE>
<CAPTION>
===============================================================================
Ratio of Consolidated Indebtedness to Letter of Credit Rate:
Consolidated EBITDA:
<S> <C>
- - -------------------------------------------------------------------------------
Equal to or greater than 3.50:1.00 1-1/2%
- - -------------------------------------------------------------------------------
3.25:1.00 up to but not including 3.50:1.00 1-1/4%
- - -------------------------------------------------------------------------------
Less than 3.25:1.00 1.00%
===============================================================================
</TABLE>
"LIBOR Base Rate": with respect to each day during each LIBOR Interest
---------------
Period, the rate per annum equal to the rate at which Fleet is offered Dollar
deposits at or about 10:00 A.M., Eastern time, two Business Days prior to the
beginning of such LIBOR Interest Period in the London interbank market where the
eurodollar and foreign currency and exchange operations in respect of its LIBOR
Loans are then being conducted for delivery on the first day of such LIBOR
Interest Period for the number of days comprised therein and in an amount
comparable to the amount of its LIBOR Loan to be outstanding during such LIBOR
Interest Period.
"LIBOR Interest Period": any one (1), two (2), three (3) or six (6) month
---------------------
period selected by the Company in respect to any LIBOR Loan pursuant to
subsections 2.2, 2.4 or 2.5 of this Agreement.
8
<PAGE>
"LIBOR Reserve Requirements": for any day as applied to a LIBOR Loan, the
--------------------------
aggregate (without duplication) of the rates (expressed as a decimal fraction)
of reserve requirements in effect on such day (including, without limitation,
basic, supplemental, marginal and emergency reserves under any regulations of
the Board of Governors of the Federal Reserve System or other Governmental
Authority having jurisdiction with respect thereto) dealing with reserve
requirements prescribed for eurocurrency funding maintained by a member bank of
such System.
"LIBOR Loans": Loans the rate of interest applicable to which is based
-----------
upon the LIBOR Rate.
"LIBOR Rate": with respect to each day during each LIBOR Interest Period,
----------
a rate per annum determined for such day in accordance with the following
formula (rounded upward to the nearest 1/100th of 1%):
LIBOR Base Rate
-------------------------------------------------
1.00 - LIBOR Reserve Requirements
"Lien": any mortgage, pledge, hypothecation, assignment, security
----
interest, deposit arrangement, encumbrance, lien (statutory or other), or
preference, priority or other security agreement or preferential arrangement of
any kind or nature whatsoever (including, without limitation, any conditional
sale or other title retention agreement, any Financing Lease having
substantially the same economic effect as any of the foregoing, and the filing
of any financing statement under the Uniform Commercial Code or comparable law
of any jurisdiction in respect of any of the foregoing).
"Loan": any loan made by any Bank pursuant to this Agreement.
----
"Loan Documents": this Agreement, the Notes, the Applications, the
--------------
Subsidiary Guarantee, the Pledge Agreements and the Company Security Agreement,
together with any and all other instruments, documents and agreements executed
and delivered by the Company or the Designated Subsidiaries from time to time in
connection with the Indebtedness evidenced by this Agreement and the Notes, as
the same may hereafter be amended, restated or modified, from time to time.
"Material Adverse Effect": a material adverse effect on (a) the business,
-----------------------
operations, property, condition (financial or otherwise) or prospects of the
Company and its Subsidiaries taken as a whole, (b) the ability of the Company or
any Designated Subsidiary to perform its obligations under the Loan Documents to
which it is a party or (c) the validity or enforceability of this Agreement, the
Notes or any of the other Loan Documents or the rights or remedies of the Agent
or the Banks hereunder or thereunder.
"Minimum Consolidated Net Worth": at each FQED to occur after FYED 1994,
------------------------------
an amount of Consolidated Net Worth equal to the excess of (a) the sum of (i)
$34,200,000, plus (ii) the product of (a) 65% times (b) the cumulative
Consolidated Net Income of the Company and its Subsidiaries (without deduction
for any consolidated net loss in any fiscal quarter) for the period commencing
on the first day of FYED 1995 and ending on such FQED, plus (iii) the net
proceeds received by the Company after FYED 1994 in connection with the issuance
and sale of any common stock of the Company, over (b) the aggregate amount of
----
any payments or distributions
9
<PAGE>
by the Company after FYED 1994, whether as cash or as other property, in respect
of any purchase, redemption, defeasance, retirement or other acquisition of any
shares of Capital Stock of the Company permitted under subsection 7.7.
"Multiemployer Plan": a Plan which is a multiemployer plan as defined in
------------------
Section 4001(a) (3) of ERISA.
"Net Cash Proceeds": (a) when used in respect of any sale or other
-----------------
disposition of assets that is not an issuance of debt securities of the Company
or any Subsidiary, the gross proceeds received by the Company or such Subsidiary
from such sale or disposition less (i) all reasonable legal, title, recording
and transfer tax expenses, commissions and other customary fees and expenses
incurred, and all other federal, state and local taxes assessed, in connection
therewith, (ii) the principal amount of, premium, if any, and interest on any
Indebtedness (other than the Loans and the Reimbursement Obligations) which is
secured by the asset sold or otherwise disposed of and which is required to be
repaid in connection with such sale or other disposition of assets and (iii)
amounts to be provided by the Company or such Subsidiary as a reserve, in
accordance with GAAP, against any liabilities associated with any such sale or
other disposition of assets and retained by such Person after such sale or other
disposition of assets, including, without limitation, pension and other post-
employment benefit liabilities and liabilities related to environmental matters
or against any indemnification obligations associated with such sale or other
disposition of assets and (b) when used in respect of the issuance of any debt
securities of the Company or any Subsidiary, the gross proceeds received by the
Company or such Subsidiary from such issuance less all legal expenses,
commissions and other fees and expenses incurred and all federal, state and
local taxes assessed in connection therewith.
"Notes": the collective reference to the Revolving Credit Notes.
-----
"Participants": as defined in subsection 10.6(b).
------------
"PBGC": the Pension Benefit Guaranty Corporation established pursuant to
----
Subtitle A of Title IV of ERISA.
"Permitted Holders": the collective reference to Frank Colaccino and his
-----------------
Related parties, or in the event of the death or mental or physical incapacity
of Frank Colaccino, any of Gregory Landry, Mitchell Kupperman, Robert Stein and
their respective Related Parties.
"Permitted Joint Venture Investment": investments in corporations,
----------------------------------
partnerships or joint ventures (other than Subsidiaries) which investments do
not require investment by the Company of cash equity in excess of $50,000 in the
aggregate; provided, that for the purpose of determining the amount of cash
--------
equity invested, investments by the Company of the proceeds of any fees or other
amounts received by the Company in connection with such investment shall not be
deemed to be cash equity.
"Person": an individual, partnership, corporation, business trust, joint
------
stock company, trust, unincorporated association, joint venture, Governmental
Authority or other entity of whatever nature.
10
<PAGE>
"Plan": at a particular time, any employee benefit plan which is covered
----
by ERISA and in respect of which the Company or a Commonly Controlled Entity is
(or, if such plan were terminated at such time, would under Section 4069 of
ERISA be deemed to be) an "employer" as defined in Section 3(5) of ERISA.
"Pledge Agreements": the Company Pledge Agreement and the Subsidiary
-----------------
Pledge Agreement.
"POS Program Expenses": those expenses incurred in connection with the
--------------------
acquisition or installation by the Company or any Subsidiary of cash registers,
personal computers and other inventory management equipment, and any licenses of
intellectual property in connection therewith.
"Prime Rate": the rate of interest per annum publicly announced from time
----------
to time by the Agent as its prime rate in effect at its principal office (the
Prime Rate not being intended to be the best or lowest rate of interest charged
by Fleet in connection with extensions of credit to debtors). Any change in the
Prime Rate shall be effective as of the opening of business on the effective day
of such change in the Prime Rate.
"Prime Rate Loans": Loans the rate of interest applicable to which is
----------------
based upon the Prime Rate.
"Purchasing Banks": as defined in subsection 10.6(c).
----------------
"Register": as defined in subsection 10.6(d).
--------
"Regulation U": Regulation U of the Board of Governors of the Federal
------------
Reserve System.
"Reimbursement Obligation": the obligation of the Company to reimburse the
------------------------
Issuing Bank pursuant to subsection 3.5 for amounts drawn under Letters of
Credit.
"Reimbursing Bank": as defined in subsection 2.14(a).
----------------
"Related Party": with respect to each Permitted Holder, (a) any spouse or
-------------
immediate family member of such Permitted Holder or (b) any trust, corporation,
partnership or other entity, all of the beneficiaries, stockholders, partners,
owners or Persons beneficially holding an 80% or more controlling interest of
which consist of Permitted Holders and/or such other Persons referred to in the
immediately preceding clause (a).
"Reorganization": with respect to any Multiemployer Plan, the condition
--------------
that such plan is in reorganization within the meaning of Section 4241 of ERISA.
"Reportable Event": any of the events set forth in Section 4043(b) of
----------------
ERISA, other than those events as to which the thirty day notice period is
waived under subsections .13, .14, .16, .18, .19 or .20 of PBGC Reg. (S) 2615.
"Required Banks": at any time, Banks the Commitment Percentages of which
--------------
aggregate greater than 50%.
11
<PAGE>
"Requirement of Law": as to any Person, the Certificate of Incorporation
------------------
and By-Laws or other organizational or governing documents of such Person, and
any law, treaty, rule or regulation or determination of an arbitrator or a court
or other Governmental Authority, in each case applicable to or binding upon such
Person or any of its property or to which such Person or any of its property is
subject.
"Responsible Officer": the chief executive officer or the president or
-------------------
other executive officer of the Company or, with respect to financial matters,
the chief financial officer or other executive officer of the Company.
"Revolving Credit Commitment": as to any Bank, the obligation of such Bank
---------------------------
to make Revolving Credit Loans to the Company hereunder in an aggregate
principal amount at any one time outstanding not to exceed the amount set forth
opposite such Bank's name on Schedule I under the caption, "Commitment Amount".
"Revolving Credit Loans": any loans, advances or other disbursements by
----------------------
Agent, or any or all of the Banks to or for the account of the Company under the
Revolving Credit Commitments (including without limitation, amounts paid in
respect of any draft under any Letter of Credit) or in respect of any amounts
due and not paid by the Company in accordance with subsection 10.5.
"Revolving Credit Note": as defined in subsection 2.7.
---------------------
"Sale/Leaseback Transaction": as defined in subsection 7.12.
--------------------------
"SBA": the United States Small Business Administration or any regulatory
---
body succeeding to all or any of the functions thereof.
"Security Documents": the Pledge Agreements and the Company Security
------------------
Agreement.
"Senior Subordinated Indenture": the indenture among the Company, certain
-----------------------------
of its Subsidiaries, as guarantors, and Society National Bank, as trustee,
pursuant to which the Company will issue its 10.25% Senior Subordinated Notes
due 2004 in the aggregate original principal amount of $75,000,000, as such
Indenture may be amended, supplemented or otherwise modified from time to time.
"Senior Subordinated Notes": those 10.25% Senior Subordinated Notes due
-------------------------
2004 in the original principal amount of $75,000,000 issued pursuant to the
Senior Subordinated Indenture, as such Notes may be amended, modified,
supplemented, renewed or extended from time to time.
"Single Employer Plan": any Plan which is covered by Title IV of ERISA,
--------------------
but which is not a Multiemployer Plan.
"Subordinated Debentures": those 14.25% Subordinated Debentures Due 2000
-----------------------
in the original aggregate principal amount of $35,000,000 issued pursuant to the
Subordinated Indenture, as such Debentures may be amended, modified,
supplemented, renewed or extended from time to time.
12
<PAGE>
"Subordinated Indenture": the Indenture dated as of November 13, 1985
----------------------
between the Company and Fleet Bank, National Association, as assignee of The New
Connecticut Bank and Trust Company, N.A., as trustee, as such Indenture may be
amended, supplemented or otherwise modified from time to time.
"Subsequently Acquired Subsidiary": any Subsidiary acquired by the Company
--------------------------------
or any Designated Subsidiary pursuant to subsection 7.9(i) if the assets or
revenues of such Subsequently Acquired Subsidiary are considered, in the
reasonable judgment of the Agent and the Banks, material in relation to the
consolidated assets or consolidated revenues of the Company and its consolidated
Subsidiaries (as shown from the most recent financial statements delivered
pursuant to subsection 6.1).
"Subsidiary": as to any Person, a corporation, partnership or other entity
----------
of which shares of stock or other ownership interests having ordinary voting
power (other than stock or such other ownership interests having such power only
by reason of the happening of a contingency) to elect a majority of the board of
directors or other managers of such corporation, partnership or other entity are
at the time owned, or the management of which is otherwise controlled, directly
or indirectly through one or more intermediaries, or both, by such Person.
Unless otherwise qualified, all references to a "Subsidiary" or to
"Subsidiaries" in this Agreement shall refer to a Subsidiary or Subsidiaries of
the Company.
"Subsidiary Guarantee": the Guarantee, substantially in the form of
--------------------
Exhibit B, made by each Designated Subsidiary in favor of the Agent for the
ratable benefit of the Banks, as the same may be amended, supplemented or
otherwise modified from time to time.
"Subsidiary Pledge Agreement": the Pledge Agreement, substantially in the
---------------------------
form of Exhibit D, made by each Designated Subsidiary in favor of the Agent for
the ratable benefit of the Banks, as the same may be amended, supplemented or
otherwise modified from time to time.
"Successor Agent": any Bank or any bank, depository or financial
---------------
institution, trust company, bank and trust company having capital and surplus in
excess of $100,000,000 and acceptable to the remaining Bank or Banks and to the
Company, the Company's consent not to be unreasonably withheld or delayed.
"Termination Date": March 1, 1997, or such later date to which the
----------------
Termination Date may be extended in accordance with subsection 2.15.
"Tranche": the collective reference to LIBOR Loans having LIBOR Interest
-------
Periods which begin on the same date and end on the same later date (whether
such Loans shall originally have been made on the same day or not).
"Transferee": as defined in subsection 10.6(f).
----------
"Type": as to any Loan, its nature as a Prime Rate Loan or a LIBOR Loan.
----
"Uniform Customs": the Uniform Customs and Practice for Documentary
---------------
Credits (1983 Revision), International Chamber of Commerce Publication No. 400,
as the same may be amended from time to time.
13
<PAGE>
"Voting Stock": with respect to a corporation, all classes of Capital
------------
Stock then outstanding of such corporation normally entitled to vote in
elections of directors.
1.2 Other Definitional Provisions.
-----------------------------
(a) Unless otherwise specified therein, all terms defined in this
Agreement shall have the defined meanings when used in the Notes or any
certificate or other document made or delivered pursuant hereto.
(b) As used herein and in the Notes, and any certificate or other
document made or delivered pursuant hereto, accounting terms relating to
the Company and its Subsidiaries not defined in subsection 1.1 and
accounting terms partly defined in subsection 1.1, to the extent not
defined, shall have the respective meanings given to them under GAAP.
(c) The words "hereof", "herein" and "hereunder" and words of similar
import when used in this Agreement shall refer to this Agreement as a whole
and not to any particular provision of this Agreement, and Section,
subsection, Schedule and Exhibit references are to this Agreement unless
otherwise specified.
(d) The meanings given to terms defined herein shall be equally
applicable to both the singular and plural forms of such terms.
1.3 Change in Accounting Principles. Except as otherwise provided herein,
-------------------------------
any changes in GAAP which are hereafter made and adopted by the Company with the
agreement of its independent certified public accountants shall not affect the
method of calculation of any of the financial covenants, standards or terms
found in subsection 1.1 or Section 7.
SECTION 2. AMOUNT AND TERMS OF COMMITMENTS
2.1 Revolving Credit Commitments. Subject to the terms and conditions
----------------------------
hereof, and provided that no Default or Event of Default shall have occurred and
be continuing, each Bank severally agrees to make Revolving Credit Loans to the
Company from time to time on or after the date each of the conditions precedent
set forth in subsection 5.1 has been satisfied or waived by the Required Banks
(the "Initial Funding Date") and continuing throughout the Commitment Period in
an aggregate principal amount at any one time outstanding not to exceed the
amount of such Bank's Available Revolving Credit Commitment. From and after the
Initial Funding Date and continuing throughout the Commitment Period the Company
may use the Revolving Credit Commitments by borrowing, prepaying the Revolving
Credit Loans in whole or in part, and reborrowing in accordance with the terms
and conditions hereof.
2.2 Designation of Interest Rates; LIBOR Interest Periods.
------------------------------------------------------
(a) The Revolving Credit Loans may from time to time be (i) LIBOR
Loans, (ii) Prime Rate Loans or (iii) a combination thereof, as determined
by the Company and notified to the Agent in accordance with subsections 2.4
and 2.5. In the event the Company fails to designate the Type of all or
any portion of a Loan (whether initially or
14
<PAGE>
upon expiration of a LIBOR Interest Period), the per annum rate of interest
applicable thereto shall be or become the rate of interest applicable to
Prime Rate Loans.
(b) The Company may not select a LIBOR Interest Period pursuant to
subsections 2.2(a), 2.5 or otherwise, which would expire on a day after the
Termination Date. If any LIBOR Interest Period would otherwise end on a
day that is not a Business Day, such LIBOR Interest Period shall be
extended to the next succeeding Business Day unless the result of such
extension would be to carry such LIBOR Interest Period into another
calendar month in which event such LIBOR Interest Period shall end on the
immediately preceding Business Day. If any LIBOR Interest Period that
begins on the last Business Day of a calendar month (or on a day for which
there is no numerically corresponding day in the calendar month at the end
of such LIBOR Interest Period) such LIBOR Interest Period shall end on the
last Business Day of a calendar month.
2.3 Interest Rates and Payment Dates.
--------------------------------
(a) Each LIBOR Loan shall bear interest, during the applicable LIBOR
Interest Period, at a rate per annum equal to the applicable LIBOR Rate
plus the Applicable Margin. The Applicable Margin for each LIBOR Loan
shall be determined based upon the calculations submitted to the Banks
pursuant to subsection 6.2(b) and shall be effective as of the first day of
the fiscal quarter next following the date such calculations are submitted
to the Banks, provided that such calculations shall be subject to the
review and approval of the Banks. Any change in such Applicable Margin as
a consequence of the Bank's review of the aforesaid calculation after the
effective date of such Applicable Margin shall be retroactively applied to
the first day such Applicable Margin became effective. In the event the
Applicable Margin for a LIBOR Loan can not be determined at any time
because the Company's financial statements for the immediately preceding
fiscal quarter are not available at such time, the Applicable Margin for
each LIBOR Loan shall be presumed to be the same as the Applicable Margin
for such LIBOR Loans as of the last FQED for which the Company's financial
statements were available.
(b) Each Prime Rate Loan shall bear interest for so long as it is
outstanding and unpaid at a rate per annum equal to the Prime Rate plus the
Applicable Margin.
(c) If all or a portion of the principal amount of any Loan or any
interest payable thereon shall not be paid when due (whether at the stated
maturity, by acceleration or otherwise), such overdue amount shall bear
interest at a rate per annum (the "Default Rate") which is equal to the
rate that would otherwise be applicable thereto pursuant to the foregoing
provisions of this subsection plus 3% from the date of such non-payment
until such amount is paid in full (as well after as before judgment).
(d) Interest shall be payable in arrears on each Interest Payment
Date; provided that interest accruing at the Default Rate pursuant to
--------
subsection 2.3(c) shall be payable on demand. In the event the rate of
interest applicable to any LIBOR Loan decreases as a consequence of a
decrease in the Applicable Margin with respect thereto, the Company shall
be entitled to apply the difference between the amount of interest paid and
the amount of interest due (after giving effect to such reduction) as a
credit against the next installment of interest due hereunder. In the
event the rate of interest applicable
15
<PAGE>
to any LIBOR Loan increases as a consequence of an increase in the
Applicable Margin with respect thereto, the Company shall pay the
difference between the amount of interest paid and the amount of interest
due (after giving effect to such increase) on the next Interest Payment
Date.
(e) In the event the total amount of any payment of principal or
interest or amounts due in respect of any Reimbursement Obligation or of
any fee required to be paid under this Agreement is not received by Agent
or Issuing Bank, as the case may be, within ten (10) days following the due
date of such payment, the Company shall, in addition to and together with
such payment, pay to Agent or Issuing Bank, as the case may be, a late
charge equal to five percent (5%) of the total amount of such payment or
amount due ; provided, such late charge shall not be payable in respect of
any overdue payment in the event Borrower was entitled to an Advance in the
amount of such payment under the provisions of subsection 2.1 at the time
such payment became due.
2.4 Procedure for Borrowing. The Company may borrow under the Revolving
-----------------------
Credit Commitments on or after the Initial Funding Date during the Commitment
Period on any Business Day by giving the Agent irrevocable notice (which notice
must be received by the Agent prior to (x) 1:00 P.M., Eastern time, at least
three Business Days prior to the requested Borrowing Date, if all or any part of
the requested Revolving Credit Loans are to be initially LIBOR Loans, or (y)
1:00 P.M., Eastern time, on the requested Borrowing Date, otherwise), specifying
(i) the amount to be borrowed, (ii) the requested Borrowing Date, (iii) the Type
of the requested borrowing and (iv) if the borrowing is to be entirely or partly
of LIBOR Loans, the amounts and LIBOR Interest Periods thereof. Each borrowing
under the Revolving Credit Commitments shall be in an amount equal to (A) in the
case of Prime Rate Loans, $100,000 or a whole multiple thereof (or, if the then
Available Revolving Credit Commitments are less than $100,000, such lesser
amount) or (B) in the case of LIBOR Loans, $100,000 or a whole multiple thereof.
Upon receipt of any such notice from the Company, the Agent shall promptly
notify each Bank thereof. Each Bank will make the amount of its pro rata share
(based on its Commitment Percentage) of each borrowing available to the Agent
for the account of the Company at the office of the Agent specified in
subsection 10.2 prior to 2:00 P.M., Eastern time, on the Borrowing Date
requested by the Company in funds immediately available to the Agent. Such
borrowing will then be made available to the Company by the Agent crediting the
account of the Company on the books of such office with the aggregate of the
amounts made available to the Agent by the Banks and in like funds as received
by the Agent.
2.5 Conversion and Continuation Options.
-----------------------------------
(a) The Company may elect from time to time to convert LIBOR Loans to
Prime Rate Loans by giving the Agent at least two Business Days' prior
irrevocable notice of such election, provided that any such conversion of
--------
LIBOR Loans may only be made on and as of the last day of a LIBOR Interest
Period with respect thereto. The Company may elect from time to time to
convert Prime Rate Loans to LIBOR Loans by giving the Agent at least three
Business Days' prior irrevocable notice of such election, which notice
shall specify the length of the initial LIBOR Interest Period or LIBOR
Interest Periods therefor. Upon receipt of any such notice the Agent shall
promptly notify each Bank thereof. All or any part of outstanding LIBOR
Loans and Prime Rate Loans may be converted as provided herein, provided
--------
that no Loan may be converted into a LIBOR Loan when any
16
<PAGE>
Event of Default has occurred and is continuing or the Agent has or the
Required Banks have determined pursuant to subsection 2.13 that such a
conversion is not appropriate.
(b) The Company may elect to continue all or any portion of any LIBOR
Loan upon the expiration of the designated LIBOR Interest Period in respect
of such LIBOR Loan by giving the Agent at least three Business Days' prior
irrevocable notice of such election; provided that no LIBOR Loan may be
--------
continued as such when any Event of Default has occurred and is continuing
or the Agent has or the Required Banks have determined pursuant to
subsection 2.13 that such a continuation as a LIBOR Loan is not
appropriate. The Company shall specify in the aforesaid notice the amount
to be continued as a LIBOR Loan and the LIBOR Interest Period with respect
thereto in accordance with subsection 2.2.
2.6 Minimum Amounts and Maximum Number of Tranches. All borrowings,
----------------------------------------------
conversions and continuations of Loans hereunder and all selections of LIBOR
Interest Periods hereunder shall be in such amounts and be made pursuant to such
elections so that, after giving effect thereto, the aggregate principal amount
of the LIBOR Loans comprising each Tranche shall be equal to $100,000 or a whole
multiple thereof and so that there shall not be more than 5 Tranches at any one
time outstanding.
2.7 Revolving Credit Notes. The Revolving Credit Loans made by each Bank
----------------------
shall be evidenced by a promissory note of the Company, substantially in the
form of Exhibit A with appropriate insertions as to payee, date and principal
amount (a "Revolving Credit Note"), payable to the order of such Bank and in a
principal amount equal to the amount of the initial Revolving Credit Commitment
of such Bank. Each Bank is hereby authorized to record the date, Type and
amount of each Revolving Credit Loan made by such Bank, each continuation
thereof, each conversion of all or a portion thereof to another Type, the date
and amount of each payment or prepayment of principal thereof and, in the case
of LIBOR Loans, the length of each LIBOR Interest Period and LIBOR Rate with
respect thereto, on the schedule annexed to and constituting a part of its
Revolving Credit Note, and any such recordation shall constitute prima facie
----- -----
evidence of the accuracy of the information so recorded. Each Revolving Credit
Note shall (x) be dated the Closing Date, (y) be stated to mature on the
Termination Date and (z) provide for the payment of interest in accordance with
subsection 2.3.
2.8 Fees. The Company agrees to pay to the Agent for the account of each
----
Bank a commitment fee for the period from and including the date hereof to the
Termination Date, computed at the rate of 1/2 of 1% per annum on the average
daily amount of the Available Revolving Credit Commitment of such Bank during
the period for which payment is made, payable quarterly in arrears on the last
day of each March, June, September and December and on the Termination Date or
such earlier date as the Revolving Credit Commitments shall terminate as
provided herein, commencing on the first of such dates to occur after the date
hereof.
2.9 Termination or Reduction of Revolving Credit Commitments.
--------------------------------------------------------
(a) The Company shall have the right, upon not less than three
Business Days' notice to the Agent, to terminate the Commitments or, from
time to time, to reduce the amount of the Revolving Credit Commitments;
provided that no such termination or reduction shall be permitted if, after
--------
giving effect thereto and to any prepayments of the
17
<PAGE>
Revolving Credit Loans made on the effective date thereof, the aggregate
principal amount of the Revolving Credit Loans then outstanding, when added
to such Bank's Commitment Percentage of the L/C Obligations, would exceed
the Revolving Credit Commitments then in effect. Any such reduction shall
be in an amount not less than $250,000 and shall reduce permanently the
Revolving Credit Commitments then in effect.
(b) Simultaneously with any required prepayment of the Loans pursuant
to subsection 2.11 (a) or (b), the Commitments shall automatically be
reduced by an amount equal to the amount of such required prepayment.
Simultaneously with the occurrence of any event requiring prepayment
pursuant to subsection 2.11 (c), the Commitments shall automatically
terminate.
2.10 Optional Prepayments. The Company may at any time and from time to
--------------------
time, prepay the Revolving Credit Loans, in whole or in part, without premium or
penalty, upon at least three Business Days' irrevocable notice, in the case of
prepayment of any Revolving Credit Loans which are LIBOR Loans, or upon
irrevocable notice (which notice must be received by 1:00 P.M., Eastern time, on
or before the proposed date of prepayment), in the case of prepayments of any
Revolving Credit Loans which are Prime Rate Loans, to the Agent, specifying the
date and amount of prepayment and whether the prepayment is of LIBOR Loans,
Prime Rate Loans or a combination thereof, and, in each case if a combination
thereof, the amount allocable to each; provided that, if a LIBOR Loan is prepaid
--------
other than at the end of the LIBOR Interest Period applicable thereto, the
Company shall also pay any amounts required to be paid pursuant to subsection
2.20. Upon receipt of any such notice the Agent shall promptly give notice
thereof to each Bank. If any such notice is given by the Company, the amount
specified in such notice shall be due and payable on the date specified therein.
Partial prepayments of the Revolving Credit Loans shall be in an aggregate
principal amount of $100,000 or a whole multiple in excess thereof.
2.11 Mandatory Prepayments; Cash Collateralizations.
----------------------------------------------
(a) Immediately upon the occurrence of any public issuance or private
placement of any debt securities of the Company or any Subsidiary (other
than Indebtedness incurred pursuant to subsection 7.2(d) and other than
renewals or refinancings of the indebtedness evidenced by the Senior
Subordinated Notes or of Indebtedness of debt securities issued and
outstanding as of the date hereof so long as the outstanding principal
amount of such Indebtedness is not increased by such renewal or
refinancing) the Company shall make or cause to be made a prepayment on the
Loans equal to 100% of the Net Cash Proceeds received therefor.
(b) If, at any time or from time to time, the Company makes an "Asset
Disposition" (as defined under the Senior Subordinated Indenture), the
Company shall, within 210 days from the date of such Asset Disposition (or
such longer period permitted under the Senior Subordinated Indenture),
apply all of the Net Cash Proceeds from such Asset Disposition to either or
both of (in the sole discretion of the Company) (i) the prepayment of the
Loans or (ii) an investment in "fixed assets" (as defined under GAAP) in
the same or substantially similar line of business as defined in the
Indenture as the assets that were the subject of such Asset Disposition,
provided that, notwithstanding the foregoing, (A) up to $1,000,000 of the
Net Cash Proceeds received in any fiscal year from
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any such Asset Dispositions shall not be subject to this subsection 2.11(b)
and (B) no application of the Net Cash Proceeds resulting from any such
Asset Dispositions pursuant to this paragraph shall be necessary until the
aggregate amount of such Net Cash Proceeds (above the aforesaid $1,000,000)
equals or exceeds $5,000,000 at any time after the date hereof. Without
limiting the generality of the foregoing, no repayments by the Company of
outstanding Revolving Credit Loans shall be considered mandatory
prepayments under this subsection unless and until the Company shall have
designated such repayments as such.
(c) Amounts prepaid on account of Revolving Credit Loans pursuant to
this subsection 2.11 shall be allocated to the outstanding principal amount
of the Revolving Credit Loans, together with a corresponding permanent
reduction of the Revolving Credit Commitments; provided that, if the amount
--------
of such prepayment (the "Prepayment Amount") exceeds the then outstanding
Revolving Credit Loans or is made at a time when no Revolving Credit Loans
are outstanding, then the Company shall deposit such Prepayment Amount as
collateral for the then outstanding L/C Obligations in a cash collateral
account maintained by the Agent pursuant to its customary documentation for
such purposes, which deposit shall be made on the payment date specified in
the notice of prepayment.
2.12 Computation of Interest and Fees. Interest on the Loans, Letter of
--------------------------------
Credit commissions and commitment fees shall be calculated on the basis of a
360-day year for the actual days elapsed. The Agent shall as soon as practicable
notify the Company and the Banks of each determination of a LIBOR Rate. Any
change in the interest rate on a Loan resulting from a change in the Prime Rate
or the LIBOR Reserve Requirements shall become effective as of the opening of
business on the day on which such change becomes effective. The Agent shall as
soon as practicable notify the Company and the Banks of the effective date and
the amount of each such change in interest rate. Each determination of an
interest rate by the Agent pursuant to any provision of this Agreement shall be
conclusive and binding on the Company and the Banks in the absence of manifest
error.
2.13 Inability to Determine Interest Rate. If prior to the first day of
------------------------------------
any LIBOR Interest Period:
(a) the Agent shall have determined (which determination shall be
conclusive and binding upon the Company) that, by reason of circumstances
affecting the relevant market, adequate and reasonable means do not exist
for ascertaining the LIBOR Rate for such LIBOR Interest Period, or
(b) the Agent shall have received notice from the Required Banks that
the LIBOR Rate determined or to be determined for such LIBOR Interest
Period will not adequately and fairly reflect the cost to such Banks (as
conclusively certified by such Banks) of making or maintaining their
affected Loans during such LIBOR Interest Period,
the Agent shall give telecopy or telephonic notice thereof to the Company and
the Banks as soon as practicable thereafter. If such notice is given (x) any
LIBOR Loans requested to be made on the first day of such LIBOR Interest Period
shall be made as Prime Rate Loans, (y) any Loans that were to have been
converted on the first day of such LIBOR Interest Period to LIBOR Loans
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shall be converted to or continued as Prime Rate Loans and (z) any outstanding
LIBOR Loans shall be converted, on the first day of such LIBOR Interest Period,
to Prime Rate Loans. Until such notice has been withdrawn by the Agent, no
further LIBOR Loans shall be made or continued as such, nor shall the Company
have the right to convert Loans to LIBOR Loans.
2.14 Pro Rata Treatment and Payments.
-------------------------------
(a) Unless the Agent shall have been notified in writing by any Bank
prior to a Borrowing Date that such Bank will not make the amount that
would constitute its Commitment Percentage of the borrowing on such date
available to the Agent, the Agent may assume that such Bank (a "Reimbursing
Bank") has made such amount available to the Agent on such Borrowing Date,
and the Agent or any Bank may (but shall not be obligated), in reliance
upon such assumption, make available to the Company a corresponding amount.
If such amount is made available to the Agent on a date after such
Borrowing Date, the Reimbursing Bank shall pay to the Agent on demand an
amount equal to the product of (i) the daily average Federal Funds
Effective Rate during such period as quoted by the Agent, times (ii) the
amount of such Reimbursing Bank's Commitment Percentage of such borrowing,
times (iii) a fraction the numerator of which is the number of days that
elapse from and including such Borrowing Date to the date on which such
Reimbursing Bank's Commitment Percentage of such borrowing shall have
become immediately available to the Agent and the denominator of which is
360. A certificate of the Agent submitted to any Reimbursing Bank with
respect to any amounts owing under this subsection shall be conclusive in
the absence of manifest error. If a Reimbursing Bank's Commitment
Percentage of such borrowing is not in fact made available to the Agent by
such Reimbursing Bank within three Business Days of such Borrowing Date,
the Agent shall be entitled to recover such amount, with interest thereon
at the rate per annum applicable to Prime Rate Loans hereunder, on demand,
from such Reimbursing Bank or the Company in such order and manner as Agent
may determine in its discretion.
(b) Each borrowing of Revolving Credit Loans by the Company from the
Banks hereunder shall be made by the Banks pro rata in accordance with the
respective Commitment Percentage of such Banks. Each payment by the
Company on account of the principal of and interest on the Revolving Credit
Loans, any commitment fee hereunder and any reduction of the Commitments of
the Banks shall be payable to the Banks pro rata in accordance with the
respective Commitment Percentages of the Banks; provided that in the event
the Agent or any Bank pursuant to subsection 2.14(a) makes available to the
Company a Reimbursing Bank's Commitment Percentage of a requested
borrowing, the Agent or such Bank providing such funding shall be entitled
to receive all payments that would otherwise be payable to such Reimbursing
Bank until such time as the Agent or such Bank, as the case may be, shall
have received an amount equal to the amount so funded on behalf of such
Reimbursing Bank, together with interest thereon as provided in subsection
2.14(a). All payments (including prepayments) to be made by the Company
hereunder and under the Notes, whether on account of principal, interest,
fees or otherwise, shall be made without set off or counterclaim and shall
be made prior to 1:00 P.M., Eastern time, on the due date thereof to the
Agent, for the account of the Banks, at the Agent's office specified in
subsection 10.2, in Dollars and in immediately available. funds. The Agent
shall distribute such payments to the Banks promptly upon
20
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receipt in like funds as received. If any payment hereunder becomes due and
payable on a day other than a Business Day, such payment shall be extended
to the next succeeding Business Day, and, with respect to payments of
principal, interest thereon shall be payable at the then applicable rate
during such extension.
2.15 Extension of Termination Date. By the date which is one year and 60
-----------------------------
days prior to the initial Termination Date (and, if the initial Termination Date
has been extended pursuant to this subsection, by the date which is one year and
60 days prior to the Termination Date as so extended by the first Extension),
the Company may notify the Agent of its desire to extend the Termination Date
each such Extension consisting of one additional year (each, an "Extension"),
and its request that the Banks approve such Extension, whereupon the Agent shall
promptly notify the Banks of such request. The Agent shall notify the Company of
the decision of the Banks (to be made in the Banks' sole discretion) with
respect thereto not later than 30 days after the Agent's receipt of the request
for such Extension. If all of the Banks agree to the requested Extension, the
Termination Date shall be so extended.
2.16 Annual Clean-Down of Revolving Credit Loans. For a period of at least
-------------------------------------------
30 consecutive days to occur during each Clean-Down Period, the aggregate
principal amount of Revolving Credit Loans outstanding at all times during such
30-day period shall not exceed $5,000,000.
2.17 Illegality. Notwithstanding any other provision herein, if the
----------
adoption of or any change in any Requirement of Law or in the interpretation or
application thereof shall make it unlawful for any Bank to make or maintain
LIBOR Loans as contemplated by this Agreement, (a) the commitment of such Bank
hereunder to make LIBOR Loans, continue LIBOR Loans as such and convert Prime
Rate Loans to LIBOR Loans shall forthwith be cancelled and (b) such Bank's Loans
then outstanding as LIBOR Loans, if any, shall be converted automatically to
Prime Rate Loans on the respective last days of the then current LIBOR Interest
Periods with respect to such Loans or within such earlier period as required by
law. If any such conversion of a LIBOR Loan occurs on a day which is not the
last day of the then current LIBOR Interest Period with respect thereto, the
Company shall pay to such Bank such amounts, if any, as may be required pursuant
to subsection 2.20.
2.18 Requirements of Law.
-------------------
(a) If the adoption of or any change in any Requirement of Law or in
the interpretation or application thereof or compliance by any Bank with
any request or directive (whether having the force of law or not) from any
central bank or other Governmental Authority made subsequent to the date
hereof:
(i) shall subject any Bank to any tax of any kind whatsoever
with respect to this Agreement, any Note or any LIBOR Loan made by it,
or change the basis of taxation of payments to such Bank in respect
thereof (except for Non-Excluded Taxes covered by subsection 2.19 and
changes in the rate of tax on the overall net income of such Bank);
(ii) shall impose, modify or hold applicable any reserve,
special deposit, compulsory loan or similar requirement against assets
held by, deposits
21
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or other liabilities in or for the account of, advances, loans or
other extensions of credit by, or any other acquisition of funds by,
any office of such Bank which is not otherwise included in the
determination of the LIBOR Rate hereunder; or
(iii) shall impose on such Bank any other condition;
and the result of any of the foregoing is to increase the cost to such
Bank, by an amount which such Bank deems to be material, of making,
converting into, continuing or maintaining LIBOR Loans or to reduce any
amount receivable hereunder in respect thereof, then, in any such case, the
Company shall promptly pay such Bank, upon its demand, any additional
amounts necessary to compensate such Bank for such increased cost or
reduced amount receivable. If any Bank becomes entitled to claim any
additional amounts pursuant to this subsection, it shall promptly notify
the Company, through the Agent, of the event by reason of which it has
become so entitled. A certificate as to any additional amounts payable
pursuant to this subsection submitted by such Bank, through the Agent, to
the Company shall be conclusive in the absence of manifest error. This
covenant shall survive the termination of this Agreement and the payment of
the Notes and all other amounts payable hereunder.
(b) If any Bank shall have determined that the adoption of or any
change in any Requirement of Law regarding capital adequacy or in the
interpretation or application thereof or compliance by such Bank or any
corporation controlling such Bank with any request or directive regarding
capital adequacy (whether having the force of law or not) from any
Governmental Authority made subsequent to the date hereof does or shall
have the effect of reducing the rate of return on such Bank's or such
corporation's capital as a consequence of its obligations hereunder to a
level below that which such Bank or such corporation could have achieved
but for such change or compliance (taking into consideration such Bank's or
such corporation's policies with respect to capital adequacy) by an amount
deemed by such Bank to be material, then from time to time, after
submission by such Bank to the Company (with a copy to the Agent) of a
written request therefore, the Company shall pay to such Bank such
additional amount or amounts as will compensate such Bank for such
reduction.
2.19 Taxes.
-----
(a) All payments made by the Company under this Agreement and the
Notes shall be made free and clear of, and without deduction or withholding
for or on account of, any present or future income, stamp or other taxes,
levies, imposts, duties, charges, fees, deductions or withholdings, now or
hereafter imposed, levied, collected, withheld or assessed by any
Governmental Authority, excluding net income taxes and franchise taxes
(imposed in lieu of net income taxes) imposed on the Agent or any Bank as a
result of a present or former connection between the Agent or such Bank and
the jurisdiction of the Governmental Authority imposing such tax or any
political subdivision or taxing authority thereof or therein (other than
any such connection arising solely from the Agent or such Bank having
executed, delivered or performed its obligations or received a payment
under, or enforced, this Agreement or the Notes). If any such non-excluded
taxes, levies, imposts, duties, charges, fees deductions or withholdings
("Non-Excluded Taxes") are required to be withheld from any amounts payable
to the Agent or any Bank
22
<PAGE>
hereunder or under the Notes, the amounts so payable to the Agent or such
Bank shall be increased to the extent necessary to yield to the Agent or
such Bank (after payment of all Non-Excluded Taxes) interest or any such
other amounts payable hereunder at the rates or in the amounts specified in
this Agreement and the Notes, provided, however, that the Company shall not
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be required to increase any such amounts payable to any Bank that is not
organized under the laws of the United States of America or a state thereof
if such Bank fails to comply with the requirements of paragraph (b) of this
subsection. Whenever any Non-Excluded Taxes are payable by the Company, as
promptly as possible thereafter the Company shall send to the Agent for its
own account or for the account of such Bank, as the case may be, a
certified copy of an original official receipt received by the Company
showing payment thereof. If the Company fails to pay any Non-Excluded
Taxes when due to the appropriate taxing authority or fails to remit to the
Agent the required receipts or other required documentary evidence, the
Company shall indemnify the Agent and the Banks for any incremental taxes,
interest or penalties that may become payable by the Agent or any Bank as a
result of any such failure. The agreements in this subsection shall survive
the termination of this Agreement and the payment of the Notes and all
other amounts payable hereunder.
(b) Each Bank that is not incorporated under the laws of the United
States of America or a state thereof shall:
(i) deliver to the Company and the Agent (A) two duly completed
copies of United States Internal Revenue Service Form 1001 or 4224, or
successor applicable form, as the case may be, and (B) an Internal
Revenue Service Form W-8 or W-9, or successor applicable form, as the
case may be;
(ii) deliver to the Company and the Agent two further copies of
any such form or certification on or before the date that any such
form or certification expires or becomes obsolete and after the
occurrence of any event requiring a change in the most recent form
previously delivered by it to the Company; and
(iii) obtain such extensions of time for filing and complete
such forms or certifications as may reasonably be requested by the
Company or the Agent;
unless in any such case an event (including, without limitation, any change in
treaty, law or regulation) has occurred prior to the date on which any such
delivery would otherwise be required which renders all such forms inapplicable
or which would prevent such Bank from duly completing and delivering any such
form with respect to it and such Bank so advises the Company and the Agent. Such
Bank shall certify (i) in the case of a Form 1001 or 4224, that it is entitled
to receive payments under this Agreement without deduction or withholding of any
United States federal income taxes and (ii) in the case of a Form W-8 or W-9,
that it is entitled to an exemption from United States backup withholding tax.
Each Person that shall become a Bank or a Participant pursuant to subsection
10.6 shall, upon the effectiveness of the related transfer, be required to
provide all of the forms and statements required pursuant to this subsection,
provided that in the case of a Participant such Participant shall furnish all
such required forms and statements to the Bank from which the related
participation shall have been purchased.
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2.20 Indemnity. The Company agrees to indemnify each Bank and to hold each
---------
Bank harmless from any loss or expense which such Bank may sustain or incur as a
consequence of (a) default by the Company in making a borrowing of, conversion
into or continuation of LIBOR Loans after the Company has given a notice
requesting the same in accordance with the provisions of this Agreement, (b)
default by the Company in making any prepayment after the Company has given a
notice thereof in accordance with the provisions of this Agreement or (c) the
making of a prepayment of LIBOR Loans on a day which is not the last day of an
LIBOR Interest Period with respect thereto. Such indemnification may include,
without limitation, any loss or expense incurred by reason of the liquidation or
reemployment of deposits or other funds obtained to fund or maintain a LIBOR
Loan during any LIBOR Interest Period, which any Bank may incur as a consequence
of such failure to borrow, convert or continue, as the case may be. A
certificate by Agent as to the amount of such loss, expense or increased costs
shall, when submitted to the Company, be conclusive, in the absence of manifest
error, unless the Company shall have provided the Agent with written notice of
the Company's objection to all or any portion of such certificate not later than
ten (10) days after the date on which such certificate is submitted to the
Company. Any such LIBOR Loan shall not be deemed paid or satisfied until all
such additional amounts are paid. Agent agrees to provide the Company with such
information as the Company may reasonably request with respect to the
calculation of any such losses or expenses. The covenant contained in this
subsection 2.20 shall survive the termination of this Agreement and the payment
of the Notes and all other amounts payable hereunder.
SECTION 3. LETTERS OF CREDIT
3.1 L/C Commitment.
--------------
(a) Prior to the date hereof, Society National Bank issued various
letters of credit on behalf of the Company. Subject to the terms and
conditions hereof, the Issuing Bank, in reliance on the agreements of the
other Banks set forth in subsection 3.5(a), agrees to issue standby letters
of credit for the account of the Company and its Designated Subsidiaries on
any Business Day on or after the Initial Funding Date until the date which
is five Business Days prior to the end of the Commitment Period in such
form as may be approved from time to time by the Issuing Bank (all such
letters of credit outstanding on the date hereof and all letters of credit
to be issued hereunder, together with all extensions, renewals and
replacements thereof, are herein collectively referred to as the "Letters
of Credit"); provided that the Issuing Bank shall have no obligation to
--------
issue any Letter of Credit if at the time of such issuance a Default exists
or an Event of Default has occurred and is continuing or if, after giving
effect to such issuance, (i) the L/C Obligations would exceed the L/C
Commitment or (ii) the Available Revolving Credit Commitment would be less
than zero. Each Letter of Credit shall (i) be denominated in Dollars, (ii)
expire no later than the Termination Date and (iii) expire no later than a
date one year after its issuance. Each Letter of Credit (except for
previously issued Letters of Credit) shall be issued as credit support for
(x) insurance and vendor financial obligations, (y) performance bonds
issued on behalf of the Company or any Designated Subsidiary in its
ordinary course of business or (z) other similar financial support for
obligations of the Company.
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(b) Each Letter of Credit shall be subject to the Uniform Customs and,
to the extent not inconsistent therewith, the laws of the State of the
Issuing Bank's principal place of business.
(c) The Issuing Bank shall not at any time be obligated to issue any
Letter of Credit hereunder if such issuance would conflict with, or cause
the Issuing Bank or any L/C Participant to exceed any limits imposed by,
any applicable Requirement of Law.
3.2 Procedure for Issuance of Letters of Credit. The Company may from
-------------------------------------------
time to time request that the Issuing Bank issue a Letter of Credit by
delivering to the Issuing Bank at its address for notices specified herein an
Application therefor, completed to the satisfaction of the Issuing Bank, and
such other certificates, documents and other papers and information as the
Issuing Bank may request. Upon receipt of any Application, the Issuing Bank will
process such Application and the certificates, documents and other papers and
information delivered to it in connection therewith in accordance with its
customary procedures and shall promptly issue the Letter of Credit requested
thereby (but in no event shall the Issuing Bank be required to issue any Letter
of Credit earlier than three Business Days after its receipt of the Application
therefor and all such other certificates, documents and other papers and
information relating thereto) by issuing the original of such Letter of Credit
to the beneficiary thereof or as otherwise may be agreed by the Issuing Bank and
the Company. The Issuing Bank shall furnish a copy of such Letter of Credit to
the Company and the other Banks promptly following the issuance thereof.
3.3 Fees, Commissions and Other Charges.
-----------------------------------
(a) The Company shall pay to the Agent a letter of credit facility
fee (the "L/C Fee"), upon issuance of a Letter of Credit, in an amount
equal to the product of (i) the face amount of such Letter of Credit, times
(ii) the applicable Letter of Credit Rate, times (iii) the term of such
Letter of Credit, expressed as a fraction equal to the number of days of
such term divided by three hundred sixty (360). The applicable Letter of
Credit Rate shall be determined based upon the calculations submitted to
the Banks pursuant to subsection 6.2(b) and shall be effective as of the
first day of the fiscal quarter next following the date such calculations
are submitted to the Banks, provided that such calculations shall be
subject to the review and approval of the Banks. Any change in the
applicable Letter of Credit Rate as a consequence of the Bank's review of
the aforesaid calculation after the effective date of such Letter of Credit
Rate shall be retroactively applied to the first day such Letter of Credit
Rate became effective. In the event that the Letter of Credit Rate can not
be determined at any time because the Company's financial statements for
the immediately preceding fiscal quarter are not available at such time,
the Letter of Credit Rate shall be presumed to be the same as the Letter of
Credit Rate as of the last FQED for which the Company's financial
statements were available. Any change in the L/C Fee as a consequence of a
change in the Letter of Credit Rate shall be effective as of the date of
such change in the Letter of Credit Rate. Any increase or reduction in the
L/C Fee as a consequence of an increase or reduction in the Letter of
Credit Rate, as the case may be, shall be credited against or deducted from
the next L/C Fee, as the case may be. In the event any Letter of Credit is
terminated or the available credit thereunder is permanently reduced prior
to the stated expiry date thereof, the Company shall be entitled to a
rebate of that portion of the L/C Fee paid with respect to such Letter of
Credit which is allocable pro rata to the portion of the Letter of Credit
that
25
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has been terminated or reduced, as the case may be, as determined by the
Issuing Bank. Each L/C Fee payable under this subsection 3.3 shall be
shared ratably among the Banks in accordance with their respective
Commitment Percentages.
(b) In addition to the L/C Fees, the Company shall pay or reimburse
the Issuing Bank for such normal and customary costs and expenses as are
incurred or charged by the Issuing Bank in issuing, processing, effecting
payment under, amending or otherwise administering any Letter of Credit.
(c) The Agent shall, promptly following its receipt thereof,
distribute to the Issuing Bank and the L/C Participants all fees and
commissions received by the Agent for their respective accounts pursuant to
this subsection.
3.4 Reimbursement Obligation of the Company. The Company agrees to
---------------------------------------
reimburse the Issuing Bank on each date on which the Issuing Bank notifies the
Company of the date and amount of a draft presented under any Letter of Credit
and paid by the Issuing Bank for the amount of (a) such draft so paid and (b)
any taxes (other than income taxes), fees, charges or other costs or expenses
incurred by the Issuing Bank in connection with such payment. Each such payment
shall be made to the Issuing Bank at its address for notices specified herein in
Dollars and in immediately available funds. Interest shall be payable on any and
all amounts remaining unpaid by the Company under this subsection from the date
such amounts become payable (whether at stated maturity, by acceleration or
otherwise) until payment in full at the rate which would be payable on any
outstanding Loans which were then overdue under subsection 2.3. Each drawing
under any Letter of Credit shall constitute a request by the Company to the
Agent for the borrowing pursuant to subsection 2.1 of Revolving Credit Loans in
the amount of such drawing and any reimbursement made by an L/C Participant
pursuant to subsection 3.5 shall constitute a Revolving Credit Loan pursuant to
subsection 2.3.
3.5 L/C Draws and Reimbursements.
----------------------------
(a) Each L/C Participant unconditionally and irrevocably agrees with
the Issuing Bank that, if a draft is paid under any Letter of Credit for
which the Issuing Bank is not reimbursed in full by the Company in
accordance with the terms of this Agreement, such L/C Participant shall pay
to the Issuing Bank upon demand at the Issuing Bank's address for notices
specified herein an amount equal to such L/C Participant's Commitment
Percentage of the amount of such draft, or any part thereof, which is not
so reimbursed through participation or otherwise. In furtherance of the
foregoing, the Issuing Bank irrevocably agrees to grant and hereby grants
to each L/C Participant, and, to induce the Issuing Bank to issue Letters
of Credit hereunder, each L/C Participant irrevocably agrees to accept and
purchase and hereby accepts and purchases from the Issuing Bank, on the
terms and conditions hereinafter stated, for such L/C Participant's own
account and risk an undivided interest equal to such L/C Participant's
Commitment Percentage in the Issuing Bank's obligations and rights under
each Letter of Credit issued hereunder and the amount of each draft paid by
the Issuing Bank thereunder.
(b) If any amount required to be paid by any L/C Participant to the
Issuing Bank pursuant to subsection 3.5(a) in respect of any unreimbursed
portion of any payment made by the Issuing Bank under any Letter of Credit
is paid to the Issuing Bank
26
<PAGE>
within three Business Days after the date such payment is due, such L/C
Participant shall pay to the Issuing Bank on demand an amount equal to the
product of (I) such amount, times (2) the daily average Federal Funds
-----
Effective Rate, as quoted by the Issuing Bank, during the period from and
including the date such payment is required to the date on which such
payment is immediately available to the Issuing Bank, times (3) a fraction
-----
the numerator of which is the number of days that elapse during such period
and the denominator of which is 360. If any such amount required to be paid
by any L/C Participant pursuant to subsection 3.4(a) is not in fact made
available to the Issuing Bank by such L/C Participant within three Business
Days after the date such payment is due, the Issuing Bank shall be entitled
to recover from such L/C Participant, on demand, such amount with interest
thereon calculated from such due date at the rate per annum equal to the
Prime Rate. A certificate of the Issuing Bank submitted to any L/C
Participant with respect to any amounts owing under this subsection shall
be conclusive in the absence of manifest error.
(c) Whenever, at any time after the Issuing Bank has made payment
under any Letter of Credit and has received from any L/C Participant its
share of such payment in accordance with subsection 3.5(a), the Issuing
Bank receives any payment related to such Letter of Credit (whether
directly from the Company or otherwise, including proceeds of collateral
applied thereto by the Issuing Bank), or any payment of interest on account
thereof, the Issuing Bank will distribute to such L/C Participant its share
thereof; provided, however, that in the event that any such payment
-------- -------
received by the Issuing Bank shall be required to be returned by the
Issuing Bank, such L/C Participant shall return to the Issuing Bank the
portion thereof previously distributed by the Issuing Bank to it.
3.6 Obligations Absolute. The Company's obligations under this Section 3
--------------------
shall be absolute and unconditional under any and all circumstances and
irrespective of any set-off, counterclaim or defense to payment which the
Company may have or have had against the Issuing Bank or any beneficiary of a
Letter of Credit. The Company also agrees with the Issuing Bank that the Issuing
Bank shall not be responsible for, and the Company's Reimbursement Obligations
under subsection 3.4 shall not be affected by, among other things, the validity
or genuineness of documents or of any endorsements thereon, even though such
documents shall in fact prove to be invalid, fraudulent or forged, or any
dispute between or among the Company and any beneficiary of any Letter of Credit
or any other party to which such Letter of Credit may be transferred or any
claims whatsoever of the Company against any beneficiary of such Letter of
Credit or any such transferee. The Issuing Bank shall not be liable for any
error, omission, interruption or delay in transmission, dispatch or delivery of
any message or advice, however transmitted, in connection with any Letter of
Credit, except for errors or omissions caused by the Issuing Bank's gross
negligence or willful misconduct. The Company agrees that any action taken or
omitted by the Issuing Bank under or in connection with any Letter of Credit or
the related drafts or documents, if done in the absence of gross negligence or
willful misconduct and in accordance with the standards of care specified in the
Uniform Commercial Code of the State of Connecticut, shall be binding on the
Company and shall not result in any liability of the Issuing Bank to the
Company.
3.7 Letter of Credit Payments. If any draft shall be presented for
-------------------------
payment under any Letter of Credit, the Issuing Bank shall promptly notify the
Company and the Banks of the date and amount thereof. The responsibility of the
Issuing Bank to the Company in connection with
27
<PAGE>
any draft presented for payment under any Letter of Credit shall, in addition to
any payment obligation expressly provided for in such Letter of Credit, be
limited to determining that the documents (including each draft) delivered under
such Letter of Credit in connection with such presentment are in conformity with
such Letter of Credit.
3.8 Application. To the extent that any provision of any Application
-----------
related to any Letter of Credit is inconsistent with the provisions of this
Section 3, the provisions of this Section 3 shall apply.
SECTION 4. REPRESENTATIONS AND WARRANTIES
To induce the Banks to enter into this Agreement and to make the Loans and
issue or participate in the Letters of Credit the Company hereby represents and
warrants to the Agent and each Bank that:
4.1 Financial Condition.
-------------------
(a) The consolidated balance sheet of the Company and its
consolidated Subsidiaries as at January 30, 1993 and the related
consolidated statements of operations and retained earnings and of cash
flows for the fiscal year ended on such date, reported on by Arthur
Andersen & Co., copies of which have heretofore been furnished to each
Bank, are complete and correct and present fairly the consolidated
financial condition of the Company and its consolidated Subsidiaries as at
such date, and the consolidated results of their operations and their
consolidated cash flows for the fiscal year then ended. The unaudited
consolidated balance sheet of the Company and its consolidated Subsidiaries
as at December 25, 1993 and the related unaudited consolidated statements
of operations and retained earnings for the eleven-month period ended on
such date, certified by a Responsible Officer, copies of which have
heretofore been furnished to each Bank, are complete and correct and
present fairly the consolidated financial condition of the Company and its
consolidated Subsidiaries as at such date, and the consolidated results of
their operations for the eleven-month period then ended (subject to normal
year-end audit adjustments). All such financial statements, including the
related schedules and notes thereto, have been prepared in accordance with
GAAP applied consistently throughout the periods involved (except as
approved by such accountants or Responsible Officer, as the case may be,
and as disclosed therein).
(b) Except as set forth on Schedule II, neither the Company nor any
of its consolidated Subsidiaries had, at the date of the most recent
balance sheet referred to in subsection 4.1(a), any material Guarantee
Obligation, contingent liability or liability for taxes, or any long-term
lease or unusual forward or long-term commitment, including, without
limitation, any interest rate or foreign currency swap or exchange
transaction, which is not reflected in the financial statements referred to
in subsection 4.1(a) or in the notes thereto.
(c) Except as set forth on Schedule III, during the period from
January 30, 1993 to and including the date hereof there has been no sale,
transfer or other disposition by the Company or any of its consolidated
Subsidiaries of any material part of its business or property and no
purchase or other acquisition of any business or
28
<PAGE>
property (including any capital stock of any other Person) material in
relation to the consolidated financial condition of the Company and its
consolidated Subsidiaries at January 30, 1993.
4.2 No Change. Since January 30, 1993 (a) there has been no development
---------
or event nor any prospective development or event which has had or could have a
Material Adverse Effect and (b) except as set forth on Schedule IV or as
permitted by this Agreement, no dividends or other distributions have been
declared, paid or made upon the Capital Stock of the Company or any of its
Subsidiaries nor has any of the Capital Stock of the Company been redeemed,
retired, purchased or otherwise acquired for value by the Company or any of its
Subsidiaries.
4.3 Corporate Existence; Compliance with Law. Each of the Company and
----------------------------------------
each Designated Subsidiary (a) is duly organized, validly existing and in good
standing under the laws of the jurisdiction of its organization, (b) has the
corporate power and authority, and the legal right, to own and operate its
property, to lease the property it operates as lessee and to conduct the
business in which it is currently engaged in each jurisdiction where the failure
to have such power, authority or right would have a Material Adverse Effect, (c)
is duly qualified as a foreign corporation and in good standing under the laws
of each jurisdiction where its ownership, lease or operation of property or the
conduct of its business requires such qualification except where the failure so
to qualify could not have a Material Adverse Effect and (d) is in compliance
with all Requirements of Law except to the extent that the failure to comply
therewith could not, in the aggregate, have a Material Adverse Effect.
4.4 Corporate Power; Authorization; Enforceable Obligations. The Company
-------------------------------------------------------
has the corporate power and authority, and the legal right, to make, deliver and
perform this Agreement, the Notes, each Application and the other Loan Documents
to which it is a party, to borrow hereunder and to grant the Liens pursuant to
the Security Documents to which it is a party and has taken all necessary
corporate action to authorize the borrowings on the terms and conditions of this
Agreement and the Notes, the grant of the Liens pursuant to the Security
Documents to which it is a party and the execution, delivery and performance of
this Agreement, the Notes, each Application and each other Loan Document to
which it is a party. No consent or authorization of, filing with or other act by
or in respect of, any Governmental Authority or any other Person is required in
connection with the borrowings hereunder, the grant of the Liens pursuant to the
Security Documents or the execution, delivery, performance, validity or
enforceability of this Agreement, the Notes, each Application or any other Loan
Document except that prior authorization of the SBA is required for any exercise
of remedies under the Subsidiary Pledge Agreement with respect to the FinOp
common stock pledged thereunder and under the Company Pledge Agreement with
respect to the common stock of CONNA Corporation pledged thereunder. This
Agreement and each other Loan Document to which the Company is a party (except
the Notes) has been, and each Note will be, duly executed and delivered on
behalf of the Company. This Agreement and each other Loan Document to which the
Company is a party (except the Notes) constitutes, and each Note when executed
and delivered will constitute, a legal, valid and binding obligation of the
Company enforceable against the Company in accordance with its terms, except as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the enforcement of
creditors' rights generally and by general equitable principles (whether
enforcement is sought by proceedings in equity or at law).
29
<PAGE>
4.5 No Legal Bar. The execution, delivery and performance of this
------------
Agreement, the Notes, each Application and each other Loan Document, the grant
of the Liens pursuant to the Security Documents, the borrowings hereunder and
the use of the proceeds thereof will not violate any Requirement of Law or
Contractual Obligation of the Company or of any Designated Subsidiary and will
not result in, or require, the creation or imposition of any Lien on any of its
or their respective properties or revenues pursuant to any such Requirement of
Law or Contractual Obligation.
4.6 No Material Litigation. No litigation, investigation or proceeding of
----------------------
or before any arbitrator or Governmental Authority is pending or, to the
knowledge of the Company, threatened by or against the Company or any Designated
Subsidiary or against any of its or their respective properties or revenues (a)
with respect to this Agreement, the Notes, any Application or any other Loan
Document or any of the transactions contemplated hereby or thereby or (b) which
could have a Material Adverse Effect, except with respect to matters described
on Schedule VII.
4.7 No Default. Neither the Company nor any Designated Subsidiary is in
----------
default under or with respect to any of its Contractual Obligations or Capital
Stock in any respect which could have a Material Adverse Effect. No Default or
Event of Default has occurred and is continuing.
4.8 Ownership of Property; Liens. Each of the Company and each Designated
----------------------------
Subsidiary has good record and marketable title in fee simple to, or a valid
leasehold interest in, all its real property, and good title to all its other
property except for any defect in title thereto or leasehold interest therein
which could not in the aggregate have a Material Adverse Effect, and none of the
property owned or leased by the Company or any Designated Subsidiary is subject
to any Lien except as permitted by subsection 7.3 or which could in the
aggregate not have a Material Adverse Effect.
4.9 Intellectual Property. The Company and each Designated Subsidiary
---------------------
owns, or is licensed to use, all trademarks, tradenames, copyrights, technology,
know-how and processes necessary for the conduct of its business as currently
conducted except for those the failure to own or license which could not have a
Material Adverse Effect (the "Intellectual Property"). No claim has been
asserted and is pending by any Person challenging or questioning the use of any
such Intellectual Property or the validity or effectiveness of any such
Intellectual Property, nor does the Company know of any valid basis for any such
claim which could or might have a Material Adverse Effect. The use of such
Intellectual Property by the Company and each Designated Subsidiary does not
infringe on the rights of any Person, except for such claims and infringements
that, in the aggregate, do not have a Material Adverse Effect.
4.10 No Burdensome Restrictions. No Requirement of Law or Contractual
--------------------------
Obligation of the Company or any Designated Subsidiary has a Material Adverse
Effect.
4.11 Taxes. Each of the Company and its Subsidiaries has filed or caused
-----
to be filed all tax returns which, to the knowledge of the Company, are required
to be filed (the "Tax Returns") and has paid all taxes shown to be due and
payable on said returns or on any assessments made against it or any of its
property and all other taxes, fees or other charges imposed on it or any of its
property by any Governmental Authority (other than any the amount or validity of
which are currently being contested in good faith by appropriate proceedings and
30
<PAGE>
with respect to which reserves in conformity with GAAP have been provided on the
books of the Company or its Subsidiaries, as the case may be) where the failure
to so file such Tax Returns or to pay such taxes could or might have a Material
Adverse Effect; no tax Lien has been filed, and, to the knowledge of the
Company, no claim is being asserted, with respect to any such tax, fee or other
charge. Schedule XII sets forth a complete and correct list of all audits
concerning any Tax Return that are being conducted by any Governmental Authority
or are otherwise in progress on the Closing Date.
4.12 Federal Regulations. No part of the proceeds of any Loans will be
-------------------
used for "purchasing" or "carrying" any "margin stock" within the respective
meanings of each of the quoted terms under Regulation U of the Board of
Governors of the Federal Reserve System as now and from time to time hereafter
in effect or for any purpose which violates the provisions of the Regulations of
such Board of Governors. If requested by any Bank or the Agent, the Company will
furnish to the Agent and each Bank a statement to the foregoing effect in
conformity with the requirements of FR Form U-1 referred to in said Regulation
U.
4.13 ERISA. No Reportable Event has occurred during the five-year period
-----
prior to the date on which this representation is made or deemed made with
respect to any Plan, and each Plan has complied in all material respects with
the applicable provisions of ERISA and the Code. The present value of all
accrued benefits under each Single Employer Plan maintained by the Company or
any Commonly Controlled Entity (based on those assumptions used to fund the
Plans) did not, as of the last annual valuation date prior to the date on which
this representation is made or deemed made, exceed the value of the assets of
such Plan allocable to such accrued benefits. Neither the Company nor any
Commonly Controlled Entity has had a complete or partial withdrawal from any
Multiemployer Plan except as set forth on Part A of Schedule V, and neither the
Company nor any Commonly Controlled Entity would become subject to any liability
under ERISA if the Company or any such Commonly Controlled Entity were to
withdraw completely from all Multiemployer Plans as of the valuation date most
closely preceding the date on which this representation is made or deemed made,
except as set forth on Part B of Schedule V. No such Multiemployer Plan is in
Reorganization or Insolvent. The present value (determined using actuarial and
other assumptions which are reasonable in respect of the benefits provided and
the employees participating) of the liability of the Company and each Commonly
Controlled Entity for post-retirement benefits to be provided to their current
and former employees under Plans which are welfare benefit plans (as defined in
Section 3(1) of ERISA) does not, in the aggregate, exceed the assets under all
such Plans allocable to such benefits.
4.14 Investment Company Act; Other Regulations. Neither the Company nor
-----------------------------------------
any Subsidiary is an "investment company", or a company "controlled" by an
"investment company", within the meaning of the Investment Company Act of 1940,
as amended. Neither the Company nor any Designated Subsidiary is subject to
regulation under any Federal or State statute or regulation which limits its
ability to incur Indebtedness.
4.15 Subsidiaries. All the Subsidiaries of the Company (other than the
------------
Designated Subsidiaries) are listed on Part B of Schedule VI except for those
corporations or other entities not listed which are not known to the Company on
the Closing Date due to the Company's or a Subsidiary's acquisition of certain
businesses prior to the Closing Date, which corporations or other entities not
so listed are immaterial to the business, operations, property, condition
(financial or otherwise) of the Company or any Designated Subsidiary. The
assets owned by the
31
<PAGE>
Designated Subsidiaries on the Closing Date represent in the aggregate at least
90% of the total assets of the Company and its Subsidiaries as shown on the
audited consolidated balance sheet as at January 30, 1993 referred to in
subsection 4.1(a). The revenues of the Designated Subsidiaries represent in the
aggregate at least 90% of the revenues of the Company and its Subsidiaries as
shown on the audited consolidated statement of operations and retained earnings
for the period ended January 30, 1993 referred to in subsection 4.1(a).
4.16 Purpose of Loans. The proceeds of the Loans shall be used by the
----------------
Company for the working capital needs of the Company, including, without
limitation, financing any Reimbursement Obligations and financing any other
general corporate purposes of the Company or any Designated Subsidiary in the
ordinary course of the Company's or such Subsidiary's business.
4.17 Environmental Matters. To the best knowledge of the Company, each of
---------------------
the representations and warranties set forth in paragraphs (a) through (e) of
this subsection is true and correct with respect to each parcel of real property
heretofore or now owned or operated by the Company or any Subsidiary (the
"Properties"), except as set forth on Schedule VII and except to the extent that
the facts and circumstances giving rise to any such failure to be so true and
correct could not have a Material Adverse Effect:
(a) The Properties do not contain, and have not previously contained,
in, on, or under, including, without limitation, the soil and groundwater
thereunder, any Hazardous Materials.
(b) The Properties and all operations and facilities at the
Properties are in compliance with all Environmental Laws, and there is no
Hazardous Materials contamination or violation of any Environmental Law
which could interfere with the continued operation of any of the Properties
or impair the fair saleable value of any thereof.
(c) Neither the Company nor any of its Subsidiaries has received any
complaint, notice of violation, alleged violation, investigation or
advisory action or of potential liability or of potential responsibility
regarding environmental protection matters or permit compliance with regard
to the Properties, nor is the Company aware that any Governmental Authority
is contemplating delivering to the Company or any of its Subsidiaries any
such notice.
(d) Hazardous Materials have not been generated, treated, stored,
disposed of, at, on or under any of the Properties, nor have any Hazardous
Materials been transferred from the Properties to any other location.
(e) There are no governmental, administrative or judicial proceedings
pending or contemplated under any Environmental Laws to which the Company
or any of its Subsidiaries is or will be named as a party with respect to
the Properties, nor are there any consent decrees or other decrees, consent
orders, administrative orders or other orders, or other administrative or
judicial requirements outstanding under any Environmental Law with respect
to any of the Properties.
32
<PAGE>
4.18 Security Documents.
------------------
(a) The provisions of each Pledge Agreement are effective to create
in favor of the Agent for the ratable benefit of the Banks a legal, valid
and enforceable security interest in all right, title and interest of the
pledgor in the Collateral as described therein. Each Pledge Agreement
constitutes a fully perfected first lien on, and security interest in, all
right, title and interest of the pledgor in the Collateral described
therein.
(b) The provisions of the Company Security Agreement are effective to
create in favor of the Agent for the ratable benefit of the Banks a legal,
valid and enforceable security interest in all right, title and interest of
the Company in the Collateral as described therein. The Company Security
Agreement constitutes a fully perfected first lien on, and security
interest in, all right, title and interest of the Company in the Collateral
described therein, and no Uniform Commercial Code financing statements have
been filed by any other Person with respect to such Collateral other than
as may be filed in connection with this Agreement.
4.19 Senior Debt. The extensions of credit under this Agreement, the Notes
-----------
and each Application will be, and are hereby designated as, Senior Debt under
and as defined in each of the Subordinated Indenture and the Senior Subordinated
Indenture.
SECTION 5. CONDITIONS PRECEDENT
5.1 Conditions to Initial Extension of Credit. The agreement of each Bank
-----------------------------------------
to make the initial extension of credit requested to be made by it is subject to
the satisfaction of the following conditions precedent:
(a) Agreement, Notes. The Agent shall have received (i) with a
----------------
counterpart for each Bank, this Agreement, executed and delivered by a duly
authorized officer of the Company, and (ii) for the account of each Bank, a
Revolving Credit Note conforming to the requirements hereof and executed by
a duly authorized officer of the Company.
(b) Other Loan Documents. The Agent shall have received, with a
--------------------
counterpart for each Bank, (i) the Subsidiary Guarantee, executed and
delivered by a duly authorized officer of each Designated Subsidiary, (ii)
the Company Pledge Agreement, executed and delivered by a duly authorized
officer of the Company, (iii) the Subsidiary Pledge Agreement, executed and
delivered by a duly authorized officer of each Designated Subsidiary and
(iv) the Company Security Agreement, executed and delivered by a duly
authorized officer of the Company.
(c) Senior Subordinated Notes. The Agent shall have received, with a
-------------------------
copy for each Bank, a certificate, dated on or before the Initial Funding
Date, executed by a duly authorized officer of the Company certifying that,
on or before the Initial Funding Date, the Company shall have received at
least $75,000,000 in cash (less deduction of all underwriting discounts and
commissions and any costs, fees and expenses related thereto) from the
issuance of the Senior Subordinated Notes on terms and conditions set forth
in the Registration Statement with respect to the Senior Subordinated
Notes.
33
<PAGE>
(d) Redemption of Subordinated Debentures. The Agent shall have
-------------------------------------
received, with a copy for each Bank, a certificate, dated on or before the
Initial Funding Date, executed by a duly authorized officer of the Company
certifying that, on or before the Initial Funding Date, the Company shall
have (i) initiated the process of redemption of the Subordinated Debentures
and (ii) indefeasibly deposited in an escrow or trust account funds in an
amount sufficient to effect such redemption of the Subordinated Debentures,
each in accordance with the provisions of the Subordinated Indenture.
(e) Satisfaction of Existing Credit Agreement Indebtedness. The
------------------------------------------------------
Agent shall have received, with a copy for each Bank, a certificate, dated
on or before the Initial Funding Date, executed by a duly authorized
officer of the Company certifying that, on or before the Initial Funding
Date, the Company shall have paid in full all indebtedness of the Company
outstanding under that certain Credit Agreement with PNC Bank, Kentucky,
Inc., Chemical Bank and Fleet.
(f) Pledged Stock; Stock Powers; UCC Filings.
----------------------------------------
(i) The Agent shall have received (A) certificates representing
the stock pledged pursuant to each Pledge Agreement, together with an
undated stock power executed in blank for each such certificate, and
(B) the Acknowledgments and Consents attached as exhibits to each
Pledge Agreement, in each case executed and delivered by a duly
authorized officer of the relevant issuer.
(ii) All documents (including, without limitation, financing
statements) required to be filed in respect of the Company Security
Agreement in order to create in favor of the Agent for the ratable
benefit of the Banks a perfected, first-priority security interest in
the Collateral described therein with respect to which a security
interest may be perfected by filing under the Uniform Commercial Code
shall have been properly filed in each office listed on Schedule VIII.
The Agent shall have received acknowledgement copies of all such
filings (or, in lieu thereof, other evidence satisfactory to it that
all such filings have been made); and the Agent shall have received
evidence that all necessary filing fees and all taxes or other
expenses related to such filings have been paid in full.
(g) Corporate Proceedings. The Agent shall have received, with a
---------------------
counterpart for each Bank, a copy of the resolutions, in form and substance
satisfactory to the Agent, of the Board of Directors of the Company and
each Designated Subsidiary authorizing (i) the execution, delivery and
performance of the Loan Documents to which it is a party, (ii) with respect
to the Company, the borrowings contemplated hereunder, (iii) with respect
to the Company, the grant of the Liens pursuant to the Security Documents
to which it is a party, and (iv) with respect to each Designated
Subsidiary, the grant of the Liens pursuant to the Subsidiary Pledge
Agreement, in each case certified by the Secretary or an Assistant
Secretary of the Company or such Designated Subsidiary at the Closing Date,
which certificate shall state that the resolutions thereby certified have
not been amended, modified, revoked or rescinded and shall be in form and
substance satisfactory to the Agent.
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<PAGE>
(h) Incumbency Certificates. The Agent shall have received a
-----------------------
certificate dated the Closing Date, of the Secretary or an Assistant
Secretary of the Company and each Designated Subsidiary as to the
incumbency and signature of the officer or officers signing the Loan
Documents to which such Person is a party, together with evidence of the
incumbency of such Secretary or Assistant Secretary.
(i) Corporate Documents. The Agent shall have received, with a
-------------------
counterpart for each Bank, true and complete copies of the certificate of
incorporation and by-laws of the Company and each Designated Subsidiary,
certified at the Closing Date as complete and correct copies thereof, by
the Secretary or an Assistant Secretary of the Company or such Designated
Subsidiary.
(j) Good Standing Certificates. The Agent shall have received, with a
--------------------------
copy for each Bank, copies of certificates dated as of a recent date from
the Secretary of State or other appropriate authority of such jurisdiction,
evidencing the good standing of the Company and each Designated Subsidiary.
(k) Financial Statements. The Agent shall have received, with copies
--------------------
for each Bank, copies of the financial statements referred to in subsection
4.1 and all other documents requested by the Agent in connection with its
completion of a testing and review of the assets and liabilities of the
Company and its Subsidiaries.
(l) Closing Certificate. The Agent shall have received, with a
-------------------
counterpart for each Bank, a Closing Certificate, substantially in the form
of Exhibit F and dated the Initial Funding Date, executed by a duly
authorized officer of the Company and each Designated Subsidiary.
(m) Lien Searches. The Agent shall have received the results of a
-------------
recent search by a Person satisfactory to the Agent, of Uniform Commercial
Code and other filings which may have been filed with respect to the
intangible personal property of the Company or any Designated Subsidiaries
in those locations of which the Agent notifies the Company prior to the
Closing Date.
(n) Litigation. No suit, action, investigation, inquiry or other
----------
proceeding (including, without limitation, the enactment or promulgation of
a statute or rule) by or before any arbitrator or any Governmental
Authority shall be formally instituted or threatened and no preliminary or
permanent injunction or restraining order by a state or federal court shall
have been entered or threatened (i) in connection with any Loan Document or
any of the transactions contemplated hereby or thereby or (ii) which, in
the reasonable opinion of the Banks, could have a Material Adverse Effect.
(o) No Violation. The consummation of the transactions contemplated
------------
by this Agreement, the Notes, each Application and the other Loan Documents
shall not contravene, violate or conflict with, nor involve the Agent or
any Bank in any violation of, any Requirement of Law.
(p) Fees. The Agent and each Bank shall have received the fees to be
----
received by it on the Closing Date referred to in subsection 2.8 and those
fees to be paid
35
<PAGE>
on the Closing Date by the Company pursuant to its written agreement or
agreements executed prior to the date hereof.
(q) Legal Opinions. The Agent shall have received, with a
--------------
counterpart for each Bank, the executed legal opinions of Schatz & Schatz,
Ribicoff & Kotkin, counsel to the Company and its Subsidiaries, and Gregory
Wozniak, General Counsel to the Company and its Subsidiaries, each dated
the Closing Date and substantially in the form of Exhibit H with such
changes thereto as the Agent shall approve. Such legal opinions shall cover
such other matters incident to the transactions contemplated by this
Agreement as the Agent may reasonably require.
(r) Consents, Licenses and Approvals. The Agent shall have received,
--------------------------------
with a counterpart for each Bank, a certificate, dated the Closing Date,
executed by a duly authorized officer of the Company stating that all
consents, authorizations, notices and filings necessary or advisable in
connection with the financings contemplated by this Agreement and the
continuing operations of the Company, have been obtained and are in full
force and effect, except where the failure to obtain such consents,
authorizations, notices or filings could not have a Material Adverse
Effect.
5.2 Conditions to Each Extension of Credit. The agreement of each Bank to
--------------------------------------
make any extension of credit requested to be made by it on any date (including,
without limitation, its initial extension of credit) is subject to the
satisfaction on the Initial Funding Date and on such borrowing date of the
following conditions precedent:
(a) Representations and Warranties. Each of the representations and
------------------------------
warranties made by the Company and each Subsidiary in or pursuant to the
Loan Documents shall be true and correct in all material respects on and as
of such date as if made on and as of such date; provided that, with respect
--------
to extensions of credit made after the Initial Funding Date, Guarantee
Obligations incurred after the Initial Funding Date and in accordance with
the terms of this Agreement shall not be deemed a breach of the
representation and warranty set forth in subsection 4.1(b) to the extent
that such Guarantee Obligations are not described in the financial
statements described in subsection 4.1(a).
(b) No Default. No Default or Event of Default shall have occurred
----------
and be continuing on such date or after giving effect to the extension of
credit requested to be made on such date.
(c) Additional Documents. The Agent shall have received each
--------------------
additional document, instrument, legal opinion or item of information
reasonably requested by it, including, without limitation, a copy of any
debt instrument, security agreement or other material contract to which the
Company or any Subsidiary may be a party.
(d) Additional Matters. All corporate and other proceedings, and all
------------------
documents, instruments and other legal matters in connection with the
transactions contemplated by this Agreement and the other Loan Documents
shall be satisfactory in form and substance to the Agent, and the Agent
shall have received such other
36
<PAGE>
documents and legal opinions in respect of any aspect or consequence of the
transactions contemplated hereby or thereby as it shall reasonably request.
Each borrowing by and Letter of Credit issued on behalf of the Company hereunder
shall constitute a representation and warranty by the Company as of the date of
such Loan or Letter of Credit that the conditions contained in this subsection
5.2 have been satisfied.
SECTION 6. AFFIRMATIVE COVENANTS
The Company hereby agrees that, so long as the Commitments remain in
effect, any Note or any Letter of Credit remains outstanding and unpaid or any
other amount is owing to any Bank or the Agent hereunder, the Company shall and
(except in the case of delivery of financial information, reports and notices)
shall cause each of its Subsidiaries to:
6.1 Financial Statements. Furnish to each Bank:
--------------------
(a) as soon as available, but in any event within 90 days after the
end of each fiscal year of the Company, a copy of the consolidated balance
sheet of the Company and its consolidated Subsidiaries as at the end of
such year and the related consolidated statements of operations and
retained earnings and of cash flows for such year, setting forth in each
case in comparative form the figures for the previous year, reported on
without a "going concern" or like qualification or exception, or
qualification arising out of the scope of the audit, by Arthur Andersen &
Co. or other independent certified public accountants of nationally
recognized standing not unacceptable to the Required Banks;
(b) as soon as available, but in any event not later than 45 days
after the end of each of the first three fiscal quarters of each fiscal
year of the Company, the unaudited consolidated balance sheet of the
Company and its consolidated Subsidiaries as at the end of such quarter,
the related unaudited consolidated statement of operations and retained
earnings of the Company and its consolidated Subsidiaries, for such quarter
and the portion of the fiscal year through the end of such quarter, and the
related unaudited consolidated statement of cash flows of the Company and
its consolidated Subsidiaries for the portion of the fiscal year through
the end of such quarter, setting forth in each case in comparative form the
figures for the previous year, certified by a Responsible Officer as being
fairly stated in all material respects when considered in relation to the
consolidated financial statements of the Company and its consolidated
Subsidiaries (subject to normal year-end audit adjustments); and
(c) as soon as available, but in any event not later than 45 days
after the last day of each of the 12 fiscal periods of each fiscal year of
the Company (other than the last such fiscal period in each such fiscal
year), (i) the unaudited consolidated balance sheet of the Company and its
consolidated Subsidiaries as at the end of such fiscal period and the
related unaudited consolidated statement of operations and retained
earnings of the Company and its consolidated Subsidiaries for such fiscal
period and the portion of the fiscal year of the Company through the end of
such fiscal period, setting forth in each case in comparative form the
figures for the previous year and (ii) a statement setting forth the
aggregate amount of Capital Expenditures made by the Company and its
consolidated Subsidiaries during such fiscal period (which aggregate
37
<PAGE>
amount shall separately specify the total amount of Capital Expenditures
consisting of cash and the total amount of Capital Expenditures consisting
of Financing Leases and other non-cash financings), in each case, certified
by a Responsible Officer as being fairly stated in all material respects
when, in the case of the financial statements delivered pursuant to clause
(i) above, considered in relation to the consolidated financial statements
of the Company and its consolidated Subsidiaries (subject to normal year-
end audit adjustments);
all such financial statements to be complete and correct in all material
respects and to be prepared in reasonable detail and in accordance with GAAP
applied consistently throughout the periods reflected therein and with prior
periods (except as approved by such accountants or officer, as the case may be,
and disclosed therein).
6.2 Certificates; Other Information. Furnish to each Bank:
-------------------------------
(a) concurrently with the delivery of the financial statements
referred to in subsection 6.1(a), a certificate of the independent
certified public accountants reporting on such financial statements stating
that in making the examination necessary therefor no knowledge was obtained
of any Default or Event of Default, except as specified in such
certificate;
(b) (i) concurrently with the delivery of each of the financial
statements referred to in subsections 6.1 (a) and 6.1 (b), a certificate of
a Responsible Officer (which certificate shall set forth, in detail, all
interim and preparatory figures and calculations used in determining the
Company's satisfaction of its covenants and agreements contained in
subsection 7.1) stating that, to the best of such Officer's knowledge, each
of the Company and its Subsidiaries during such period has observed or
performed all of its covenants and other agreements, and satisfied every
condition, contained in this Agreement, the Notes and the other Loan
Documents to which it is a party to be observed, performed or satisfied by
it, and that such Officer has obtained no knowledge of any Default or Event
of Default except as specified in such certificate and (ii) concurrently
with the delivery of the financial statements referred to in subsection
6.1(a), a certificate of a Responsible Officer setting forth the aggregate
Net Cash Proceeds received by the Company and any of its Subsidiaries
during the preceding fiscal year, the portion thereof which has been
reinvested by the Company or its Subsidiaries in fixed or capital assets or
POS Program Expenses, the portion thereof which has been applied by or on
behalf of the Company to make any mandatory prepayment in accordance with
subsection 2.11 and any remaining balances in respect of such Net Cash
Proceeds which have not been so reinvested or applied;
(c) as soon as delivered, but in any event within 120 days after the
end of each fiscal year of the Company, a copy of the letter, addressed to
the Company, of the certified public accountants who prepared the financial
statements referred to in subsection 6.1(a) for such fiscal year and
otherwise referred to as a "management letter";
(d) as soon as available, but in any event within 30 days after the
end of each fiscal year of the Company, a copy of (i) the projections by
the Company of the operating budget and cash flow budget of the Company and
its Subsidiaries for the succeeding
38
<PAGE>
fiscal year and (ii) the projected consolidated balance sheet of the
Company and its consolidated subsidiaries as at the last day of the
succeeding fiscal year, such projections and projected balance sheet to be
accompanied by a certificate of a Responsible Officer to the effect that
such projections and projected balance sheet have been prepared on the
basis of sound financial planning practice and that such Officer has no
reason to believe they are incorrect or misleading in any material respect;
(e) within five days after the same are sent, copies of all financial
statements and reports which the Company sends to its stockholders, and
within five days after the same are filed, copies of all financial
statements and reports which the Company may make to, or file with, the
Securities and Exchange Commission or any successor or analogous
Governmental Authority; and
(f) promptly, such additional financial and other information as any
Bank may from time to time reasonably request.
6.3 Payment of Obligations. Pay, discharge or otherwise satisfy at or
----------------------
before maturity or before they become delinquent, as the case may be, all its
obligations of whatever nature, except where the amount or validity thereof is
currently being contested in good faith by appropriate proceedings and reserves
in conformity with GAAP with respect thereto have been provided on the books of
the Company or its Subsidiaries, as the case may be or except where the failure
to pay, discharge or otherwise satisfy could not have a Material Adverse Effect.
6.4 Conduct of Business and Maintenance of Existence. Continue to engage
------------------------------------------------
in business of the same general type as now conducted by it and preserve, renew
and keep in full force and effect its corporate existence and take all
reasonable action to maintain all rights, privileges and franchises necessary or
desirable in the normal conduct of its business except as otherwise permitted
pursuant to subsection 7.5; comply with all Contractual Obligations and
Requirements of Law except to the extent that failure to comply therewith could
not, in the aggregate, have a Material Adverse Effect.
6.5 Maintenance of Property; Insurance. (a) Keep all property useful and
----------------------------------
necessary in its business in good working order and condition except where the
failure to do so could not have a Material Adverse Effect; (b) maintain with
financially sound and reputable insurance companies insurance on all its
property in at least such amounts and against at least such risks (but including
in any event public liability, product liability and business interruption) as
are usually insured against in the same general area by companies engaged in the
same or a similar business; and furnish to each Bank, upon written request, full
information as to the insurance carried; provided that a program of self-
--------
insurance maintained by the Company and its Subsidiaries with respect to certain
product liability, workmen's compensation, environmental liability, public
liability, accident and health and property insurance risks shall comply with
the requirements of subsection 6.5(b) so long as adequate reserves in connection
with such self-insurance program are taken and maintained in accordance with
GAAP and such program is otherwise reasonably satisfactory to the Agent.
6.6 Inspection of Property; Books and Records; Discussions. Keep proper
------------------------------------------------------
books of records and account in which full, true and correct entries in
conformity with GAAP and all Requirements of Law shall be made of all dealings
and transactions in relation to its business
39
<PAGE>
and activities; and permit representatives of any Bank, upon reasonable notice
to the Company, to visit and inspect any of its properties and examine and make
abstracts from any of its books and records at any reasonable time and as often
as may reasonably be desired and to discuss the business, operations, properties
and financial and other condition of the Company and its Subsidiaries with
officers and employees of the Company and its Subsidiaries and with its
independent certified public accountants.
6.7 Notices. Promptly give notice to the Agent and each Bank of:
-------
(a) the occurrence of any Default or Event of Default;
(b) any (i) default or event of default under any Contractual
Obligation of the Company or any of its Subsidiaries or (ii) litigation,
investigation or proceeding which may exist at any time between the Company
or any of its Subsidiaries and any Governmental Authority, which in either
case, if not cured or if adversely determined, as the case may be, would
have a Material Adverse Effect;
(c) any litigation or proceeding affecting the Company or any of its
Subsidiaries in which the amount involved is $1,000,000 or more and not
covered by insurance or in which injunctive or similar relief is sought
which individually or in the aggregate could or might have a Material
Adverse Effect; provided that the Company shall not be required to give
notice of any such litigation or proceeding if the Company has reasonably
determined, after consultation with counsel, that the possibility is remote
that such litigation or proceeding will result in a judgment of $1,000,000
or more or in injunctive or similar relief against the Company or its
Subsidiaries;
(d) the following events, as soon as possible and in any event within
30 days after the Company knows or has reason to know thereof: (i) the
occurrence or expected occurrence of any Reportable Event with respect to
any Plan, or any withdrawal from, or the termination, Reorganization or
Insolvency of any Multiemployer Plan or (ii) the institution of proceedings
or the taking of any other action by the PBGC or the Company or any
Commonly Controlled Entity or any Multiemployer Plan with respect to the
withdrawal from, or the terminating, Reorganization or Insolvency of, any
Plan;
(e) as soon as the Company knows or has reason to know that it or any
Subsidiary has become liable for remediation and/or environmental
compliance expenses and/or fines, penalties or other charges which, in the
aggregate, are in excess of $2,000,000 at any one time outstanding (net of
all reimbursements in respect of such amounts from any state trust funds
which have been or are reasonably expected to be made to the Company or its
Subsidiaries and have been recognized as a receivable or may properly be
set off as a credit against such liabilities in accordance with GAAP); and
(f) a material adverse change in the business, operations, property,
condition (financial or otherwise) or prospects of the Company and its
Subsidiaries taken as a whole.
40
<PAGE>
Each notice pursuant to this subsection shall be accompanied by a statement of a
Responsible Officer setting forth details of the occurrence referred to therein
and stating what action the Company proposes to take with respect thereto.
6.8 Environmental Laws.
------------------
(a) Comply with, and insure compliance by all tenants and subtenants,
if any, with, all Environmental Laws and obtain and comply with and
maintain, and ensure that all tenants and subtenants obtain and comply with
and maintain, any and all licenses, approvals, registrations or permits
required by Environmental Laws, except to the extent that failure to do so
could not have a Material Adverse Effect;
(b) Conduct and complete all investigations, studies, sampling and
testing, and all remedial, removal and other actions required under
Environmental Laws and promptly comply with all lawful orders and
directives of all Governmental Authorities respecting Environmental Laws,
except to the extent that the same are being contested in good faith by
appropriate proceedings and the pendency of such proceedings could not have
a Material Adverse Effect;
(c) Defend, indemnify and hold harmless the Agent and the Banks, and
their respective employees, agents, officers and directors, from and
against any claims, demands, penalties, fines, liabilities, settlements,
damages, costs and expenses of whatever kind or nature known or unknown,
contingent or otherwise, arising out of, or in any way relating to the
violation of or noncompliance with any Environmental Laws by the Company or
any of its Subsidiaries, or any orders, requirements or demands of
Governmental Authorities related thereto, including, without limitation,
attorney's and consultant's fees, investigation and laboratory fees, court
costs and litigation expenses, except to the extent that any of the
foregoing arise out of the gross negligence or willful misconduct of the
party seeking indemnification therefor.
(d) Prepare and deliver, at least as frequently as once each fiscal
quarter, to the Agent and to each other Bank, a report setting forth a
summary, as of the end of such fiscal quarter, of (i) the gross amount of
all sums accrued in respect of any remediation required by applicable
Environmental Laws, (ii) all reimbursements in respect of such amounts from
any state trust funds which have been or are reasonably expected to be made
to the Company or its Subsidiaries and have been recognized as a receivable
or may properly be set off as a credit against the cost of such remediation
under GAAP and (iii) the net amount of all sums accrued in respect of such
remediation costs.
6.9 Additional Designated Subsidiaries. If, at any time following the
----------------------------------
delivery of the financial statements referred to in subsections 6.1(a) and (b),
the Company cannot (x) represent and warrant to the Agent and the Banks as to
the matters set forth in either the second or third sentences of subsection 4.15
because a Subsidiary or certain Subsidiaries not named a Designated Subsidiary
on the Closing Date causes the Designated Subsidiaries to fail to reach the
percentage threshold set forth in either of such sentences or (y) pursuant to
the provisions of Section 4.14 of the Senior Subordinated Indenture, is required
to cause one or more of its Subsidiaries to become an additional "Guarantor" (as
defined in the Senior Subordinated Indenture) (in either case, an "Undesignated
Subsidiary"), then as soon as possible and in any
41
<PAGE>
event concurrently with any actions taken in respect thereof under the Senior
Subordinated Indenture or within 15 days after the delivery of such financial
statements, (a) the Company shall deliver to the Agent, with a counterpart for
each Bank, (i) a supplement to the Subsidiary Guarantee, satisfactory in form
and substance to the Agent, whereby such Undesignated Subsidiary guarantees the
Obligations (as defined in the Subsidiary Guarantee and subject to the Maximum
Guaranteed Amount, as defined therein, with respect to such Undesignated
Subsidiary) and agrees to be bound by the terms and conditions of the Subsidiary
Guarantee, (ii) the Capital Stock of any such Undesignated Subsidiary, pledged
and delivered by the holder thereof pursuant to a supplement to the pledge
agreement to which such holder is a party, duly authorized, executed and
delivered by such holder and otherwise in form and substance satisfactory to the
Agent and (iii) an opinion of counsel to such Undesignated Subsidiary and such
pledgor addressed to the Agent and the Banks and covering such matters as the
Agent may reasonably request and (b) Schedule VI shall be deemed amended to
include the name of such Undesignated Subsidiary.
SECTION 7. NEGATIVE COVENANTS
The Company hereby agrees that, so long as the Commitments remain in
effect, any Note or any Letter of Credit remains outstanding and unpaid or any
other amount is owing to any Bank or the Agent hereunder, the Company shall not,
and (except with respect to subsection 7.1) shall not permit any of its
Subsidiaries to, directly or indirectly:
7.1 Financial Condition Covenants.
-----------------------------
(a) EBIRT to Interest and Rent. For any period of four consecutive
--------------------------
fiscal quarters ending on any FQED, permit the ratio of (i) Consolidated
EBIRT for such period to (ii) the sum of Consolidated Interest Expense and
Consolidated Rent Expense for such period to be less than 1.0 to 1.0.
(b) EBITDA less Capital Expenditures to Interest. For any period of
--------------------------------------------
four consecutive fiscal quarters ending on any FQED, permit the ratio of
(i) an amount equal to Consolidated EBITDA minus Capital Expenditures
(which, for purposes of this test only, shall not include (A) any Capital
Expenditures of the Company which are financed by Indebtedness permitted by
subsection 7.2(d) or (B) any Capital Expenditures with respect to the
acquisition of assets which are subsequently leased through a
Sale/Leaseback Transaction which lease would be treated as an operating
lease under GAAP), in each case for such period, to (ii) Consolidated
Interest Expense for such period to be less than 1.0 to 1.0; provided that,
--------
on any FQED on which such ratio shall be less than 1.0 to 1.0, no breach of
this test shall be deemed to occur until the earlier to occur of (i) the
failure of the Company to negotiate in good faith with the Agent and the
Banks to reset the amounts of Capital Expenditures permitted under the
terms of this Agreement and (ii) the date on which the Company has
delivered, pursuant to subsection 6.1(b), its quarterly financial
statements with respect to its fiscal quarter ending on such FQED.
(c) Consolidated Indebtedness to Consolidated EBITDA. For any period
------------------------------------------------
of four consecutive fiscal quarters ending on any FQED to occur during any
"Test Period" set forth below, permit the ratio of (i) Consolidated
Indebtedness at the end of such period
42
<PAGE>
to (ii) Consolidated EBITDA for such period to be more than the ratio set
forth opposite such period below:
<TABLE>
<CAPTION>
Test Period Ratio
----------- -----
<S> <C>
Closing Date through Third 4.25 to 1.0
FQED 1995
First day of Fourth FQED 4.00 to 1.0
1995 through the Fourth
Fiscal Quarter of FYED 1996
First day of First FQED 3.75 to 1.0
1997 and each Fiscal Quarter
thereafter
</TABLE>
(d) Maintenance of Net Worth. Permit Consolidated Net Worth of the
------------------------
Company to be less than the Minimum Consolidated Net Worth.
7.2 Limitation on Indebtedness. Create, incur, assume or suffer to exist
--------------------------
any Indebtedness, except:
(a) Indebtedness in respect of the Loans, the Notes and the Letters
of Credit and other obligations of the Company and its Designated
Subsidiaries under the Loan Documents;
(b) Indebtedness of the Company to any Designated Subsidiary and of
any Designated Subsidiary to the Company or any other Designated
Subsidiary;
(c) Indebtedness outstanding on the Closing Date and listed on Part B
of Schedule IX;
(d) any Indebtedness of the Company or any Designated Subsidiary
incurred after the Closing Date to finance the acquisition, improvement or
construction of fixed or capital assets or POS Program Expenses (whether
pursuant to a loan, a Financing Lease or otherwise), including any
Indebtedness incurred in connection with any transaction permitted under
subsection 7.3(g);
(e) Indebtedness of FinOp to the SBA incurred in connection with the
Company's on-going franchise program, in an aggregate amount not exceeding
$20,000,000 at any one time outstanding; and
(f) Indebtedness under any Interest Rate Agreement.
7.3 Limitation on Liens. Create, incur, assume or suffer to exist any
-------------------
Lien upon any of its property, assets or revenues, whether now owned or
hereafter acquired, except for:
43
<PAGE>
(a) Liens for taxes not yet due or which are being contested in good
faith by appropriate proceedings, provided that adequate reserves with
--------
respect thereto are maintained on the books of the Company or its
Subsidiaries, as the case may be, in conformity with GAAP;
(b) carriers', warehousemen's, mechanics', materialmen's, repairmen's
or other like Liens arising in the ordinary course of business which are
not overdue for a period of more than 60 days or which are being contested
in good faith by appropriate proceedings;
(c) pledges or deposits in connection with workers' compensation,
unemployment insurance and other social security legislation and deposits
securing liability to insurance carriers under insurance or self-insurance
arrangements;
(d) deposits to secure the performance of bids, trade contracts
(other than for borrowed money), leases, statutory obligations, surety and
appeal bonds, performance bonds and other obligations of a like nature
incurred in the ordinary course of business;
(e) easements, rights-of-way, restrictions and other similar
encumbrances incurred in the ordinary course of business which, in the
aggregate, are not substantial in amount and which do not in any case
materially detract from the value of the property subject thereto or
materially interfere with the ordinary conduct of the business of the
Company or such Subsidiary;
(f) Liens in existence on the Closing Date listed on Schedule X,
securing Indebtedness permitted by subsection 7.2(c), provided that no such
--------
Lien is spread to cover any additional property after the Closing Date and
that the amount of Indebtedness secured thereby is not increased;
(g) Liens securing Indebtedness of the Company or a Designated
Subsidiary permitted by subsection 7.2 (d), provided that (i) such Liens
--------
shall be created promptly upon the acquisition, improvement or completion
of the construction of such fixed or capital asset or the incurrence of
such POS Program Expense, as the case may be (and in any event no later
than the earlier of (A) twelve months from the date on which the
construction of such fixed or capital asset is completed or such POS
Program Expense is incurred and (B) 24 months from the date on which the
real estate, on which such fixed or capital asset is located, was purchased
by the Company, (ii) such Liens do not at any time encumber any property
other than the property financed by such Indebtedness, (iii) the amount of
Indebtedness secured thereby is not increased and (iv) the principal amount
of Indebtedness secured by any such Lien shall at no time exceed 100% of
the original purchase price of such property; and
(h) Liens created under the Security Documents.
7.4 Limitation on Guarantee Obligations. Create, incur, assume or suffer
-----------------------------------
to exist any Guarantee Obligation except:
(a) the Subsidiary Guarantee;
44
<PAGE>
(b) Guarantee Obligations arising from the issuance of the Letters of
Credit issued pursuant to this Agreement and any Application issued for the
account of the Company or any Designated Subsidiary in the ordinary course
of its business, not to exceed an aggregate face amount and unreimbursed
obligations of the L/C Commitment at any one time outstanding;
(c) Guarantee Obligations arising with respect to the Franchisee
Guarantees or under the Senior Subordinated Indenture; and
(d) Guarantee Obligations arising as a result of guarantees by the
Company of any Indebtedness of a consolidated Subsidiary that would appear
as a liability on a consolidated balance sheet of the Company and its
consolidated Subsidiaries.
7.5 Limitations on Fundamental Changes. Enter into any merger,
----------------------------------
consolidation or amalgamation, or liquidate, wind up or dissolve itself (or
suffer any liquidation or dissolution), or convey, sell, lease, assign, transfer
or otherwise dispose of, all or substantially all of its property, business or
assets, or make any material change in its present method of conducting
business, except:
(a) any Subsidiary of the Company may be merged or consolidated with
or into the Company (provided that the Company shall be the continuing or
--------
surviving corporation) or with or into any one or more wholly-owned
Designated Subsidiaries of the Company (provided that the wholly-owned
--------
Designated Subsidiary or Designated Subsidiaries shall be the continuing or
surviving corporation and shall be a member of the Company's consolidated
group for financial reporting and tax purposes);
(b) any wholly-owned Designated Subsidiary may sell, lease, transfer
or otherwise dispose of any or all of its assets (upon voluntary
liquidation or otherwise) to the Company or any other wholly-owned
Designated Subsidiary of the Company; and
(c) any Subsidiary which is not a Designated Subsidiary (i) may be
merged or consolidated with or into any other Subsidiary and (ii) may
liquidate, wind up or dissolve itself (provided, in the case of clause (ii)
only, that the Required Banks consent to such action (which consent will
not be unreasonably withheld)).
7.6 Limitation on Sale of Assets. Convey, sell, lease, assign, transfer
----------------------------
or otherwise dispose of any of its property, business or assets (including,
without limitation, receivables and leasehold interests), whether now owned or
hereafter acquired, except:
(a) the sale of inventory in the ordinary course of business;
(b) as permitted by subsection 7.5(b); and
(c) Asset Dispositions (as defined in the Senior Subordinate
Indenture), such dispositions being subject to the provisions of subsection
2.11(b) hereof.
7.7 Limitation on Dividends. Declare or pay any dividend (other than (i)
-----------------------
dividends payable solely in common stock of a Subsidiary so long as any such
common stock dividend
45
<PAGE>
is pledged by the stockholder pursuant to the Pledge Agreement to which such
stockholder is a party, (ii) dividends payable solely in the common stock of the
Company to stockholders of the Company, or (iii) dividends by a Subsidiary to
another Subsidiary or to the Company) on, or make any payment on account of, or
set apart assets for a sinking or other analogous fund for, the purchase,
redemption, defeasance, retirement or other acquisition of, any shares of any
class of Capital Stock of the Company or any Subsidiary or any warrants or
options to purchase any such Stock, whether now or hereafter outstanding, or
make any other distribution in respect thereof, either directly or indirectly,
whether in cash or property or in obligations of the Company or any Subsidiary,
(collectively, a "Dividend or Redemption") unless such Dividend or Redemption,
when aggregated with any other Dividend or Redemption, and any repurchase by the
Company of Senior Subordinated Indebtedness, made since May 1, 1993, would not
exceed 50% of Consolidated Net Income accrued on a cumulative basis from May 1,
1993 to the end of the most recent fiscal quarter ending prior to the date of
each such proposed Dividend or Redemption calculated on a cumulative basis as if
such period were a single accounting period.
7.8 Limitation on Capital Expenditures. Make or commit to make (by way of
----------------------------------
the acquisition of securities of a Person or otherwise) any Capital Expenditure
(excluding (i) with respect to both the "Gross Amount" and the "Net Amount" set
forth below, any expenses incurred in connection with normal replacement and
maintenance programs properly charged to current operations and (ii) with
respect to only the "Net Amount" referred to below, (A) any Capital Expenditures
which have been financed with Indebtedness permitted by subsection 7.2 (d) and
(B) any Capital Expenditure with respect to the acquisition of assets which are
subsequently leased through a Sale/Leaseback Transaction which lease would be
treated as an operating lease under GAAP), in the aggregate for the Company and
its Subsidiaries during any of the fiscal years of the Company set forth below,
either the "Gross Amount" or the "Net Amount" set forth opposite such fiscal
year below:
<TABLE>
<CAPTION>
Fiscal Year Gross Amount Net Amount
----------- ------------ -----------
<S> <C> <C>
1995 $28,000,000 $19,000,000
1996 $36,500,000 $22,500,000
1997 and thereafter $38,000,000 $24,000,000
</TABLE>
provided that, POS Program Expenses shall not be subject to, nor be included in
the calculations of, the foregoing maximum amounts.
7.9 Limitation on Investments, Loans and Advances. Make any advance, loan,
---------------------------------------------
extension of credit or capital contribution to, or purchase any stock, bonds,
notes, debentures or other securities of or any assets constituting a business
unit of, or make any other investment in (each, an "Investment"), any Person,
except:
(a) extensions of trade credit in the ordinary course of business;
(b) Investments in Cash Equivalents;
46
<PAGE>
(c) loans and advances to employees of the Company or its Subsidiaries
in the ordinary course of business in an aggregate amount for the Company
and its Subsidiaries not to exceed $750,000 in the aggregate at any one
time outstanding (including the principal amount of the loans listed on
Schedule XI hereto);
(d) Investments by the Company in its Subsidiaries and investments by
a Designated Subsidiary in the Company and in other Designated Subsidiaries
(other than, in either case, any investments in FinOp); provided that any
--------
Designated Subsidiary making an investment or receiving the proceeds
thereof is a member of the Company's consolidated group for financial
reporting and tax purposes;
(e) Investments after the date hereof by the Company or any
Designated Subsidiary in FinOp in an aggregate amount of up to $2,500,000;
(f) Investments by the Insurance Subsidiary of its statutory or
regulatory reserves in accordance with the laws of the jurisdiction of its
incorporation;
(g) Investments of amounts held in depositary accounts in financial
institutions geographically proximate to the location of the Company's or a
Subsidiary's retail operations; provided that such amounts are withdrawn
--------
from such accounts and deposited into the Company's cash concentration
account at least once during each seven-day period;
(h) Investments as a result of stock repurchases permitted by
subsection 7.7;
(i) Investments by the Company or any Designated Subsidiary (other
than a Permitted Joint Venture Investment) in any Person not a Subsidiary
on the Closing Date; provided that (i) any such Investment (whether made in
one transaction or a series of transactions) does not exceed $2,000,000
(inclusive of commissions, fees and other transaction costs, but not
including any portion of the Investments with respect to which the
consideration is the capital stock of the Company), (ii) all such
Investments made after the Closing Date do not exceed $5,000,000 in the
aggregate (inclusive of commissions, fees and other transaction costs, but
not including any portion of the Investments with respect to which the
consideration is the capital stock of the Company), (iii) any such acquired
Person that is a Subsequently Acquired Subsidiary executes and delivers to
the Agent, with a counterpart for each Bank, a supplement to the Subsidiary
Guarantee, satisfactory in form and substance to the Agent, whereby such
Subsequently Acquired Subsidiary guarantees the Obligations (as defined in
the Subsidiary Guarantee subject to the Maximum Guaranteed Amount, as
defined therein, with respect to such Subsequently Acquired Subsidiary) and
agrees to be bound by the terms and conditions of the Subsidiary
Guarantee), (iv) the Capital Stock of any such acquired Person is pledged
and delivered by the holder thereof pursuant to a supplement to the pledge
agreement to which such holder is a party, duly authorized, executed and
delivered by such holder and otherwise in form and substance satisfactory
to the Agent and (v) in connection with the matters contemplated by the
foregoing clauses (iii) and (iv) the Person executing such supplement
contemporaneously therewith causes to be delivered an opinion of counsel to
such Person so executing such supplement and such pledgor, addressed to the
Agent and the Banks and covering such matters as the Agent may
47
<PAGE>
request. Notwithstanding the foregoing, the Company or any Subsidiary shall
not make any Investment in any Person which exceeds 1% of the voting power
represented by the Capital Stock then outstanding of such Person if the
Board of Directors or other governing body of such Person has disapproved
or recommended against any such Investment or refused to negotiate or
terminated negotiations, with the Company or such Subsidiary; and
(j) Permitted Joint Venture Investments.
7.10 Limitation on Optional Payments and Modifications of Debt Instruments.
----------------------------------------------------------------------
(a) Make any optional payment or prepayment on or redemption of any Indebtedness
(other than (i) Indebtedness pursuant to this Agreement, (ii) the redemption of
the Subordinated Debentures or (iii) the repayment of that certain Indebtedness
evidenced by the Company's existing Credit Agreement with PNC Bank, Kentucky,
Inc., Chemical Bank and Fleet), including, without limitation, the Senior
Subordinated Notes (except to the extent permitted by subsection 7.7), (b)
amend, modify or change, or consent or agree to any amendment, modification or
change to any of the terms of the Senior Subordinated Notes or the Senior
Subordinated Indenture, including, without limitation, any amendment to the
subordination provisions thereof or (c) amend, modify or change, or consent or
agree to any amendment, modification or change to, any of the terms relating to
the payment or prepayment of principal of or interest on any Indebtedness (other
than Indebtedness pursuant to this Agreement or the Senior Subordinated Notes),
other than, with respect to the Indebtedness described in the foregoing clauses
(b) and (c), any such amendment, modification or change the primary effect of
which would extend the maturity or reduce the amount of any payment of principal
thereof or the primary effect of which would reduce the rate or extend the date
for payment of interest thereon.
7.11 Transactions with Affiliates. Enter into any transaction, including,
----------------------------
without limitation, any purchase, sale, lease or exchange of property or the
rendering of any service, with any Affiliate unless such transaction is not
otherwise prohibited under this Agreement, is in the ordinary course of the
Company's or such Subsidiary's business (including in connection with the
Company's on-going franchise program) and is upon fair and reasonable terms no
less favorable to the Company or such Subsidiary, as the case may be, than it
would obtain in a comparable arm's length transaction with a Person not an
Affiliate.
7.12 Sale and Leaseback. Enter into any arrangement with any Person
------------------
providing for the leasing by the Company or any Subsidiary of real or personal
property which has been or is to be sold or transferred by the Company or such
Subsidiary to such Person or to any other Person to whom funds have been or are
to be advanced by such Person on the security of such property or rental
obligations of the Company or such Subsidiary (a "Sale/Leaseback Transaction")
unless (a) the proceeds received therefrom are not required by subsections 2.11
and 7.6 to be applied to prepay the Loans, or (b) the proceeds received
therefrom are applied, if so required under subsections 2.11 and 7.6, to prepay
the Loans in accordance with such subsections.
7.13 Corporate Documents. Amend its Certificate of Incorporation (except
-------------------
to increase the number of authorized shares of common stock).
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7.14 Fiscal Year. Permit the fiscal year of the Company to end on a day
-----------
other than on the Saturday closest to January 31 of each calendar year.
7.15 Limitation on Negative Pledge Clauses. Enter into any agreement,
-------------------------------------
other than (i) as permitted by this Agreement and (ii) any industrial revenue
bonds, purchase money or other mortgages, the Senior Subordinated Indenture or a
lease the obligations of which are required in accordance with GAAP to be
capitalized on a balance sheet of the Company (in which cases, any prohibition
or limitation shall only be effective against the assets financed thereby), with
any Person other than the Banks pursuant hereto which prohibits or limits the
ability of the Company or any of its Subsidiaries to create, incur, assume or
suffer to exist any Lien upon any of its property, assets or revenues, whether
now owned or hereafter acquired.
SECTION 8. EVENTS OF DEFAULT
If any of the following events shall occur and be continuing:
(a) The Company shall fail to pay any principal of any Note or any
Reimbursement Obligation when due in accordance with the terms thereof or
hereof; or the Company shall fail to pay any interest on any Note or any
Reimbursement Obligation, or any other amount payable hereunder, within
five days after any such interest or other amount becomes due in accordance
with the terms thereof or hereof; or
(b) Any representation or warranty made or deemed made by the Company
or any Subsidiary in any Loan Document to which the Company or such
Subsidiary is a party or which is contained in any certificate, document or
financial or other statement furnished at any time under or in connection
with this Agreement or any other Loan Document shall prove to have been
incorrect in any material respect on or as of the date made or deemed made;
or
(c) The Company shall default in the observance or performance of any
agreement contained in Section 6 (other than subsection 6.7) and Section 7;
or
(d) The Company shall default in the observance or performance of any
other agreement contained in this Agreement (other than as provided in
paragraphs (a) through (c) of this Section), and such default shall
continue unremedied for a period of 30 days after the earlier of (i) an
officer of the Company becoming aware of such default or (ii) notice of
such default to the Company by Agent or any Bank; or
(e) Any Subsidiary shall default in the observance or performance of
any agreement contained in any Loan Document to which it is a party, and
such default shall continue unremedied for a period of 30 days after the
earlier of (i) an officer of any such Subsidiary becoming aware of such
default or (ii) notice of such default to such Subsidiary by Agent or any
Bank; or
(f) The Company or any of its Subsidiaries shall (i) default in any
payment of principal of or interest of any Indebtedness (other than the
Notes) which has an aggregate principal amount in excess of $500,000,
individually or in the aggregate, or in the payment of any Guarantee
Obligation under which the maximum liability of the
49
<PAGE>
Company or such Subsidiary exceeds $500,000, individually or in the
aggregate, beyond the period of grace (not to exceed 30 days), if any,
provided in the instrument or agreement under which such Indebtedness or
Guarantee Obligation was created; or (ii) default in the observance or
performance of any other agreement or condition relating to any such
Indebtedness or Guarantee Obligation or contained in any instrument or
agreement evidencing, securing or relating thereto, or any other event
shall occur or condition exist, the effect of which default or other event
or condition is to cause, or to permit the holder or holders of such
Indebtedness or beneficiary or beneficiaries of such Guarantee Obligation
(or a trustee or agent on behalf of such holder or holders or beneficiary
or beneficiaries) to cause, with the giving of notice if required, such
Indebtedness to become due prior to its stated maturity or such Guarantee
Obligation to become payable; or
(g) (i) The Company or any of its Subsidiaries shall commence any
case, proceeding or other action (A) under any existing or future law of
any jurisdiction, domestic or foreign, relating to bankruptcy, insolvency,
reorganization or relief of debtors, seeking to have an order for relief
entered with respect to it, or seeking to adjudicate it a bankrupt or
insolvent, or seeking reorganization, arrangement, adjustment, winding-up,
liquidation, dissolution, composition or other relief with respect to it or
its debts, or (B) seeking appointment of a receiver, trustee, custodian or
other similar official for it or for all or any substantial part of its
assets, or the Company or any of its Subsidiaries shall make a general
assignment for the benefit of its creditors; or (ii) there shall be
commenced against the Company or any of its Subsidiaries any case,
proceeding or other action of a nature referred to in clause (i) above
which (A) results in the entry of an order for relief or any such
adjudication or appointment or (B) remains undismissed, undischarged or
unbonded for a period of 60 days; or (iii) there shall be commenced against
the Company or any of its Subsidiaries any case, proceeding or other action
seeking issuance of a warrant of attachment, execution, distraint or
similar process against all or any substantial part of its assets which
results in the entry of an order for any such relief which shall not have
been vacated, discharged, or stayed or bonded pending appeal within 60 days
from the entry thereof; or (iv) the Company or any of its Subsidiaries
shall take any action in furtherance of, or indicating its consent to,
approval of, or acquiescence in, any of the acts set forth in clause (i),
(ii), or (iii) above; or (v) the Company or any of its Subsidiaries shall
generally not, or shall be unable to, or shall admit in writing its
inability to, pay its debts as they become due; or
(h) (i) Any Person shall engage in any "prohibited transaction (as
defined in Section 406 of ERISA or Section 4975 of the Code) involving any
Plan, (ii) any "accumulated funding deficiency" (as defined in Section 302
of ERISA), whether waived or not, shall exist with respect to any Plan,
(iii) a Reportable Event shall occur with respect to, or proceedings shall
commence to have a trustee appointed, or a trustee shall be appointed, to
administer or to terminate, any Single Employer Plan, which Reportable
Event or commencement of proceedings or appointment of a trustee is, in the
reasonable opinion of the Required Banks, likely to result in the
termination of such Plan for purposes of Title IV of 59 ERISA, (iv) any
Single Employer Plan shall terminate for purposes of Title IV of ERISA, (v)
the Company or any Commonly Controlled Entity shall, or in the reasonable
opinion of the Required Banks is likely to, incur any liability in
connection with a withdrawal from, or the Insolvency or Reorganization of,
a Multiemployer Plan or (vi) any
50
<PAGE>
other event or condition shall occur or exist, with respect to a Plan; and
in each case in clauses (i) through (vi) above, such event or condition,
together with all other such events or conditions, if any, could subject
the Company or any of its Subsidiaries to any tax, penalty or other
liabilities in the aggregate material in relation to the business,
operations, property or financial or other condition of the Company and its
Subsidiaries taken as a whole; or
(i) One or more judgments or decrees shall be entered against the
Company or any of its Subsidiaries involving in the aggregate a liability
(to the extent not paid or covered by insurance) of $1,000,000 or more and
all such judgments or decrees shall not have been vacated, discharged,
stayed or bonded pending appeal within 60 days from the entry thereof; or
(j) If at any time the Company or all or any of its Subsidiaries
shall become liable for remediation and/or environmental compliance
expenses and/or fines, penalties or other charges which, in the aggregate,
are in excess of $3,000,000 at any one time outstanding (net of all
reimbursements in respect of such amounts from any state trust funds which
have been or are reasonably expected to be made to the Company or its
Subsidiaries and have been recognized as a receivable or may properly be
set off as a credit against such liabilities under GAAP); or
(k) A Change of Control shall have occurred; or
(l) The Indebtedness of DM Associates under that certain Loan
Agreement dated February 6, 1992, between DM Associates and the Connecticut
Development Authority shall become due prior to the stated maturity of such
Indebtedness; or
(m) The Subsidiary Guarantee or any other Guarantee Obligation in
respect of the Company's Indebtedness hereunder shall be held in any
judicial proceeding to be unenforceable or invalid or shall cease for any
reason to be in full force and effect, or any Person having a Guarantee
Obligation in respect of the Company's Indebtedness hereunder, including
without limitation each Designated Subsidiary (or any Person acting on
behalf of any such Person) shall deny or disaffirm such Guarantee
Obligation.
then, and in any such event, (A) if such event is an Event of Default specified
in clause (i) or (ii) of paragraph (g) above with respect to the Company,
automatically the Commitments shall immediately terminate and the Loans
hereunder (with accrued interest thereon) and all other amounts owing under this
Agreement (including, without limitation, all amounts of L/C Obligations,
regardless of whether the beneficiaries of the then outstanding Letters of
Credit shall have presented the documents required thereunder) and the Notes
shall immediately become due and payable, and (B) if such event is any other
Event of Default, either or both of the following actions may be taken: (i) with
the consent of the Required Banks, the Agent may, or upon the request of the
Required Banks, the Agent shall, by notice to the Company declare the
Commitments to be terminated forthwith, whereupon the Commitments shall
immediately terminate; and (ii) with the consent of the Required Banks, the
Agent may, or upon the request of the Required Banks, the Agent shall, by notice
of default to the Company, declare the Loans hereunder (with accrued interest
thereon) and all other amounts owing under this Agreement (including, without
limitation, all amounts of L/C Obligations, regardless of whether the
51
<PAGE>
beneficiaries of the then outstanding Letters of Credit shall have presented the
documents required thereunder) and the Notes to be due and payable forthwith,
whereupon the same shall immediately become due and payable.
With respect to all Letters of Credit with respect to which presentment for
honor shall not have occurred at the time of an acceleration pursuant to the
preceding paragraph, the Company shall at such time deposit in a cash collateral
account to be opened by the Agent (the "Cash Collateral Account") an amount
equal to the aggregate then undrawn and unexpired amount of such Letters of
Credit. The Company hereby grants to the Agent, for the benefit of the Issuing
Bank and the L/C Participants, a security interest in the Cash Collateral
Account and all amounts from time to time on deposit therein to secure all
obligations of the Company in respect of such Letters of Credit under this
Agreement and the other Loan Documents. The Company shall execute and deliver to
the Agent, for the account of the Issuing Bank and the L/C Participants, such
further documents and instruments as the Agent may request to evidence the
creation and perfection of such security interest in the Cash Collateral
Account. Amounts held in the Cash Collateral Account shall be applied by the
Agent to the payment of drafts drawn under such Letters of Credit, and the
unused portion thereof after all such Letters of Credit shall have expired or
been fully drawn upon, if any, shall be applied to repay other obligations of
the Company hereunder and under the Notes. After all such Letters of Credit
shall have expired or been fully drawn upon, all Reimbursement Obligations shall
have been satisfied and all other obligations of the Company hereunder and under
the Notes shall have been paid in full, the balance, if any, in the Cash
Collateral Account shall be returned to the Company.
Except as expressly provided above in this Section, presentment, demand,
protest and all other notices of any kind are hereby expressly waived.
SECTION 9. THE AGENT
9.1 Appointment. Each Bank hereby irrevocably designates and appoints
-----------
Fleet Bank, National Association as the Agent of such Bank under this Agreement
and the other Loan Documents, and each such Bank irrevocably authorizes Fleet
Bank, National Association, as the Agent for such Bank, to take such action on
its behalf under the provisions of this Agreement and the other Loan Documents
and to exercise such powers and perform such duties as are expressly delegated
to the Agent by the terms of this Agreement and the other Loan Documents,
together with such other powers as are reasonably incidental thereto.
Notwithstanding any provision to the contrary elsewhere in this Agreement, the
Agent shall not have any duties or responsibilities, except those expressly set
forth herein, or any fiduciary relationship with any Bank, and no implied
covenants, functions, responsibilities, duties, obligations or liabilities shall
be read into this Agreement or any other Loan Document or otherwise exist
against the Agent.
9.2 Delegation of Duties. The Agent may execute any of its duties under
--------------------
this Agreement and the other Loan Documents by or through agents or attorneys-
in-fact and shall be entitled to advice of counsel concerning all matters
pertaining to such duties. The Agent shall not be responsible for the
negligence or misconduct of any agents or attorneys-in-fact selected by it with
reasonable care.
9.3 Exculpatory Provisions. Neither the Agent nor any of its officers,
----------------------
directors, employees, agents, attorneys-in-fact or Affiliates shall be (i)
liable for any action lawfully taken or
52
<PAGE>
omitted to be taken by it or such Person under or in connection with this
Agreement or any other Loan Document (except for its or such Person's own gross
negligence or willful misconduct) or (ii) responsible in any manner to any of
the Banks for any recitals, statements, representations or warranties made by
the Company or any officer thereof contained in this Agreement or any other Loan
Document or in any certificate, report, statement or other document referred to
or provided for in, or received by the Agent under or in connection with, this
Agreement or any other Loan Document or for the value, validity, effectiveness,
genuineness, enforceability or sufficiency of this Agreement or the Notes or any
other Loan Document or for any failure of the Company to perform its obligations
hereunder or thereunder. The Agent shall not be under any obligation to any Bank
to ascertain or to inquire as to the observance or performance of any of the
agreements contained in, or conditions of, this Agreement or any other Loan
Document, or to inspect the properties, books or records of the Company.
9.4 Reliance by Agent. The Agent shall be entitled to rely, and shall be
-----------------
fully protected in relying, upon any Note, writing, resolution, notice, consent,
certificate, affidavit, letter, cablegram, telegram, telecopy, telex or teletype
message, statement, order or other document or conversation believed by it to be
genuine and correct and to have been signed, sent or made by the proper Person
or Persons and upon advice and statements of legal counsel (including, without
limitation, counsel to the Company), independent accountants and other experts
selected by the Agent. The Agent may deem and treat the payee of any Note as the
owner thereof for all purposes unless a written notice of assignment,
negotiation or transfer thereof shall have been filed with the Agent. The Agent
shall be fully justified in failing or refusing to take any action under this
Agreement or any other Loan Document unless it shall first receive such advice
or concurrence of the Required Banks as it deems appropriate or it shall first
be indemnified to its satisfaction by the Banks against any and all liability
and expense which may be incurred by it by reason of taking or continuing to
take any such action. The Agent shall in all cases be fully protected in acting,
or in refraining from acting, under this Agreement and the Notes and the other
Loan Documents in accordance with a request of the Required Banks, and such
request and any action taken or failure to act pursuant thereto shall be binding
upon all the Banks and all future holders of the Notes.
9.5 Notice of Default. The Agent shall not be deemed to have knowledge or
-----------------
notice of the occurrence of any Default or Event of Default hereunder unless the
Agent has received notice from a Bank or the Company referring to this
Agreement, describing such Default or Event of Default and stating that such
notice is a "notice of default". In the event that the Agent receives such a
notice, the Agent shall give notice thereof to the Banks. The Agent shall take
such action with respect to such Default or Event of Default as shall be
reasonably directed by the Required Banks; provided that unless and until the
--------
Agent shall have received such directions, the Agent may (but shall not be
obligated to) take such action, or refrain from taking such action, with respect
to such Default or Event of Default as it shall deem advisable in the best
interests of the Banks.
9.6 Non-Reliance on Agent and Other Banks. Each Bank expressly
-------------------------------------
acknowledges that neither the Agent nor any of its officers, directors,
employees, agents, attorneys-in-fact or Affiliates has made any representations
or warranties to it and that no act by the Agent hereinafter taken, including
any review of the affairs of the Company, shall be deemed to constitute any
representation or warranty by the Agent to any Bank. Each Bank represents to the
Agent that it has, independently and without reliance upon the Agent or any
other Bank, and
53
<PAGE>
based on such documents and information as it has deemed appropriate, made its
own appraisal of and investigation into the business, operations, property,
financial and other condition and creditworthiness of the Company and made its
own decision to make its Loans hereunder and enter into this Agreement. Each
Bank also represents that it will, independently and without reliance upon the
Agent or any other Bank, and based on such documents and information as it shall
deem appropriate at the time, continue to make its own credit analysis,
appraisals and decisions in taking or not taking action under this Agreement and
the other Loan Documents, and to make such investigation as it deems necessary
to inform itself as to the business, operations, property, financial and other
condition and creditworthiness of the Company. Except for notices, reports and
other documents expressly required to be furnished to the Banks by the Agent
hereunder, the Agent shall not have any duty or responsibility to provide any
Bank with any credit or other information concerning the business, operations,
property, condition (financial or otherwise), prospects or creditworthiness of
the Company which may come into the possession of the Agent or any of its
officers, directors, employees, agents, attorneys-in-fact or Affiliates.
9.7 Indemnification. The Banks agree to indemnify the Agent in its
---------------
capacity as such (to the extent not reimbursed by the Company and without
limiting the obligation of the Company to do so), ratably according to the
respective amounts of their original Commitments, from and against any and all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements of any kind whatsoever which may at any time
(including, without limitation, at any time following the payment of the Notes)
be imposed on, incurred by or asserted against the Agent in any way relating to
or arising out of this Agreement, any of the other Loan Documents or any
documents contemplated by or referred to herein or therein or the transactions
contemplated hereby or thereby or any action taken or omitted by the Agent under
or in connection with any of the foregoing; provided that no Bank shall be
--------
liable for the payment of any portion of such liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or disbursements
resulting solely from the Agent's gross negligence or willful misconduct. The
agreements in this subsection shall survive the payment of the Notes and all
other amounts payable hereunder.
9.8 Agent in Its Individual Capacity. The Agent and its Affiliates may
--------------------------------
make loans to, accept deposits from and generally engage in any kind of business
with the Company as though the Agent were not the Agent hereunder and under the
other Loan Documents. With respect to its Loans made or renewed by it and any
Note issued to it and with respect to any Letter of Credit issued or
participated in by it, the Agent shall have the same rights and powers under
this Agreement and the other Loan Documents as any Bank and may exercise the
same as though it were not the Agent, and the terms "Bank" and "Banks" shall
include the Agent in its individual capacity.
9.9 Successor Agent. The Agent may resign as Agent upon 10 days' notice
---------------
to the Banks. If the Agent shall resign as Agent under this Agreement and the
other Loan Documents, then the Required Banks shall appoint a Successor Agent,
whereupon such Successor Agent shall succeed to the rights, powers and duties of
the Agent, and the term "Agent" shall mean such Successor Agent effective upon
its appointment, and the former Agent's rights, powers and duties as Agent shall
be terminated, without any other or further act or deed on the part of such
former Agent or any of the parties to this Agreement or any holders of the
Notes. After any retiring Agent's resignation as Agent, the provisions of this
subsection shall inure to its benefit
54
<PAGE>
as to any actions taken or omitted to be taken by it while it was Agent under
this Agreement and the other Loan Documents.
SECTION 10. MISCELLANEOUS
10.1 Amendments and Waivers. Neither this Agreement, any Note, any other
----------------------
Loan Document nor any terms hereof or thereof may be amended, supplemented or
modified except in accordance with the provisions of this subsection. With the
written consent of the Agent and the Required Banks, the Agent and the Company
may, from time to time, enter into written amendments, supplements or
modifications hereto and to the Notes and the other Loan Documents for the
purpose of adding any provisions to this Agreement, the Notes or the other Loan
Documents or changing in any manner the rights of the Banks or of the Company
hereunder or thereunder or waiving, on such terms and conditions as the Agent
may specify in such instrument, any of the requirements of this Agreement, the
Notes or the other Loan Documents or any Default or Event of Default and its
consequences; provided, however, that no such waiver and no such amendment,
-------- -------
supplement or modification shall (a) reduce the amount or extend the maturity of
any Note or any installment thereof, or reduce the rate or extend the time of
payment of interest thereon, or reduce any fee payable to any Bank hereunder, or
change the amount of any Bank's Commitment, in each case without the consent of
the Bank affected thereby, or (b) amend, modify or waive any provision of this
subsection or reduce the percentage specified in the definition of Required
Banks, or consent to the assignment or transfer by the Company of any of its
rights and obligations under this Agreement and the other Loan Documents or
release any of the Collateral, in each case without the written consent of the
Agent and all the Banks, or (c) amend, modify or waive any provision of Section
9 without the written consent of the then Agent. Any such waiver and any such
amendment, supplement or modification shall apply equally to each of the Banks
and shall be binding upon the Company, the Banks, the Agent and all future
holders of the Notes. In the case of any waiver, the Company, the Banks and the
Agent shall be restored to their former position and rights hereunder and under
the outstanding Notes and any other Loan Documents, and any Default or Event of
Default waived shall be deemed to be cured and not continuing; but no such
waiver shall extend to any subsequent or other Default or Event of Default, or
impair any right consequent thereon.
10.2 Notices. All notices, requests and demands to or upon the respective
-------
parties hereto to be effective shall be in writing (including by telecopy,
telegraph or telex), and, unless otherwise expressly provided herein, shall be
deemed to have been duly given or made when delivered by hand, or three days
after being deposited in the mail, postage prepaid, or, in the case of telecopy
notice, when received, or, in the case of telegraphic notice, when delivered to
the telegraph company, or, in the case of telex notice, when sent, answerback
received, addressed as follows in the case of the Company and the Agent, and as
set forth in Schedule I in the case of the other parties hereto, or to such
other address as may be hereafter notified by the respective parties hereto and
any future holders of the Notes:
The Company: Dairy Mart Convenience Stores, Inc.
One Vision Drive
Enfield, Connecticut 06082
Attention: Gregory G. Landry
Telecopy: (203) 741-4487
55
<PAGE>
The Agent: Fleet Bank, National Association
One Constitution Plaza
Hartford, Connecticut 06115
Attention: Walter P. Schuppe, Vice President
Telecopy: (203) 244-4495
provided that any notice, request or demand to or upon the Agent or the Banks
- - --------
pursuant to subsection 2.4, 2.5, 2.9, 2.14 or 2.15 shall not be effective until
received.
10.3 No Waiver; Cumulative Remedies. No failure to exercise and no delay
------------------------------
in exercising, on the part of the Agent or any Bank, any right, remedy, power or
privilege hereunder shall operate as a waiver thereof; nor shall any single or
partial exercise of any right, remedy, power or privilege hereunder preclude any
other or further exercise thereof or the exercise of any other right, remedy,
power or privilege. The rights, remedies, powers and privileges herein provided
are cumulative and not exclusive of any rights, remedies, powers and privileges
provided by law.
10.4 Survival of Representations and Warranties. All representations and
------------------------------------------
warranties made hereunder and in any document, certificate or statement
delivered pursuant hereto or in connection herewith shall survive the execution
and delivery of this Agreement and the Notes.
10.5 Payment of Expenses and Taxes. The Company agrees, within 15 days
-----------------------------
after demand, (a) to pay or reimburse the Agent for all its out-of-pocket costs
and expenses incurred in connection with the development, preparation and
execution of, and any amendment, supplement or modification to, this Agreement,
the Notes and the other Loan Documents and any other documents prepared in
connection herewith or therewith, and the consummation of the transactions
contemplated hereby and thereby, including, without limitation, the fees and
disbursements of counsel to the Agent, (b) to pay or reimburse each Bank and the
Agent for all its costs and expenses incurred in connection with the enforcement
or preservation of any rights under this Agreement, the Notes, the other Loan
Documents and any such other documents, including, without limitation, fees and
disbursements of counsel to the Agent and to the several Banks, and (c) to pay,
indemnify, and hold each Bank and the Agent harmless from, any and all recording
and filing fees and any and all liabilities with respect to, or resulting from
any delay in paying, stamp, excise and other taxes, if any, which may be payable
or determined to be payable in connection with the execution and delivery of, or
consummation of any of the transactions contemplated by, or any amendment,
supplement or modification of, or any waiver or consent under or in respect of,
this Agreement, the Notes, the other Loan Documents and any such other
documents, and (d) to pay, indemnify and hold each Bank harmless from any and
all fees, costs and expenses incurred by any such Bank after the occurrence and
throughout the continuance of an Event of Default in connection with any
inspection or examination pursuant to subsection 6.6, and (e) to pay, indemnify,
and hold each Bank and the Agent (and their respective directors, officers,
employees and agents) harmless from and against any and all other liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements of any kind or nature whatsoever with respect to the
execution, delivery, enforcement, performance and administration of this
Agreement, the Notes, the other Loan Documents and any such other documents (all
the foregoing, collectively, the "indemnified liabilities"), provided, that the
--------
Company shall have no obligation hereunder to the Agent or any Bank with respect
to indemnified liabilities arising from (i) the gross negligence or willful
56
<PAGE>
misconduct of the Agent or any such Bank (or any of their respective directors,
officers, employees or agents), (ii) legal proceedings commenced against the
Agent or any such Bank by any security holder or creditor thereof arising out of
and based upon rights afforded any such security holder or creditor solely in
its capacity as such, or (iii) legal proceedings commenced against the Agent or
any such Bank by any other Bank or by any Transferee. The agreements in this
subsection shall survive repayment of the Notes and all other amounts payable
hereunder.
10.6 Successors and Assigns; Participations; Purchasing Banks.
--------------------------------------------------------
(a) This Agreement shall be binding upon and inure to the benefit of
the Company, the Banks, the Agent, all future holders of the Notes and
their respective successors and assigns, except that the Company may not
assign or transfer any of its rights or obligations under this Agreement
without the prior written consent of each Bank.
(b) Without the consent of the Company, any Bank may, in the ordinary
course of its commercial banking business and in accordance with applicable
law, at any time sell to one or more banks or other entities (other than
any entity which, to the knowledge of such Bank, is a competitor of the
Company or an Affiliate of such a competitor ("Participants"))
participating interests in any Loan owing to such Bank, any Note held by
such Bank, any Commitment of such Bank or any other interest of such Bank
hereunder and under the other Loan Documents. In the event of any such sale
by a Bank of participating interests to a Participant, such Bank's
obligations under this Agreement to the other parties to this Agreement
shall remain unchanged, such Bank shall remain solely responsible for the
performance thereof, such Bank shall remain the holder of any such Note for
all purposes under this Agreement and the other Loan Documents, and the
Company and the Agent shall continue to deal solely and directly with such
Bank in connection with such Bank's rights and obligations under this
Agreement and the other Loan Documents. The Company agrees that if amounts
outstanding under this Agreement and the Notes are due or unpaid, or shall
have been declared or shall have become due and payable upon the occurrence
of an Event of Default, each Participant shall be deemed to have the right
of setoff in respect of its participating interest in amounts owing under
this Agreement and any Note to the same extent as if the amount of its
participating interest were owing directly to it as a Bank under this
Agreement or any Note, provided that such Participant shall only be
--------
entitled to such right of setoff if it shall have agreed in the agreement
pursuant to which it shall have acquired its participating interest to
share with the Banks the proceeds thereof as provided in subsection 10.7.
The Company also agrees that each Participant shall be entitled to the
benefits of subsections 2.16, 2.17, 2.18, 2.19 and 10.5 with respect to its
participation in the Commitments and the Loans outstanding from time to
time; provided, that no Participant shall be entitled to receive any
--------
greater amount pursuant to such subsections than the transferor Bank would
have been entitled to receive in respect of the amount of the participation
transferred by such transferor Bank to such Participant had no such
transfer occurred.
(c) Any Bank may, in the ordinary course of its commercial banking
business and in accordance with applicable law, at any time sell to any
Bank or any affiliate thereof and, with the consent of the Company and each
other Bank if a Purchasing Bank (as hereinafter defined) is not then a Bank
party to this Agreement (which shall not be unreasonably withheld), to one
or more additional banks or financial institutions
57
<PAGE>
("Purchasing Banks") all or any part of its rights and obligations under
this Agreement and the Notes pursuant to an Assignment and Acceptance
executed by such Purchasing Bank, such transferor Bank (and, in the case of
a Purchasing Bank that is not then a Bank or an affiliate thereof, by the
Company and the Agent) and delivered to the Agent for its acceptance and
recording in the Register. Upon such execution, delivery, acceptance and
recording, from and after the Transfer Effective Date determined pursuant
to such Assignment and Acceptance, (x) the Purchasing Bank thereunder shall
be a party hereto and, to the extent provided in such Assignment and
Acceptance, have the rights and obligations of a Bank hereunder with a
Commitment as set forth therein, and (y) the transferor Bank thereunder
shall, to the extent provided in such Assignment and Acceptance, be
released from its obligations under this Agreement (and, in the case of an
Assignment and Acceptance covering all or the remaining portion of a
transferor Bank's rights and obligations under this Agreement, such
transferor Bank shall cease to be a party hereto). Such Assignment and
Acceptance shall be deemed to amend this Agreement to the extent, and only
to the extent, necessary to reflect the addition of such Purchasing Bank
and the resulting adjustment of the appropriate Commitment Percentages
arising from the purchase by such Purchasing Bank of all or a portion of
the rights and obligations of such transferor Bank under this Agreement and
the Notes. On or prior to the Transfer Effective Date determined pursuant
to such Assignment and Acceptance, the Company shall execute and deliver to
the Agent in exchange for the surrendered Revolving Credit Note a new
Revolving Credit Note to the order of such Purchasing Bank in an amount
equal to the Revolving Credit Commitment assumed by it pursuant to such
Assignment and Acceptance and, if the transferor Bank has retained a
Commitment hereunder, new Notes to the order of the transferor Bank in an
amount equal to the Revolving Credit Commitment retained by it hereunder.
Such new Notes shall be dated the Closing Date and shall otherwise be in
the form of the Notes replaced thereby. The Notes surrendered by the
transferor Bank shall be returned by the Agent to the Company marked
"cancelled".
(d) The Agent shall maintain at its address referred to in subsection
10.2 a copy of each Assignment and Acceptance delivered to it and a
register (the "Register") for the recordation of the names and addresses of
the Banks and the Commitment of, and principal amount of the Loans owing
to, each Bank from time to time. The entries in the Register shall be
conclusive, in the absence of manifest error, and the Company, the Agent
and the Banks may treat each Person whose name is recorded in the Register
as the owner of the Loan recorded therein for all purposes of this
Agreement. The Register shall be available for inspection by the Company or
any Bank at any reasonable time and from time to time upon reasonable prior
notice.
(e) Upon its receipt of an Assignment and Acceptance executed by a
transferor Bank and Purchasing Bank (and, in the case of a Purchasing Bank
that is not then a Bank or an affiliate thereof, by the Company and the
Agent) together with, if such Purchasing Bank is not then a Bank hereunder,
payment by the transferor Bank and/or the Purchasing Bank of a registration
and processing fee of $3,000, the Agent shall (i) promptly accept such
Assignment and Acceptance (ii) on the Transfer Effective Date determined
pursuant thereto record the information contained therein in the Register
and give notice of such acceptance and recordation to the Banks and the
Company.
58
<PAGE>
(f) The Company authorizes each Bank to disclose to any Participant or
Purchasing Bank (each, a "Transferee") and any prospective Transferee any
and all financial information in such Bank's possession concerning the
Company and its affiliates which has been delivered to such Bank by or on
behalf of the Company pursuant to this Agreement or which has been
delivered to such Bank by or on behalf of the Company in connection with
such Bank's credit evaluation of the Company and its affiliates prior to
becoming a party to this Agreement.
(g) If, pursuant to this subsection, any interest in this Agreement
or any Note is transferred to any Transferee which is organized under the
laws of any jurisdiction other than the United States or any state thereof,
the transferor Bank shall cause such Transferee, concurrently with the
effectiveness of such transfer, (i) to represent to the transferor Bank
(for the benefit of the transferor Bank, the Agent and the Company) that
under applicable law and treaties no taxes will be required to be withheld
by the Agent, the Company or the transferor Bank with respect to any
payments to be made to such Transferee in respect of the Loans, (ii) to
furnish to the transferor Bank (and, in the case of any Purchasing Bank
registered in the Register, the Agent and the Company) either (A) U.S.
Internal Revenue Service Form 4224 or U.S. Internal Revenue Service Form
1001 or (B) United States Internal Revenue Service Form W-8 or W-9, as
applicable (wherein such Transferee claims entitlement to complete
exemption from U.S. federal withholding tax on all interest payments
hereunder), and (iii) to agree (for the benefit of the transferor Bank, the
Agent and the Company) to provide the transferor Bank (and, in the case of
any Purchasing Bank registered in the Register, the Agent and the Company)
a new Form 4224 or Form 1001 or Form W-8 or W-9, as applicable, upon the
expiration or obsolescence of any previously delivered form and comparable
statements in accordance with applicable U.S. laws and regulations and
amendments duly executed and completed by such Transferee, and to comply
from time to time with all applicable U.S. laws and regulations with regard
to such withholding tax exemption.
(h) Nothing herein shall prohibit any Bank from pledging or assigning
any Note to any Federal Reserve Bank in accordance with applicable law.
10.7 Adjustments; Set-off.
--------------------
(a) Subject to the provisions of subsection 2.14(b), if any Bank (a
"benefitted Bank") shall at any time receive any payment of all or part of
its Loans or the Reimbursement Obligations owing to it, or interest
thereon, or receive any collateral in respect thereof (whether voluntarily
or involuntarily, by set-off, pursuant to events or proceedings of the
nature referred to in Section 8(g), or otherwise), in a greater proportion
than any such payment to or collateral received by any other Bank, if any,
in respect of such other Bank's Loans or the Reimbursement Obligations
owing to it, or interest thereon, such benefitted Bank shall purchase for
cash from the other Banks such portion of each such other Bank's Loan or
the Reimbursement Obligations owing to it, or shall provide such other
Banks with the benefits of any such collateral, or the proceeds thereof, as
shall be necessary to cause such benefitted Bank to share the excess
payment or benefits of such collateral or proceeds ratably with each of the
Banks; provided, however, that if all or any portion of such excess payment
-------- -------
or benefits is thereafter recovered from such benefitted Bank, such
purchase shall be rescinded, and
59
<PAGE>
the purchase price and benefits returned, to the extent of such recovery,
but without interest. The Company agrees that each Bank so purchasing a
portion of another Bank's Loan or the Reimbursement Obligations owing to it
may exercise all rights of payment (including, without limitation, rights
of set-off) with respect to such portion as fully as if such Bank were the
direct holder of such portion.
(b) In addition to any rights and remedies of the Banks provided by
law, each Bank shall have the right, without prior notice to the Company,
any such notice being expressly waived by the Company to the extent
permitted by applicable law, upon any amount becoming due and payable by
the Company hereunder or under the Notes (whether at the stated maturity,
by acceleration or otherwise) to set-off and appropriate and apply against
such amount any and all deposits (general or special, time or demand,
provisional or final), in any currency, and any other credits, indebtedness
or claims, in any currency, in each case whether direct or indirect,
absolute or contingent, matured or unmatured, at any time held or owing by
such Bank to or for the credit or the account of the Company. Each Bank
agrees promptly to notify the Company and the Agent after any such set-off
and application made by such Bank, provided that the failure to give such
--------
notice shall not affect the validity of such set-off and application.
10.8 Counterparts. This Agreement may be executed by one or more of the
------------
parties to this Agreement on any number of separate counterparts, and all of
said counterparts taken together shall be deemed to constitute one and the same
instrument. A set of the copies of this Agreement signed by all the parties
shall be lodged with the Company and the Agent.
10.9 Severability. Any provision of this Agreement which is prohibited or
------------
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.
10.10 Integration. This Agreement represents the agreement of the
-----------
Company, the Agent and the Banks with respect to the subject matter hereof, and
there are no promises, undertakings, representations or warranties by the Agent
or any Bank relative to subject matter hereof not expressly set forth or
referred to herein or in the other Loan Documents.
10.11 GOVERNING LAW. THIS AGREEMENT AND THE NOTES AND THE RIGHTS AND
-------------
OBLIGATIONS OF THE PARTIES UNDER THIS AGREEMENT AND THE NOTES SHALL BE GOVERNED
BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF
CONNECTICUT.
10.12 Submission To Jurisdiction; Waivers. The Company hereby irrevocably
-----------------------------------
and unconditionally:
(a) submits for itself and its property in any legal action or
proceeding relating to this Agreement and the other Loan Documents to which
it is a party, or for recognition and enforcement of any judgment in
respect thereof, to the non-exclusive general jurisdiction of the Courts of
the State of Connecticut, the courts of the United States of America for
the District of Connecticut, and appellate courts from any thereof;
60
<PAGE>
(b) consents that any such action or proceeding may be brought in such
courts and waives any objection that it may now or hereafter have to the
venue of any such action or proceeding in any such court or that such
action or proceeding was brought in an inconvenient court and agrees not to
plead or claim the same;
(c) agrees that service of process in any such action or proceeding
may be effected by mailing a copy thereof by registered or certified mail
(or any substantially similar form of mail), postage prepaid, to the
Company at its address set forth in subsection 10.2 or at such other
address of which the Agent shall have been notified pursuant thereto;
(d) agrees that nothing herein shall affect the right to effect
service of process in any other manner permitted by law or shall limit the
right to sue in any other jurisdiction; and
(e) waives, to the maximum extent not prohibited by law, any right it
may have to claim or recover in any legal action or proceeding referred to
in this subsection any special, exemplary, punitive or consequential
damages.
10.13 Acknowledgements. The Company hereby acknowledges that:
----------------
(a) it has been advised by counsel in the negotiation, execution and
delivery of this Agreement, the Notes and the other Loan Documents;
(b) neither the Agent nor any Bank has any fiduciary relationship to
the Company, and the relationship between Agent and Banks, on one hand, and
Company, on the other hand, is solely that of debtor and creditor; and
(c) no joint venture exists among the Banks or among the Company and
the Banks.
10.14 WAIVERS OF JURY TRIAL. THE COMPANY, THE AGENT AND THE BANKS HEREBY
---------------------
IRREVOCABLY AND UNCONDITIONALLY WAIVE TRIAL BY JURY IN ANY LEGAL ACTION OR
PROCEEDING RELATING TO THIS AGREEMENT, THE NOTES OR ANY OTHER LOAN DOCUMENTS AND
FOR ANY COUNTERCLAIM THEREIN.
10.15 PREJUDGMENT REMEDY WAIVER. THE COMPANY AND EACH OTHER PERSON LIABLE
-------------------------
OR WHO SHALL BECOME LIABLE FOR ALL OR ANY PART OF THE INDEBTEDNESS NOW OR
HEREAFTER OWED TO THE BANKS UNDER OR IN CONNECTION WITH THIS AGREEMENT, HEREBY
ACKNOWLEDGE THAT THE TRANSACTION OF WHICH THIS AGREEMENT IS A PART IS A
COMMERCIAL TRANSACTION, AND TO THE EXTENT ALLOWED UNDER CONNECTICUT GENERAL
STATUTES SECTIONS 52-278a TO 52-278n, INCLUSIVE, OR BY OTHER APPLICABLE LAW,
HEREBY WAIVE THEIR RIGHT TO NOTICE AND HEARING WITH RESPECT TO ANY PREJUDGMENT
REMEDY WHICH THE BANKS OR THEIR RESPECTIVE SUCCESSORS OR ASSIGNS MAY DESIRE TO
USE.
61
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered in Hartford, Connecticut by their proper and duly
authorized officers as of the day and year first above written.
DAIRY MART CONVENIENCE STORES,
INC.
By: /s/ Jeffrey W. Jones
-----------------------------
Name: Jeffrey W. Jones
Title: Vice President - Controller
FLEET BANK, NATIONAL ASSOCIATION
as Agent and as a Bank
By: /s/ Walter P. Schuppe
-----------------------------
Walter P. Schuppe
Vice President
SOCIETY NATIONAL BANK,
as Issuing Bank and as a Bank
By: /s/ Peter D. Moore
-----------------------------
Peter D. Moore
Vice President
SIGNATURE PAGE TO CREDIT AGREEMENT DATED FEBRUARY 25, 1994, AMONG DAIRY MART
CONVENIENCE STORES, INC., FLEET BANK, NATIONAL ASSOCIATION, AS AGENT AND THE
BANKS LISTED ON SCHEDULE I THERETO.
<PAGE>
SCHEDULE I
Commitments; Addresses
----------------------
<TABLE>
<CAPTION>
Commitment Commitment
Percentage Amount
----------- -----------
<S> <C> <C>
Fleet Bank, National Association 50% $15,000,000
One Constitution Plaza
Hartford, Connecticut 06115
Attention: Walter P. Schuppe
- - ---------
Telecopy No.: (203) 244-4495
- - ------------
Society National Bank 50% $15,000,000
127 Public Square
Cleveland, Ohio 44114
Attention: Peter D. Moore
- - ----------
Telecopy No.: (216) 689-4981
- - ------------
- - ------------------------------------------------------------
TOTAL 100% $30,000,000
</TABLE>
Schedule I-1
<PAGE>
SCHEDULE II
-----------
LONG-TERM COMMITMENTS
---------------------
Commitments and Contingencies
- - -----------------------------
In addition to the commitments and contingencies described in the January 30,
1993 audited consolidated financial statements, the Company has certain
environmental contingencies related to the ongoing costs to comply with federal,
state and local environmental assessment and remediation activities with respect
to releases of regulated substances from its existing and previously operated
retail gasoline facilities. The Company accrues its estimates of all costs to
be incurred for assessment and remediation for known releases. These accruals
are adjusted if and when new information becomes known. Due to the nature of
such releases, the actual costs of assessment and remediation activities may
vary significantly from year to year. Additionally, under current federal and
state regulatory programs, the Company will be obligated by December, 1998 to
upgrade or replace all existing underground storage tanks ("UST's") it owns or
operates. The Company presently estimates that it will be required to make
capital expenditures related to the upgrading or replacing of UST's ranging from
approximately $16.0 million to $20.0 million in aggregate through December,
1998, which capital expenditures could be reduced for locations which may be
closed in lieu of the capital costs of compliance.
The Company's estimates of costs to be incurred for environmental assessment and
remediation and for UST upgrading and other regulatory compliance are based on
factors and assumptions that could change due to modifications of regulatory
requirements, detection of unanticipated environmental conditions or other
unexpected circumstances.
<PAGE>
SCHEDULE III
------------
RECENT ACQUISITIONS
-------------------
No material acquisitions or dispositions.
<PAGE>
SCHEDULE IV
-----------
RECENT DISTRIBUTIONS
--------------------
Dividends and/or distributions are made to the Company by its Subsidiaries out
of the cash flow of the Subsidiaries on a continual basis, which amounts are
used to fund the operations of the Company.
<PAGE>
SCHEDULE V
----------
ERISA MATTERS
-------------
Part A
Reportable Events
On November 20, 1989, Central States, Southeast and Southwest Areas Pension Fund
(the "Fund"), the Company and The Lawson Company (collectively, "Dairy Mart")
entered into a settlement agreement whereby the Fund and Dairy Mart settled
Dairy Mart's partial withdrawal liability for its withdrawal from the Fund for
the International Brotherhood of Teamsters, Chauffeurs, Warehousemen and Helpers
of America Locals 336 and 348. The total settlement amount of $2,460,000 was
paid in full.
Part B
Multiemployer Plan Withdrawals
Oscar Ewing, Inc., a wholly-owned subsidiary of CONNA Corporation (collectively,
"CONNA"), recently entered into a new labor agreement with Teamsters Local 748
which agreement expires in March, 1996. Under the agreement, CONNA makes
contributions on behalf of its employees to the Fund. Withdrawal is not
currently contemplated; however, if withdrawal were to occur, Dairy Mart
estimates, based on recent calculations, that withdrawal liabilities would not
exceed $350,000.
<PAGE>
SCHEDULE VI
-----------
SUBSIDIARIES
------------
Part A -- Designated Subsidiaries
- - ------
Dairy Mart East, Inc.
Dairy Mart Farms, Inc.
Dairy Mart, Inc.
CONNA Corporation
The Lawson Company
D.M. Insurance Limited
LMC, Inc.
SNG of Southern Minnesota, Inc.
The Lawson Milk Company
Golden Stores, Inc.
Lakeside Wholesale, Inc.
Quik Shops, Inc.
Open Pantry Properties, Inc.
Remote Services, Inc.
Convenient Industries of America, Inc.
Oscar Ewing, inc.
Convenient Gasoline, Inc.
Jackson County Grocery Co., Inc.
Greenwell Grocery Co., Inc.
CIA Food Marts, Inc.
Food Merchandisers, Inc.
Dairy Mart Convenience Stores of Ohio, Inc.
Part B -- Other Subsidiaries
- - ------
Financial Opportunities, Inc.
* CONNA Limited
* CONNA Australia, Ltd.
* Petco Oil Co. of New York, Inc.
* New York Dairy Mart, Inc.
* These subsidiaries are in the process of being dissolved and the dissolutions
will occur on or before the end of this calendar year.
<PAGE>
SCHEDULE VII
------------
A. ENVIRONMENTAL MATTERS
-------------------------
<TABLE>
<CAPTION>
SITE EXPENDITURES RESERVES
- - ---- ------------ --------
<S> <C> <C>
GEORGETOWN, KY TO DATE: 54,965.00 $80,000.00
PROJECTED: 80,000.00
----------
TOTAL: $134,965.00
===========
</TABLE>
Remodeled location, glass lined
tanks, installed new lines and
removed one tank. Soil test showed
minimal contamination. Filed for
closure with state. State required
additional testing which showed
ground water contamination. State
has indicated a minimal public water
supply contamination and is
investigating potential sources of
such contamination. Area has
multiple sites which may have
contributed to the minimal public
water supply contamination.
Awaiting state direction.
B. LITIGATION
--------------
No material litigation.
<PAGE>
SCHEDULE VIII
-------------
UCC FILING LOCATIONS
--------------------
Secretary of State of the State of Connecticut
<PAGE>
INDEBTEDNESS
------------
Part A
------
Indebtedness Paid on the Closing Date
-------------------------------------
The proceeds of the Term Loans (and, if necessary, the proceeds of the
Revolving Credit Loans) will be used by the Company to pay off its indebtedness
under the terms of the Amended and Restated Loan Agreement between The
Connecticut Bank and Trust Company, N.A. ("CBT") and the Company dated as of
February 1, 1989 (the "Agreement"). The amount of $35,000,000.00 will be the
principal outstanding under the Agreement as of the Closing Date.
Part B
------
<TABLE>
<CAPTION>
Indebtedness Outstanding after the Execution Date
-------------------------------------------------
DAIRY MART CONVENIENCE STORES, INC.
SCHEDULE OF DEBT AND CAPITAL LEASES
(000's OMITTED)
OBLIGATIONS PAYABLE TO: TYPE OF OBLIGATION AMOUNT
- - ----------------------- ------------------ ------
<S> <C> <C>
Charlotte S. Blanton Capital Leases-Real Estate Leases 9
Kenneth and Thelma Gilmore Capital Leases-Real Estate Leases 45
Tradeway Center Capital Leases-Real Estate Leases 16
Bill R. Cole Capital Leases-Real Estate Leases 11
Ed Stephenson Capital Leases-Real Estate Leases 21
Habeeb Investment Company Capital Leases-Real Estate Leases 77
John Wells and William Jones Capital Leases-Real Estate Leases 21
William E. Monday Capital Leases-Real Estate Leases 49
Bissell Companies, Inc. Capital Leases-Real Estate Leases 12
Dr. Sam C. Williams Capital Leases-Real Estate Leases 9
W-M Lumber and Wood Products Capital Leases-Real Estate Leases 79
Ranseland Investment Capital Leases-Real Estate Leases 6
James and Carmen Walker Capital Leases-Real Estate Leases 92
Parks and Weisburb Realtors Capital Leases-Real Estate Leases 83
Westport Station Partners Capital Leases-Real Estate Leases 67
Michael Granus Capital Leases-Real Estate Leases 14
Sam Habeeb Capital Leases-Real Estate Leases 1
Kenneth H. Sharer Capital Leases-Real Estate Leases 2
John Wells Capital Leases-Real Estate Leases 13
Jerry W. Seligam Capital Leases-Real Estate Leases 2
Mark O'Brien Capital Leases-Real Estate Leases 86
John and Grace Harness Capital Leases-Real Estate Leases 47
Gilbert and Evelyn Miller Capital Leases-Real Estate Leases 23
Bissell Companies, Inc. Capital Leases-Real Estate Leases 24
Fleet Bank, N.A. Mortgage Note on Store C-19 35
Chicopee Savings Bank Mortgage Note on Store S-10 30
Presidential Savings Bank Mortgage Note on Store S-17 16
Park West Bank and Trust
Company Mortgage Note on Store S-24 9
People's Bank Mortgage Note on Store C-18 31
North Brookfield Savings Bank Mortgage Note on Store W-3 16
Springfield Institution for
Savings Mortgage Note on Stores S-9, S-19, S-20
and H-1 1,147
</TABLE>
<PAGE>
<TABLE>
OBLIGATIONS PAYABLE TO: TYPE OF OBLIGATION AMOUNT
- - ----------------------- ------------------ ------
<S> <C> <C>
Springfield Institution for
Savings Mortgage Note on Corp. Headquarters 2,956
Springfield Institution for
Savings Mortgage Note on Store C-21 631
Springfield Institution for
Savings Mortgage Note on Store S-2 430
Nations Banc Equipment Notes 1,721
G.E. Capital Corp. Equipment Notes 1,245
Burton Feit Promissory Note Secured by Real Estate 145
Walter E. Baker Trust Promissory Note Secured by Real Estate 200
John F. and Eleanor C.
Flibotte Promissory Note Secured by Real Estate 35
Security Pacific Credit Corp. Capital Lease-Telephone System 13
Unisys Corporation Capital Lease-Computer Systems 694
Varilease Capital Lease-POS Equipment 200
Connecticut Development
Authority Note Payable Secured by Real Estate
and Equipment 421
Manufacturers Hanover Trust Term Loan 22,000 *
Manufacturers Hanover Trust Revolver Loan 12,100 *
Debenture Holders 14.25% Subordinated Debenture 27,183 *
Small Business Administration Debentures 4,220
Burdette W. London Promissory Note Secured by a Mortgage 11
Fred Johnson, Jr. Promissory Note Secured by a Mortgage 7
Society National Bank Promissory Note Secured by a Mortgage 81
Eugene Adams Capital Leases-Real Estate Leases 12
Walter R. Morris Capital Leases-Real Estate Leases 40
Charles E. Jennings Capital Leases-Real Estate Leases 29
Charles L. Hamilton Capital Leases-Real Estate Leases 86
Orbin Greene Capital Leases-Real Estate Leases 61
Jessee Ballew Capital Leases-Real Estate Leases 27
Catherine A. Habeeb Capital Leases-Real Estate Leases 12
Richard Applegate Capital Leases-Real Estate Leases 81
T.H. Crutcher Realty Corp. Capital Leases-Real Estate Leases 23
K.G. Bernard Capital Leases-Real Estate Leases 24
Bank One of Lexington Capital Leases-Real Estate Leases 76
William J. Howe Capital Leases-Real Estate Leases 240
Louis B. Green Capital Leases-Real Estate Leases 220
D & D Investment Company Capital Leases-Real Estate Leases 19
----------
Total Debt and Capital Leases as of January 29, 1994 $ 77,336
==========
</TABLE>
*/ Indebtedness will be paid off on or before the Initial Funding Date.
<PAGE>
DAIRY MART CONVENIENCE STORES, INC.
SCHEDULE OF OTHER LIABILITIES AND DEFERRED CREDITS
(000'S OMITTED)
<TABLE>
<CAPTION>
DESCRIPTION AMOUNT
- - ----------- ------
<S> <C>
DEFERRED FRITO-LAY PROGRAM MONIES 368
DEFERRED R.J. REYNOLDS PROGRAM MONIES 759
DEFERRED PEPSI-COLA FOUNTAIN PROGRAM MONIES 760
DEFERRED PHILIP MORRIS PROGRAM MONIES 94
DEFERRED GAIN ON SALE OF FULL FRANCHISES 217
DEFERRED FRANCHISE RENTAL INCOME 73
LONG-TERM SELF INSURANCE RESERVES 2,770
LONG-TERM OHIO WORKERS COMPENSATION RESERVES 1,183
LONG-TERM CLOSED STORE LEASE LIABILITY RESERVE 155
FRANCHISEE RENTAL SECURITY DEPOSITS RECEIVED 84
NON-COMPETE COVENANTS 25
OTHER MISCELLANEOUS ITEMS 70
------
TOTAL OTHER LIABILITIES AND DEFERRED CREDITS AS OF 12/25/93 $7,188
======
</TABLE>
<PAGE>
SCHEDULE X
----------
<TABLE>
<CAPTION>
LIENS
-----
I. DAIRY MART CONVENIENCE STORES, INC.
Secured Party Date Filed Collateral
- - ------------- ---------- ----------
<S> <C> <C>
1. General Electric Capital 7/25/90 CT Soda fountain equipment and all proceeds
Corporation #887659 replacements, accretions and substitutions
2. General Electric Capital 7/26/90 KY Soda fountain equipment and all proceeds
Corporation #128231 replacements, accretions and substitutions
3. General Electric Capital 7/26/90 OH Soda fountain equipment and all proceeds
Corporation #AE 08543 replacements, accretions and substitutions
4. Unisys Finance Corporation 9/26/89 CT Computer equipment and accessories
#845602 2616-02
5. Unisys Finance Corporation 9/26/89 CT Computer equipment and accessories,
#845601 additions and attachments 2616-01
6. Unisys Finance Corporation 9/29/89 CT Computer equipment and software
#846127 2616-01
7. Unisys Finance Corporation 11/3/89 OH Computer equipment and software and all
#AB 46912 accessories, additions and attachments
8. Unisys Finance Corporation 11/6/89 CT Computer equipment and software and all
#851389 accessories, additions and attachments
2616-04
9. Unisys Finance Corporation 7/27/90 CT Computer equipment and accessories,
#887982 additions, and attachments 2616-06
10. Unisys Finance Corporation 5/13/91 KY Computer equipment located at 6060
#637576 Dutchmans Lane, Louisville, KY 2616-06
11. United States Leasing 2/13/91 CT Computer equipment 2616-07
International, Inc. #913097
12. United States Leasing 6/14/91 OH Computer equipment
International, Inc. #AE 76427
13. United States Leasing 8/5/91 CT Computer equipment
International, Inc. #933811 19129
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
14. NationsBanc Leasing 11/27/92 CT Store and gas equipment
Corporation #0989261
15. NationsBanc Leasing 11/30/92 KY Store and gas equipment for four stores
Corporation #132475 in Kentucky
16. NationsBanc Leasing 11/30/92 KY Store and gas equipment for four stores
Corporation #132476 in Kentucky
17. NationsBanc Leasing 12/3/92 OH Store equipment
Corporation #AH 83822
18. NationsBanc Leasing 12/3/92 OH Gas equipment
Corporation #AH 83823
19. NationsBanc Leasing 12/4/92 MA Store equipment store #2301
Corporation #128778 1502 Newman Ave., Seekonk,MA
20. NationsBanc Leasing 12/4/92 MA Gas equipment store #2301
Corporation #128779 1502 Newman Ave.,Seekonk,MA
21. The CIT Group/Equipment 2/23/93 MA Computer equipment,Schedule 1
Financing,Inc. #143686
22. The CIT Group/Equipment 2/23/93 CT Computer equipment, Schedule 1
Financing,Inc. #0999185
23. The CIT Group/Equipment 2/23/93 KY Computer equipment, Schedule 1
Financing,Inc. #132904
24. The CIT Group/Equipment 2/24/93 OH Computer equipment, Schedule 1
Financing, Inc. #AH 99966
25. The CIT Group/Equipment 6/10/93 CT Fujitsu Telephone System, Schedule 2
Financing,Inc. #1016311
26. The CIT Group/Equipment 8/3/93 CT Computer equipment, Schedule 4
Financing,Inc. #1023056
27. The CIT Group/Equipment 12/10/93 MA Computer equipment, Schedule 5
Financing,Inc. #202843
28. The CIT Group/Equipment 12/15/93 KY Computer equipment, Schedule 5
Financing,Inc. #134427
29. The CIT Group/Equipment 12/20/93 CT Computer equipment, Schedule 6
Financing,Inc. #1039592
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
30. The CIT Group/Equipment 12/20/93 CT Computer equipment, Schedule 6
Financing,Inc. #1039596
II. DAIRY MART, INC.
Secured Party Date Filed Collateral
- - ------------- ---------- ----------
1. General Electric Capital 7/6/93 CT Office Furniture for One Vision Drive
Corporation #1019490
2. General Electric Capital 7/28/93 CT Office Furniture for One Vision Drive
Corporation #1022282
3. Springfield Institute for 7/19/93 CT Real estate and equipment at store 1521
Savings #1021151 1030 Hamilton Ave., Waterbury,CT
4. Springfield Institute for 11/17/93 MA Real estate and equipment at store 2102
Savings #198405 411 North Main St., Palmer, MA
5. Connecticut Development 10/6/76 CT Crapaco milk processing equipment
Authority #330435
III. THE LAWSON COMPANY
Secured Party Date Filed Collateral
- - ------------- ---------- ----------
1. General Electric Capital 8/19/93 OH Freezer Tunnel
Corporation #AK 40696
IV. DAIRY MART FARMS,INC.
Secured Party Date Filed Collateral
- - ------------- ---------- ----------
1. Connecticut Development 10/6/76 CT Crapaco milk processing equipment
Authority #330436
2. Springfield Institute for 3/2/93 CT Real Estate at One Vision Drive, Enfield,
Savings #1000111 Connecticut
</TABLE>
In addition to the foregoing, see Schedule IX, Part B for a description of
certain other liens securing indebtedness described as "Promissory Notes
secured by a Mortgage," Mortgage Note" or "Equipment Notes."
<PAGE>
SCHEDULE XI
-----------
MANAGEMENT LOANS AND ADVANCES
-----------------------------
<TABLE>
<CAPTION>
NAME OF EMPLOYEE AMOUNT
- - ------------------ ------
LOANS AND ADVANCES OVER $1,000:
<S> <C>
David Bobzien $49,500.00
Vinny Desrochers 36,200.00
Roger Joplin 1,000.00
----------
SUBTOTAL $86,700.00
LOANS AND ADVANCES UNDER $1,000:
3,802.00
----------
TOTAL LOANS AND ADVANCES $90,502.00
==========
</TABLE>
<PAGE>
SCHEDULE XII
------------
OUTSTANDING TAX AUDITS
----------------------
<TABLE>
<CAPTION>
YEARS
TYPE OF UNDER
ENTITY FEDERAL EIN# STATE/FED TAX AUDIT
- - ------ ------------ --------- --------- -----------------
<S> <C> <C> <C> <C>
Dairy Mart 04-2497894 IRS Income Fiscal 88,89*
Convenience
Stores & Subs
CONNA Corporation 61-0960167 Kentucky Income/Lic. Fiscal 85 - 88**
Oscar Ewing, Inc. 61-0187240 Kentucky Income/Lic. Fiscal 85 - 88**
Convenient Equip., Inc. 61-0943209 Kentucky Income/Lic. Fiscal 85 - 88**
Remote Services, Inc. 61-0667027 Kentucky Income/Lic. Fiscal 85 - 88**
Conv. Indust. of America 61-0567766 Kentucky Income/Lic. Fiscal 85 - 88**
Food Merchandisers, Inc. 56-0889198 N. Carolina Sales/Use 03/88 - 01/91
Dairy Mart, Inc. 04-2235065 Connecticut Sales/Use 12/88 - 11/91
Dairy Mart Farms, Inc. 06-0937127 Connecticut Sales/Use 12/88 - 11/91
Dairy Mart, Inc. 04-2235065 Massachusetts Sales/Use 07/91 - 12/93
Dairy Mart East, Inc. 04-2741427 Massachusetts Sales/Use 07/91 - 12/93
The Lawson Company 36-2998715 Ohio Sales/Use 07/89- 01/93
CONNA Corporation 61-0960167 Kentucky Income/Lic. Fiscal 89 - 92*
Conv. Indust. of America 61-0567766 Kentucky Income/Lic. Fiscal 89 - 92*
Remote Services, Inc. 61-0667027 Kentucky Income/Lic. Fiscal 89 - 92*
CONNA Corporation 61-0960167 Kentucky Sales/Use Fiscal 89 - 92*
Conv. Indust. of America 61-0567766 Kentucky Sales/Use Fiscal 89 - 92*
Remote Services, Inc. 61-0667027 Kentucky Sales/Use Fiscal 89 - 92*
</TABLE>
NOTES:
* Fiscal year from February 1 to January 31
** '85 and '86 fiscal years from June to May
Stub period from June '86 to October 17, 1986
Stub period from October 18, 1986 to January 31, 1987
Fiscal years thereafter from February 1 to January 31
<PAGE>
EXHIBIT A
Form of Revolving Credit Note
-----------------------------
See Tabs 2(a) and 2(b)
Exhibit A-1
<PAGE>
EXHIBIT B
Form of Subsidiary Guarantee
----------------------------
See Tab 3
Exhibit B-1
<PAGE>
EXHIBIT G
ASSIGNMENT AND ACCEPTANCE
Reference is made to the Credit Agreement, dated as of February 25, 1994,
(as amended, supplemented or otherwise modified from time to time, the "Credit
Agreement"), among DAIRY MART CONVENIENCE STORES, INC., a Delaware corporation
(the "Borrower"), the Banks named therein and FLEET BANK, NATIONAL ASSOCIATION,
as agent for the Banks (in such capacity, the "Agent"). Unless otherwise
defined herein, terms defined in the Credit Agreement and used herein shall have
the meaning given to them in the Credit Agreement.
______________________________(the "Assignor") and ______________________
(the "Assignee") agree as follows:
1. The Assignor hereby irrevocably sells and assigns to the Assignee
without recourse to the Assignor, and the Assignee hereby irrevocably purchases
and assumes from the Assignor without recourse to the Assignor, as of the
Effective Date (as defined below), a ______% interest (the "Assigned Interest")
in and to the Assignor's rights and obligations under the Credit Agreement with
respect to the Assignor's Commitment thereunder in a principal amount as set
forth on Schedule 1 hereto.
2. The Assignor (a) makes no representation or warranty and assumes no
responsibility with respect to any statements, warranties or representations
made in or in connection with the Credit Agreement or the execution, legality,
validity, enforceability, genuineness, sufficiency or value of the Credit
Agreement, any other Loan Document or any other instrument or document furnished
pursuant thereto, or any collateral security granted in connection therewith,
other than that it has not created any adverse claim upon the interest being
assigned by it hereunder and that such interest is free and clear of any such
adverse claim; (b) makes no representation or warranty and assumes no
responsibility with respect to the financial condition of the Company, any of
its Subsidiaries or any other obligor or the performance or the observance by
the Company, any of its Subsidiaries or any other obligor of any of their
respective obligations under the Credit Agreement or any other Loan Document or
any other instrument or document furnished pursuant hereto or thereto; and (c)
attaches the Note(s) held by it evidencing the Assignor's Commitment and
requests that the Agent exchange such Note(s) for a new Note or Notes payable to
the Assignee and (if the Assignor has retained any portion of its Commitment) a
new Note or Notes payable to the Assignor in the respective amounts which
reflect the assignment being made hereby (and after giving effect to any other
assignments which have become effective on the Effective Date).
3. The Assignee (a) represents and warrants that it is legally authorized
to enter into this Assignment and Acceptance; (b) confirms that it has received
a copy of the Credit Agreement, together with copies of the financial statements
delivered pursuant to subsection 6.1 thereof and such other documents and
information as it has deemed appropriate to make its own credit analysis and
decision to enter into this Assignment and Acceptance; (c) agrees that it will,
independently and without reliance upon the Assignor, the Agent or any other
Bank based on such documents and information as it shall deem appropriate at the
time, continue to make its own Credit Agreement, the other Loan Documents or any
other instrument or document furnished
Exhibit G-1
<PAGE>
pursuant hereto or thereto; (d) appoints and authorizes the Agent to take such
action as agent on its behalf and to exercise such powers and discretion under
the Credit Agreement, the other Loan Documents or other instrument or document
furnished pursuant hereto or thereto as are delegated to the Agent by the terms
thereof, together with such powers as are incidental thereto; and (e) agrees
that it will be bound by the provisions of the Credit Agreement and will perform
in accordance with its terms all the obligations which by the terms of the
Credit Agreement are required to be performed by it as a Bank including, if it
is organized under the laws of a jurisdiction outside the United States, its
obligations pursuant to paragraph 2.19(b) of the Credit Agreement.
4. The effective date of this Assignment and Acceptance shall
be______________, 199_ (the "Effective Date"). Following the execution of this
Assignment and Acceptance, it will be delivered to the Agent for acceptance by
it and recording by the Agent pursuant to subsection 10.6 of the Credit
Agreement, effective as of the Effective Date (which shall not, unless otherwise
agreed to by the Agent, be earlier than three Business Days after the date of
such acceptance and recording by the Agent).
5. Upon such acceptance and recording, from and after the Effective Date,
the Agent shall make all payments in respect of the Assigned Interest (including
payments of principal, interest, fees and other amounts) to the Assignee whether
such amounts have accrued prior to the Effective Date or accrue subsequent to
the Effective Date. The Assignor and the Assignee shall make all appropriate
adjustments in payments by the Agent for periods prior to the Effective Date or
with respect to the making of this assignment directly between themselves.
6. From and after the Effective Date, (a) the Assignee shall be a party
to the Credit Agreement and, to the extent provided in this Assignment and
Acceptance, have the rights and obligations of a Bank thereunder and under the
other Loan Documents and shall be bound by the provisions thereof and (b) the
Assignor shall, to the extent provided in this Assignment and Acceptance,
relinquish its rights and be released from its obligations under the Credit
Agreement.
7. This Assignment and Acceptance shall be governed by and construed in
accordance with the laws of the State of Connecticut.
IN WITNESS WHEREOF, the parties hereto have caused this Assignment and
Acceptance to be executed as of the date first above written by their respective
duly authorized officers on Schedule 1 hereto.
Exhibit G-2
<PAGE>
SCHEDULE 1 to the
Assignment and Acceptance
-------------------------
Re: Credit Agreement, dated as of
February 25, 1994, among Dairy Mart
Convenience Stores, Inc., the Banks
from time to time parties thereto,
and Fleet Bank, National Association, as Agent
----------------------------------------------
Name of Assignor:
Name of Assignee:
Transfer Effective Date of Assignment:
Principal Commitment Percentage
Amount Assigned Assigned
--------------- --------
$___________________ ____._______%
[NAME OF ASSIGNEE] [NAME OF ASSIGNOR]
By: By:
----------------------------- ----------------------------
Title: Title:
Accepted: Consented To:
FLEET BANK, NATIONAL ASSOCIATION DAIRY MART CONVENIENCE
as Agent STORES, INC.
By: By:
-------------------------- -----------------------------
Title: Title:
<PAGE>
EXHIBIT H
Form of Opinions of Counsel to the Company and Its Subsidiaries
---------------------------------------------------------------
See Tabs 8(a) and 8(b)
Exhibit H-1
<PAGE>
2(a)
<PAGE>
REVOLVING CREDIT NOTE
No. 1 Hartford, Connecticut
$15,000,000 February 25, 1994
FOR VALUE RECEIVED, the undersigned, DAIRY MART CONVENIENCE STORES, INC., a
Delaware corporation (the "Company"), promises to pay to the order of FLEET
BANK, NATIONAL ASSOCIATION, a national banking association organized and
existing under the laws of the United States of America, having a place of
business at One Constitution Plaza, Hartford, Connecticut 06115 ("Payee"), or
any subsequent assignee or holder hereof (Payee or any subsequent assignee or
holder hereof sometimes being hereinafter referred to as "Holder"), at the
office of Fleet Bank, National Association, One Constitution Plaza, Hartford,
Connecticut 06103, or at such other location as the Agent (as defined in the
Credit Agreement [as hereinafter defined]) may designate in writing, in lawful
money of the United States of America and in immediately available funds, the
principal amount of FIFTEEN MILLION DOLLARS ($15,000,000) or so much thereof as
may be advanced or readvanced by Holder and remain unpaid from time to time
under and pursuant to that certain Credit Agreement dated the date hereof by and
between the Company, Payee and certain other parties (as the same may from time
to time be amended, modified or supplemented, from time to time, the "Credit
Agreement"), together with: (i) interest on the principal balance of this Note
outstanding from time to time, from the date hereof until said balance shall
have been paid in full, at the rate or rates and in the manner provided in the
Credit Agreement (whether before or after judgment); (ii) all amounts which may
be or become due under the Credit Agreement or any of the other Loan Documents
(as defined in the Credit Agreement); (iii) all costs and expenses, including
reasonable attorneys' and appraisers' fees, incurred in collecting or attempting
to collect the indebtedness evidenced by this Note, or in enforcing any of the
Loan Documents or protecting or sustaining any liens or security interests
created thereby or in any litigation or controversy arising from or connected
with this Note or any of the Loan Documents; and (iv) all taxes or duties
assessed upon the indebtedness evidenced by this Note or by any of the Loan
Documents or upon any collateral security for such indebtedness. All
capitalized terms used in this Note but not defined herein shall have the
respective meanings ascribed thereto in the Credit Agreement. This Note is one
of the Revolving Credit Notes referred to in the Credit Agreement and is
entitled to the benefits of and is subject to optional and mandatory prepayment
provisions set forth in the Credit Agreement.
Holder is authorized to record the date, Type and amount of each Revolving
Credit Loan made by Holder pursuant to the Credit Agreement, each continuation
thereof, each conversion of all or a portion thereof to another Type, the date
and amount of each payment or prepayment of principal hereof and, in the case of
LIBOR Loans, the length of each LIBOR Interest Period and LIBOR Rate with
respect thereto, on the schedules annexed hereto and made a part hereof. Any
such recordation shall constitute prima facie evidence of the accuracy of the
----- -----
information so recorded, provided that the failure of Holder to make such
--------
recordation (or any error in such recordation) shall not affect the obligations
of the Company hereunder, under the Credit Agreement, or under any other Loan
Document.
<PAGE>
This Note is secured pursuant to the Pledge Agreements and the Company
Security Agreement. Reference is hereby made to the Pledge Agreements and the
Company Security Agreement for a description of the properties and assets in
which a security interest has been granted, the nature and extent of the
security, the terms and conditions upon which the security interest was granted
and the respective rights of Holder and the Agent in respect thereof. Payment
and performance of this Note is guaranteed as set forth in the Subsidiary
Guarantee.
If any payment on this Note becomes due and payable on a day other than a
Business Day, such payment shall be extended to the next succeeding Business
Day, and, with respect to payments of principal, interest thereon shall be
payable at the then applicable rate during such extension.
Upon the occurrence of any one or more of the Events of Default specified
in the Credit Agreement, all amounts then remaining unpaid on this Note may be
declared to be immediately due and payable as provided in the Credit Agreement.
The Company and each co-maker, endorser, guarantor and surety of this Note,
any accommodation party, and each other Person liable or who shall become liable
for all or any part of the indebtedness evidenced by this Note hereby:
(a) waive demand, presentment, protest, notice of protest, notice
of dishonor, diligence in collection, notice of nonpayment and all
notices of a like nature; and
(b) consent to (i) the release, surrender, exchange or substitution
of all or any part of the security for the indebtedness evidenced by this
Note, or the taking of any additional security, (ii) the release of any
or all other Persons from liability, whether primary or contingent, for
the indebtedness evidenced by this Note or for any related obligations,
and (iii) the granting of any other indulgences to any such Person.
Each endorser, guarantor and surety of this Note, and each other Person
liable or who shall become liable for all or any part of the indebtedness
evidenced by this Note, hereby consent to (i) all renewals, extensions or
modifications of this Note or of any of the Loan Documents (including any
affecting the time of payment) and (ii) all advances under the Credit Agreement,
this Note or any of the other Loan Documents. Any such renewal, extension,
modification, advance, release, surrender, exchange, substitution, taking or
indulgence may take place without notice to any such Person, and, whether any
such notice is given or not, shall not impair the liability of any such Person.
The Company and each co-maker, endorser, guarantor and surety of this Note,
any accommodation party, and each other Person liable or who shall become liable
for all or any part of the indebtedness evidenced by this Note, hereby give
Holder a lien and right of setoff for all of their respective liabilities in
respect of such indebtedness upon and against all of their respective deposits,
credits and property, now or hereafter in the possession or control of Holder
(or any affiliate of Holder) or in transit to Holder (or any affiliate of
Holder). Holder may, at any time after the occurrence and during the
continuance of an Event of Default, apply the same, or any part thereof, to any
liability of the Company or any such other Person, whether matured or unmatured.
2
<PAGE>
THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE
WITH, THE LAWS OF THE STATE OF CONNECTICUT.
MAKER AND EACH ENDORSER, GUARANTOR AND SURETY OF THIS NOTE, AND EACH OTHER
PERSON LIABLE OR WHO SHALL BECOME LIABLE FOR ALL OR ANY PART OF THE INDEBTEDNESS
EVIDENCED BY THIS NOTE, HEREBY ACKNOWLEDGE THAT THE TRANSACTION OF WHICH THIS
NOTE IS A PART IS A COMMERCIAL TRANSACTION, AND TO THE EXTENT ALLOWED UNDER
CONNECTICUT GENERAL STATUTES SECTIONS 52-278a TO 52-278n, INCLUSIVE, OR BY OTHER
APPLICABLE LAW, HEREBY WAIVE THEIR RIGHT TO NOTICE AND HEARING WITH RESPECT TO
ANY PREJUDGMENT REMEDY WHICH HOLDER OR ITS SUCCESSORS OR ASSIGNS MAY DESIRE TO
USE.
If any one or more of the provisions of this Note shall for any reason be
held to be invalid, illegal or unenforceable, in whole or in part, or in any
respect, or if any one or more of the provisions of this Note shall operate, or
would prospectively operate, to invalidate this Note, then such provision or
provisions only shall be deemed to be null and void and of no force or effect
and shall not affect any other provision of this Note, and the remaining
provisions of this Note shall remain operative and in full force and effect,
shall be valid, legal and enforceable, and shall in no way be affected,
prejudiced or disturbed thereby.
DAIRY MART CONVENIENCE STORES, INC.
By: /s/ Gregory G. Landry
--------------------------------
Name: Gregory G. Landry
Title: Executive Vice President
3
<PAGE>
Schedule A to
Revolving Credit Note
---------------------
LOANS, CONVERSIONS AND
PAYMENTS OF LIBOR LOANS
-----------------------
<TABLE>
<CAPTION>
================================================================================================
Amount of LIBOR Amount of
Prime Rate Interest LIBOR Unpaid
Loans Period and Loans Principal
Amount of Converted LIBOR Rate Converted Amount of Balance of
LIBOR into LIBOR with Respect into Prime Principal LIBOR Notation
Date Loans Made Loans Thereto Rate Loans Repaid Loans Made by
- - -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
=================================================================================================
</TABLE>
4
<PAGE>
Schedule B to
Revolving Credit Note
---------------------
LOANS, CONVERSIONS AND
PAYMENTS OF PRIME RATE LOANS
----------------------------
<TABLE>
<CAPTION>
================================================================================================
Amount of Amount of Unpaid
LIBOR Loans Prime Rate Principal
Amount of Converted into Loans Amount of Balance of
Prime Rate Prime Rate Converted into Principal Prime Rate Notation Made
Date Loan Made Loans LIBOR Loans Repaid Loans by
- - ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
=============================================================================================
</TABLE>
5
<PAGE>
2(b)
<PAGE>
REVOLVING CREDIT NOTE
No. 2 Hartford, Connecticut
$15,000,000 February 25, 1994
FOR VALUE RECEIVED, the undersigned, DAIRY MART CONVENIENCE STORES, INC., a
Delaware corporation (the "Company"), promises to pay to the order of SOCIETY
NATIONAL BANK, a national banking association organized and existing under the
laws of the United States of America, having a place of business at 127 Public
Square, Cleveland, Ohio 44114-1306 ("Payee"), or any subsequent assignee or
holder hereof (Payee or any subsequent assignee or holder hereof sometimes being
hereinafter referred to as "Holder"), at the office of Fleet Bank, National
Association, One Constitution Plaza, Hartford, Connecticut 06103, or at such
other location as the Agent (as defined in the Credit Agreement [as hereinafter
defined]) may designate in writing, in lawful money of the United States of
America and in immediately available funds, the principal amount of FIFTEEN
MILLION DOLLARS ($15,000,000) or so much thereof as may be advanced or
readvanced by Holder and remain unpaid from time to time under and pursuant to
that certain Credit Agreement dated the date hereof by and between the Company,
Payee and certain other parties (as the same may from time to time be amended,
modified or supplemented, from time to time, the "Credit Agreement"), together
with: (i) interest on the principal balance of this Note outstanding from time
to time, from the date hereof until said balance shall have been paid in full,
at the rate or rates and in the manner provided in the Credit Agreement (whether
before or after judgment); (ii) all amounts which may be or become due under the
Credit Agreement or any of the other Loan Documents (as defined in the Credit
Agreement); (iii) all costs and expenses, including reasonable attorneys' and
appraisers' fees, incurred in collecting or attempting to collect the
indebtedness evidenced by this Note, or in enforcing any of the Loan Documents
or protecting or sustaining any liens or security interests created thereby or
in any litigation or controversy arising from or connected with this Note or any
of the Loan Documents; and (iv) all taxes or duties assessed upon the
indebtedness evidenced by this Note or by any of the Loan Documents or upon any
collateral security for such indebtedness. All capitalized terms used in this
Note but not defined herein shall have the respective meanings ascribed thereto
in the Credit Agreement. This Note is one of the Revolving Credit Notes
referred to in the Credit Agreement and is entitled to the benefits of and is
subject to optional and mandatory prepayment provisions set forth in the Credit
Agreement.
Holder is authorized to record the date, Type and amount of each Revolving
Credit Loan made by Holder pursuant to the Credit Agreement, each continuation
thereof, each conversion of all or a portion thereof to another Type, the date
and amount of each payment or prepayment of principal hereof and, in the case of
LIBOR Loans, the length of each LIBOR Interest Period and LIBOR Rate with
respect thereto, on the schedules annexed hereto and made a part hereof. Any
such recordation shall constitute prima facie evidence of the accuracy of the
----- -----
information so recorded, provided that the failure of Holder to make such
--------
recordation (or any error in such recordation) shall not affect the obligations
of the Company hereunder, under the Credit Agreement, or under any other Loan
Document.
<PAGE>
This Note is secured pursuant to the Pledge Agreements and the Company
Security Agreement. Reference is hereby made to the Pledge Agreements and the
Company Security Agreement for a description of the properties and assets in
which a security interest has been granted, the nature and extent of the
security, the terms and conditions upon which the security interest was granted
and the respective rights of Holder and the Agent in respect thereof. Payment
and performance of this Note is guaranteed as set forth in the Subsidiary
Guarantee.
If any payment on this Note becomes due and payable on a day other than a
Business Day, such payment shall be extended to the next succeeding Business
Day, and, with respect to payments of principal, interest thereon shall be
payable at the then applicable rate during such extension.
Upon the occurrence of any one or more of the Events of Default specified
in the Credit Agreement, all amounts then remaining unpaid on this Note may be
declared to be immediately due and payable as provided in the Credit Agreement.
The Company and each co-maker, endorser, guarantor and surety of this Note,
any accommodation party, and each other Person liable or who shall become liable
for all or any part of the indebtedness evidenced by this Note hereby:
(a) waive demand, presentment, protest, notice of protest, notice of
dishonor, diligence in collection, notice of nonpayment and all notices of
a like nature; and
(b) consent to (i) the release, surrender, exchange or substitution
of all or any part of the security for the indebtedness evidenced by this
Note, or the taking of any additional security, (ii) the release of any or
all other Persons from liability, whether primary or contingent, for the
indebtedness evidenced by this Note or for any related obligations, and
(iii) the granting of any other indulgences to any such Person.
Each endorser, guarantor and surety of this Note, and each other Person
liable or who shall become liable for all or any part of the indebtedness
evidenced by this Note, hereby consent to (i) all renewals, extensions or
modifications of this Note or of any of the Loan Documents (including any
affecting the time of payment) and (ii) all advances under the Credit Agreement,
this Note or any of the other Loan Documents. Any such renewal, extension,
modification, advance, release, surrender, exchange, substitution, taking or
indulgence may take place without notice to any such Person, and, whether any
such notice is given or not, shall not impair the liability of any such Person.
The Company and each co-maker, endorser, guarantor and surety of this Note,
any accommodation party, and each other Person liable or who shall become liable
for all or any part of the indebtedness evidenced by this Note, hereby give
Holder a lien and right of setoff for all of their respective liabilities in
respect of such indebtedness upon and against all of their respective deposits,
credits and property, now or hereafter in the possession or control of Holder
(or any affiliate of Holder) or in transit to Holder (or any affiliate of
Holder). Holder may, at any time after the occurrence and during the
continuance of an Event of Default, apply the same, or any part thereof, to any
liability of the Company or any such other Person, whether matured or unmatured.
2
<PAGE>
THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE
WITH, THE LAWS OF THE STATE OF CONNECTICUT.
MAKER AND EACH ENDORSER, GUARANTOR AND SURETY OF THIS NOTE, AND EACH OTHER
PERSON LIABLE OR WHO SHALL BECOME LIABLE FOR ALL OR ANY PART OF THE INDEBTEDNESS
EVIDENCED BY THIS NOTE, HEREBY ACKNOWLEDGE THAT THE TRANSACTION OF WHICH THIS
NOTE IS A PART IS A COMMERCIAL TRANSACTION, AND TO THE EXTENT ALLOWED UNDER
CONNECTICUT GENERAL STATUTES SECTIONS 52-278a TO 52-278n, INCLUSIVE, OR BY OTHER
APPLICABLE LAW, HEREBY WAIVE THEIR RIGHT TO NOTICE AND HEARING WITH RESPECT TO
ANY PREJUDGMENT REMEDY WHICH HOLDER OR ITS SUCCESSORS OR ASSIGNS MAY DESIRE TO
USE.
If any one or more of the provisions of this Note shall for any reason be
held to be invalid, illegal or unenforceable, in whole or in part, or in any
respect, or if any one or more of the provisions of this Note shall operate, or
would prospectively operate, to invalidate this Note, then such provision or
provisions only shall be deemed to be null and void and of no force or effect
and shall not affect any other provision of this Note, and the remaining
provisions of this Note shall remain operative and in full force and effect,
shall be valid, legal and enforceable, and shall in no way be affected,
prejudiced or disturbed thereby.
DAIRY MART CONVENIENCE STORES, INC.
By: /s/ Gregory G. Landry
--------------------------------
Name: Gregory G. Landry
Title: Executive Vice President
3
<PAGE>
Schedule A to
Revolving Credit Note
---------------------
LOANS, CONVERSIONS AND
PAYMENTS OF LIBOR LOANS
-----------------------
<TABLE>
<CAPTION>
================================================================================================
Amount of LIBOR Amount of
Prime Rate Interest LIBOR Unpaid
Loans Period and Loans Principal
Amount of Converted LIBOR Rate Converted Amount of Balance of
LIBOR into LIBOR with Respect into Prime Principal LIBOR Notation
Date Loans Made Loans Thereto Rate Loans Repaid Loans Made by
- - ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
================================================================================================
</TABLE>
4
<PAGE>
Schedule B to
Revolving Credit Note
---------------------
LOANS, CONVERSIONS AND
PAYMENTS OF PRIME RATE LOANS
----------------------------
<TABLE>
<CAPTION>
=================================================================================================
Amount of Amount of Unpaid
LIBOR Loans Prime Rate Principal
Amount of Converted into Loans Amount of Balance of
Prime Rate Prime Rate Converted into Principal Prime Rate Notation Made
Date Loan Made Loans LIBOR Loans Repaid Loans by
- - -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
=================================================================================================
</TABLE>
5
<PAGE>
SUBSIDIARY GUARANTEE
THIS SUBSIDIARY GUARANTEE, dated as of February 25, 1994 (as amended,
supplemented or otherwise modified from time to time, this "Guarantee"), by each
of the corporations that are signatories hereto (the "Guarantors") in favor of
FLEET BANK, NATIONAL ASSOCIATION, a national banking association organized and
existing under the laws of the United States of America, as agent (the "Agent")
for the ratable benefit of the Agent, as Agent and individually as a bank, and
the other banks and financial institutions parties thereto from time to time
(the "Banks") that are parties to the Credit Agreement (as hereinafter defined)
W I T N E S S E T H:
WHEREAS, Dairy Mart Convenience Stores, Inc., a Delaware corporation (the
"Company"), is party to a Credit Agreement, dated as of February 25, 1994, with
the Agent and the Banks (as the same may from time to time be amended,
supplemented or otherwise modified, the "Credit Agreement");
WHEREAS, pursuant to the terms of the Credit Agreement and the other Loan
Documents (as hereinafter defined), the Banks have agreed to make certain
Extensions of Credit (as hereinafter defined) to or for the benefit of the
Company;
WHEREAS, the Company owns directly or indirectly all of the issued and
outstanding stock of each Guarantor;
WHEREAS, the proceeds of Extensions of Credit will be used in part for the
benefit of each of the Guarantors in connection with the operation of their
respective businesses;
WHEREAS, the Company and the Guarantors are engaged in related businesses,
and each Guarantor will derive substantial direct and indirect benefit from the
making of the Extensions of Credit; and
WHEREAS, the obligation of the Banks to make the Extensions of Credit is
conditioned upon, among other things, the execution and delivery by the
Guarantors of this Guarantee;
NOW, THEREFORE, in consideration of the premises and to induce the Banks to
enter into the Credit Agreement and to make Extensions of Credit, each Guarantor
hereby agrees with and for the Agent, for the ratable benefit of the Banks, as
follows:
1. Defined Terms. As used in this Guarantee, the following terms have
-------------
the respective meanings set forth below or set forth in the Section hereof
following such terms:
Extensions of Credit -- (i) all Loans or advances made to the Company
under any Loan Document, (ii) all Letters of Credit issued for the account
of the Company under any Loan Document, (iii) all other extensions of
credit to or for the benefit of the Company
1
<PAGE>
under any Loan Document, and (iv) to the extent not otherwise included in
the foregoing, all Obligations.
Obligations -- the unpaid principal of and interest on (including,
without limitation, interest accruing after the maturity of the Loans and
interest accruing on or after the filing of any petition in bankruptcy, or
the commencement of any insolvency, reorganization or like proceeding,
relating to the Company, whether or not a claim for post-filing or
postpetition interest is allowed in such proceeding) the Notes and all
other obligations and liabilities of the Company to the Agent or the Banks,
whether direct or indirect, absolute or contingent, due or to become due,
now existing or hereafter incurred, which may arise under, out of, or in
connection with, the Credit Agreement, the Notes, the other Loan Documents
or any other document made, delivered or given in connection therewith, and
each other obligation and liability, whether direct or indirect, absolute
or contingent, due or to become due, or now existing or hereafter incurred,
of the Company to the Agent or any Bank, whether on account of principal,
interest, reimbursement obligations, fees, indemnities, costs, expenses
(including, without limitation, all fees and disbursements of counsel to
the Agent or any Bank) or otherwise .
All capitalized terms used and not otherwise defined herein shall have the
respective meanings ascribed thereto in the Credit Agreement.
2. Guarantee.
---------
(a) Subject to the provisions of paragraph 2(b), each of the
Guarantors hereby, jointly and severally, unconditionally and irrevocably,
guarantees to the Agent and the Banks and their respective successors,
indorsees, transferees and assigns, the prompt and complete payment by the
Company when due (whether at the stated maturity, by acceleration or
otherwise) of the Obligations. Each Guarantor further agrees to pay any and
all reasonable expenses (including, without limitation, all fees and
disbursements of counsel) which may be paid or incurred by the Agent or any
Bank in enforcing, or obtaining advice of counsel in respect of enforcing,
any rights with respect to, or collecting, any or all of the Obligations
and/or enforcing any rights with respect to, or collecting against, such
Guarantor under this Guarantee. This Guarantee shall remain in full force
and effect until the Obligations are indefeasibly paid in full and the
Commitments are terminated, notwithstanding that from time to time prior
thereto the Company may be free from any Obligations.
(b) Anything herein or in any other Loan Document to the contrary
notwithstanding, each Guarantor and by its acceptance hereof, each
beneficiary hereof, hereby confirms that it is its intention that the
obligations of each Guarantor hereunder shall be in, but not in excess of,
the maximum amount permitted by applicable law. To that end, but only to
the extent such obligations would otherwise be avoidable, the obligations
of each Guarantor hereunder shall be limited to the maximum amount that,
after giving effect to the incurrence thereof and after giving effect to
any rights to contribution of such Guarantor pursuant to any agreement
providing for an equitable contribution among such Guarantor and other
Affiliates of the Company of payments made by guarantees by such parties,
would not render such Guarantor insolvent or unable to pay its debts
(within the meaning of Title 11 of the United States Code or as
2
<PAGE>
defined under the Uniform Fraudulent Conveyance Act, the Uniform Fraudulent
Transfer Act or any analogous applicable law) as they mature or leave such
Guarantor with an unreasonably small capital. The need for any such
limitation shall be determined, and any such needed limitation shall be
effective, at the time or times that each Guarantor is deemed, under
applicable law, to incur obligations hereunder. Any such limitation shall
be apportioned amongst the Obligations owed to the respective Banks pro
rata in accordance with their respective amount thereof. This paragraph
2(b) is intended solely to preserve the rights of each Bank to the maximum
extent permitted by applicable law, and neither any of the Guarantors nor
any other Person shall have any rights under this paragraph 2(b) that it
would not otherwise have under applicable law. For the purposes of this
paragraph 2(b), "insolvency," "unreasonably small capital" and "inability
to pay debts" (as so defined) as they mature" shall be determined in
accordance with applicable law.
(c) Each Guarantor agrees that the Obligations may at any time and
from time to time exceed the amount of the liability of such Guarantor or
of all of the Guarantors without impairing this Guarantee or affecting the
rights and remedies of the Agent and the Banks hereunder.
(d) No payment or payments made by the Company, any of the
Guarantors, any other guarantor or any other Person or received or
collected by the Agent or any Bank from the Company, any of the Guarantors,
any other guarantor or any other Person by virtue of any action or
proceeding or any set-off or appropriation or application at any time or
from time to time in reduction of or in payment of the Obligations shall be
deemed to modify, reduce, release or otherwise affect the liability of any
Guarantor hereunder which shall, notwithstanding any such payment or
payments, remain liable for the Obligations up to the maximum liability of
such Guarantor until the Obligations are paid in full and the Commitments
are terminated .
(e) Each Guarantor agrees that whenever, at any time, or from time to
time, it shall make any payment to the Agent or any Bank on account of its
liability hereunder, it will notify the Agent in writing that such payment
is made under this Guarantee for such purpose.
3. Senior Guarantees. Each Guarantor agrees that all payments required
-----------------
to be made pursuant to this Guarantee by such Guarantor are senior in right and
priority of payment to the payment of any Guarantee Obligations of such
Guarantor arising under or in connection with the guarantee made by such
Guarantor of the Senior Subordinated Notes as set forth in the Senior
Subordinated Indenture.
4. Right of Contribution. Each Guarantor hereby agrees that to the
---------------------
extent that a Guarantor shall have paid more than its proportionate share of any
payment made hereunder, such Guarantor shall be entitled to seek and receive
contribution from and against any other Guarantor hereunder who has not paid its
proportionate share of such payment. Each Guarantor's right of contribution
shall be subject to the terms and conditions of paragraph 6 hereof. The
provisions of this paragraph 4 shall in no respect limit the obligations and
liabilities of any Guarantor to the Agent and the Banks, and each Guarantor
shall remain liable to the Agent and the Banks for the full amount guaranteed
by such Guarantor hereunder.
3
<PAGE>
5. Right of Set-off. Each Guarantor hereby irrevocably authorizes the
----------------
Agent and each Bank at any time and from time to time, after the occurrence of
any Event of Default specified in the Credit Agreement, without notice to such
Guarantor or any other Guarantor, any such notice being expressly waived by each
Guarantor, to set off and appropriate and apply, to the extent permitted by law,
any and all deposits (general or special, time or demand, provisional or final),
in any currency, and any other credits, indebtedness or claims, in any currency,
in each case whether direct or indirect, absolute or contingent, matured or
unmatured, at any time held or owing by the Agent or such Bank, against and on
account of the obligations and liabilities of such Guarantor to the Agent or
such Bank hereunder and claims of every nature and description of the Agent or
such Bank against such Guarantor, in any currency, whether arising hereunder,
under the Credit Agreement, any Note, any Application or any other Loan Document
or otherwise, as the Agent or such Bank may elect, whether or not the Agent or
any Bank has made any demand for payment and although such obligations,
liabilities and claims may be contingent or unmatured. The Agent and each Bank
agrees to notify such Guarantor promptly of any such set-off and the application
made by the Agent or such Bank, provided that the failure to give such notice
--------
shall not affect the validity of such set-off and application. The rights of
the Agent and each Bank under this paragraph are in addition to other rights and
remedies (including, without limitation, other rights of set-off) which the
Agent or such Bank may have.
6. No Subrogation. Notwithstanding any payment or payments made by any
--------------
of the Guarantors hereunder or any set-off or application of funds of any of the
Guarantors by the Agent or any Bank or the receipt of any amounts by the Agent
or any Bank with respect to any property held as collateral security for this
Guarantee, no Guarantor shall be entitled to be subrogated to any of the rights
of the Agent or any Bank against the Company or any other Guarantor or any
collateral security or guarantee or right of offset held by the Agent or any
Bank for the payment of the Obligations, nor shall any Guarantor seek or be
entitled to seek any contribution or reimbursement from the Company or any other
Guarantor in respect of payments made by such Guarantor hereunder, until all
amounts owing to the Agent and the Banks by the Company on account of the
Obligations are indefeasibly paid in full, and the Commitments are terminated.
If any amount shall be paid to any Guarantor on account of such subrogation
rights at any time when all of the Obligations shall not have been terminated,
such amount shall be held by such Guarantor in trust for the Agent and the
Banks, segregated from other funds of such Guarantor, and shall, forthwith upon
receipt by such Guarantor, be turned over to the Agent in the exact form
received by such Guarantor (duly indorsed by such Guarantor to the Agent, if
required), to be applied against the Obligations, whether matured or unmatured,
in such order as the Agent may determine.
7. Amendments, etc. with respect to the Obligations; Waiver of Rights.
------------------------------------------------------------------
Each Guarantor shall remain obligated hereunder notwithstanding that, without
any reservation of rights against any Guarantor and without notice to or further
assent by any Guarantor, (a) any demand for payment of any of the Obligations
made by the Agent or any Bank may be rescinded by the Agent or such Bank and any
of the Obligations continued or reinstated, or (b) the Obligations, or the
liability of any other party upon or for any part thereof, or any collateral
security or guarantee therefor or right of offset with respect thereto, may,
from time to time, in whole or in part, be renewed, extended, amended, modified,
accelerated, compromised, waived, surrendered or released by the Agent or any
Bank, or (c) the Credit Agreement, any Note, any Application, this Guarantee,
any other Loan Document and any other document executed and delivered in
connection therewith or herewith may be amended, modified, supplemented or
terminated, in
4
<PAGE>
whole or in part, as the Agent and/or any Bank may deem advisable from time to
time, or (d) any collateral security, guarantee or right of offset at any time
held by the Agent or any Bank for the payment of the Obligations may be sold,
exchanged, waived, surrendered or released. Neither the Agent nor any Bank shall
have any obligation to protect, secure, perfect or insure any Lien at any time
held by it as security for the Obligations or for this Guarantee or any property
subject thereto. When making any demand hereunder against any of the Guarantors,
the Agent or any Bank may, but shall be under no obligation to, make a similar
demand on the Company or any other Guarantor or guarantor, and any failure by
the Agent or any Bank to make any such demand or to collect any payments from
the Company or any such other Guarantor or any release of the Company or any
Guarantor shall not relieve any of the Guarantors in respect of which a demand
or collection is not made or any of the Guarantors not so released of their
several obligations or liabilities hereunder, and shall not impair, limit or
otherwise adversely affect the rights and remedies, express or implied, or as a
matter of law, of the Agent or any Bank against any of the Guarantors. For the
purposes hereof "demand" shall include the commencement and continuance of any
legal proceedings.
8. Guarantee Absolute and Unconditional. Each Guarantor waives any and
------------------------------------
all notice of the creation, renewal, extension or accrual of any of the
Obligations and notice of or proof of reliance by the Agent or any Bank upon
this Guarantee or acceptance of this Guarantee; the Obligations, and any of
them, shall conclusively be deemed to have been created, contracted or incurred,
or renewed, extended, amended or waived, in reliance upon this Guarantee; and
all dealings between the Company or any of the Guarantors, on the one hand, and
the Agent or any Bank, on the other, shall likewise be conclusively presumed to
have been had or consummated in reliance upon this Guarantee. Each Guarantor
waives diligence, presentment, protest, demand for payment and notice of default
or nonpayment to or upon the Company or any of the Guarantors with respect to
the Obligations. Each Guarantor understands and agrees that this Guarantee
shall be construed as a continuing, absolute and unconditional guarantee of
payment without regard to (a) the validity, regularity or enforceability of the
Credit Agreement, any Note, any Application or any other Loan Document, or any
of the Obligations or any other collateral security therefor or guarantee or
right of offset with respect thereto at any time or from time to time held by
the Agent or any Bank, (b) any defense, set-off or counterclaim (other than a
defense of payment or performance) which may at any time be available to or be
asserted by the Company or any other Guarantor against the Agent or any Bank, or
(c) any other circumstance whatsoever (with or without notice to or knowledge of
the Company or such Guarantor) which constitutes, or might be construed to
constitute, an equitable or legal discharge of the Company or any other
Guarantor for the Obligations, or of such Guarantor under this Guarantee, in
bankruptcy or in any other instance. When pursuing their rights and remedies
hereunder against any Guarantor, the Agent and any Bank may, but shall be under
no obligation to, pursue such rights and remedies as it may have against the
Company or any other Person or against any collateral security or guarantee for
the Obligations or any right of offset with respect thereto, and any failure by
the Agent or any Bank to pursue such other rights or remedies or to collect any
payments from the Company or any such other Person or to realize upon any such
collateral security or guarantee or to exercise any such right of offset, or any
release of the Company or any such other Person or any such collateral security,
guarantee or right of offset, shall not relieve such Guarantor of any liability
hereunder, and shall not impair or affect the rights and remedies, whether
express, implied or available as a matter of law, of the Agent or any Bank
against such Guarantor. This Guarantee shall remain in full force and effect
and be binding in accordance with and to the extent of its terms upon each
Guarantor and the successors and
5
<PAGE>
assigns thereof, and shall inure to the benefit of the Agent and the Banks,
and their respective successors, indorsees, transferees and assigns, until all
the Obligations and the obligations of each Guarantor under this Guarantee
shall have been satisfied by indefeasible payment in full and the Commitments
shall be terminated, notwithstanding that from time to time during the term of
the Credit Agreement the Company may be free from any Obligations.
9. Reinstatement. This Guarantee shall continue to be effective, or be
-------------
reinstated, as the case may be, if at any time payment, or any part thereof, of
any of the Obligations is rescinded or must otherwise be restored or returned by
the Agent or any Bank upon the insolvency, bankruptcy, dissolution, liquidation
or reorganization of the Company or any Guarantor, or upon or as a result of the
appointment of a receiver, intervenor or conservator of, or trustee or similar
officer for, the Company or any Guarantor or any substantial part of its
property, or otherwise, all as though such payments had not been made.
10. Payments. Each Guarantor hereby guarantees that payments hereunder
--------
will be paid to the Agent without set-off or counterclaim in Dollars and in
immediately available funds at the office of the Agent located at One
Constitution Plaza, Hartford, Connecticut 06103.
11. Representations and Warranties. Each Guarantor hereby represents and
------------------------------
warrants to the Agent and the Banks that:
(a) such Guarantor is a corporation duly organized, validly existing
and in good standing under the laws of the jurisdiction of its
incorporation, is in good standing as a foreign corporation in each
jurisdiction where its ownership or lease of property or conduct of
business requires such qualification and has the corporate power and
authority and the legal right to own and operate its property, to lease the
property it operates and to conduct the business in which it is currently
engaged;
(b) such Guarantor has the corporate power and authority and the
legal right to execute and deliver, and to perform its obligations under,
this Guarantee and the other Loan Documents to which it is a party and to
grant the Liens by such Guarantor pursuant to the Subsidiary Pledge
Agreement, and has taken all necessary corporate action to authorize its
execution, delivery and performance of this Guarantee and such other Loan
Documents and the grant of such Liens by such Guarantor;
(c) this Guarantee and each other Loan Document to which such
Guarantor is a party has been duly authorized, executed and delivered by
such Guarantor and constitutes a legal, valid and binding obligation of
such Guarantor enforceable in accordance with its terms, except as
enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium or similar laws affecting the enforcement of creditors' rights
generally and by general equitable principles (whether enforcement is
sought by proceedings in equity or at law);
(d) the execution, delivery and performance of this Guarantee and
each other Loan Document to which it is a party and the grant of the Liens
by such Guarantor pursuant to the Subsidiary Pledge Agreement will not
violate any provision of any Requirement of Law or Contractual Obligation
of such Guarantor and will not result in or require the creation or
imposition of any Lien on any of the properties or revenues of
6
<PAGE>
such Guarantor pursuant to any Requirement of Law or Contractual Obligation
of such Guarantor except the Liens created by such Guarantor pursuant to
the Subsidiary Pledge Agreement;
(e) no consent or authorization of, filing with, or other act by or
in respect of, any arbitrator or Governmental Authority and no consent of
any other Person (including, without limitation, any stockholder or
creditor of such Guarantor) is required in connection with the execution,
delivery, performance, validity or enforceability of this Guarantee or the
other Loan Documents to which it is a party or the grant of the Liens by
such Guarantor pursuant to the Subsidiary Pledge Agreement;
(f) no litigation, investigation or proceeding of or before any
arbitrator or Governmental Authority is pending or, to the knowledge of
such Guarantor, threatened by or against such Guarantor or against any of
its properties or revenues (i) with respect to this Guarantee or any other
Loan Document to which such Guarantor is a party or any of the transactions
contemplated hereby or thereby or (ii) which could have a Material Adverse
Effect; and
(g) such Guarantor has good record and marketable title in fee simple
to or valid leasehold interests in all its real property, and good title to
all its other property, and none of such property is subject to any Lien of
any nature whatsoever except as permitted by subsection 7.3 of the Credit
Agreement.
Each Guarantor agrees that the foregoing representations and warranties shall be
deemed to have been made by such Guarantor on the date of each Extension of
Credit to the Company under the Credit Agreement on and as of such date of such
Extension of Credit as though made hereunder on and as of such date.
12. Further Assurances. Each Guarantor hereby covenants and agrees with
------------------
the Agent and the Banks that, from and after the date of this Guarantee until
the Obligations are paid in full and the Commitments are terminated, at any time
and from time to time, upon the written request of the Agent, and at the sole
expense of each Guarantor, each Guarantor will promptly and duly execute and
deliver such further instruments and documents and take such further actions as
the Agent may reasonably request for the purposes of obtaining or preserving the
full benefits of this Guarantee and of the rights and powers herein granted.
13. Severability. Any provision of this Guarantee 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.
14. Paragraph Headings. The paragraph headings used in this Guarantee are
------------------
for convenience of reference only and are not to affect the construction hereof
or be taken into consideration in the interpretation hereof.
15. No Waiver; Cumulative Remedies. Neither the Agent nor any Bank shall
------------------------------
by any act (except by a written instrument pursuant to paragraph 16 hereof ),
delay, indulgence,
7
<PAGE>
omission or otherwise be deemed to have waived any right or remedy hereunder or
to have acquiesced in any Default or Event of Default or in any breach of any of
the terms and conditions hereof. No failure to exercise, nor any delay in
exercising, on the part of the Agent or any Bank, any right, power or privilege
hereunder shall operate as a waiver thereof. No single or partial exercise of
any right, power or privilege hereunder shall preclude any other or further
exercise thereof or the exercise of any other right, power or privilege. A
waiver by the Agent or any Bank of any right or remedy hereunder on any one
occasion shall not be construed as a bar to any right or remedy which the Agent
or such Bank would otherwise have on any future occasion. The rights and
remedies herein provided are cumulative, may be exercised singly or concurrently
and are not exclusive of any rights or remedies provided by law.
16. Waivers and Amendments; Successors and Assigns. None of the terms and
----------------------------------------------
provisions of this Guarantee may be waived, amended or supplemented or otherwise
modified except by a written instrument executed by each Guarantor and the
Agent, provided that any provision of this Guarantee may be waived by the Agent
--------
and the Banks in a letter or agreement executed by the Agent or by telex or
facsimile transmission from the Agent. This Guarantee shall be binding upon the
successors and assigns of each Guarantor and shall inure to the benefit of the
Agent and the Banks and their respective successors and assigns.
17. Notices. Notices by the Agent to each Guarantor may be given by hand,
-------
by mail, or by facsimile transmission, addressed to each Guarantor in care of
the Company at its address set forth in subsection 10.2 of the Credit Agreement
and shall be effective (a) when delivered by hand, (b) in the case of mail,
three days after deposit in the postal system, first class postage prepaid, and
(c) in the case of telecopy notice, when sent. Each Guarantor may change its
address and transmission numbers by written notice to the Agent; provided that
--------
notice of any change of address shall be effective only upon receipt thereof.
18. Counterparts. This Guarantee may be executed by one or more of the
------------
parties hereto on any number of separate counterparts and all of said
counterparts taken together shall be deemed to constitute one and the same
instrument.
19. Integration. This Guarantee represents the agreement of the
-----------
Guarantors with respect to the subject matter hereof, and there are no promises,
undertakings, representations or warranties by the Agent or any Bank relative to
the subject matter hereof not expressly set forth or referred to herein or in
the other Loan Documents.
20. Authority of Agent. Each Guarantor acknowledges that the rights and
------------------
responsibilities of the Agent under this Guarantee with respect to any action
taken by the Agent or the exercise or non-exercise by the Agent of any option,
right, request, judgment or other right or remedy provided for herein or
resulting or arising out of this Guarantee shall, as between the Agent and the
Banks, be governed by the Credit Agreement and by such other agreements with
respect thereto as may exist from time to time among them, but, as between the
Agent and each Guarantor, the Agent shall be deemed conclusively to have full
and valid authority so to act or refrain from acting on behalf of the Banks, and
each Guarantor shall not be under any obligation, or entitlement, to make any
inquiry respecting such authority.
21. GOVERNING LAW. THIS GUARANTEE AND THE RIGHTS AND OBLIGATIONS OF THE
-------------
GUARANTORS UNDER THIS GUARANTEE SHALL BE GOVERNED BY, AND
8
<PAGE>
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF
CONNECTICUT.
22. Submission to Jurisdiction; Waivers. Each Guarantor hereby
-----------------------------------
irrevocably and unconditionally:
(a) submits for itself and its property in any legal action or
proceeding relating to this Guarantee and the other Loan Documents to which
it is a party, or for recognition and enforcement of any judgment in
respect thereof, to the nonexclusive general jurisdiction of the Courts of
the State of Connecticut, the courts of the United States of America for
the District of Connecticut, and appellate courts from any thereof;
(b) consents that any such action or proceeding may be brought in
such courts and waives any objection that it may now or hereafter have to
the venue of any such action or proceeding in any such court or that such
action or proceeding was brought in an inconvenient court and agrees not to
plead or claim the same;
(c) agrees that service of process in any such action or proceeding
may be effected by mailing a copy thereof by registered or certified mail
(or any substantially similar form of mail), postage prepaid, to such
Guarantor at its address referred to in paragraph 17 hereof or at such
other address of which the Agent shall have been notified pursuant thereto;
(d) agrees that nothing herein shall affect the right to effect
service of process in any other manner permitted by law or shall limit the
right to sue in any other jurisdiction; and
(e) waives, to the maximum extent not prohibited by law, any right it
may have to claim or recover in any legal action or proceeding referred to
in this paragraph any special, exemplary, punitive or consequential
damages.
23. Acknowledgments. Each Guarantor hereby acknowledges that:
---------------
(a) such Guarantor has been advised by counsel in the negotiation,
execution and delivery of this Guarantee and the other Loan Documents to
which it is a party;
(b) neither the Agent nor any Bank has any fiduciary relationship to
such Guarantor, and the relationship between Agent and Banks, on one hand,
and such Guarantor on the other hand, is solely that of debtor and
creditor; and
(c) no joint venture exists among the Banks or among such Guarantor
and the Banks.
24. WAIVERS OF JURY TRIAL. THE GUARANTORS AND, BY THEIR ACCEPTANCE
---------------------
HEREOF, THE AGENT AND THE BANKS HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVE
TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS
GUARANTEE OR ANY OTHER LOAN DOCUMENT TO WHICH THE GUARANTORS ARE A PARTY AND FOR
ANY COUNTERCLAIM THEREIN.
9
<PAGE>
25. PREJUDGMENT REMEDY WAIVER. EACH GUARANTOR HEREBY ACKNOWLEDGES THAT
-------------------------
THE TRANSACTION OF WHICH THIS GUARANTEE IS A PART IS A COMMERCIAL TRANSACTION,
AND TO THE EXTENT ALLOWED UNDER CONNECTICUT GENERAL STATUTES SECTIONS 52-278a TO
52-278n, INCLUSIVE, OR BY OTHER APPLICABLE LAW, HEREBY WAIVES ITS RIGHT TO
NOTICE AND HEARING WITH RESPECT TO ANY PREJUDGMENT REMEDY WHICH THE AGENT, THE
BANKS OR THEIR RESPECTIVE SUCCESSORS OR ASSIGNS MAY DESIRE TO USE.
IN WITNESS WHEREOF, each of the undersigned has caused this Guarantee to be
duly executed and delivered in Hartford, Connecticut by its duly authorized
officer as of the day and year first above written.
CONNA CORPORATION
By: /s/ Gregory G. Landry
----------------------------------
Gregory G. Landry
Executive Vice President
THE LAWSON COMPANY
By: /s/ Gregory G. Landry
----------------------------------
Gregory G. Landry
Executive Vice President
DAIRY MART FARMS, INC.
By: /s/ Gregory G. Landry
----------------------------------
Gregory G. Landry
Executive Vice President
DAIRY MART EAST, INC.
By: /s/ Gregory G. Landry
----------------------------------
Gregory G. Landry
Executive Vice President
10
<PAGE>
DAIRY MART, INC.
By: /s/ Gregory G. Landry
----------------------------------
Gregory G. Landry
Executive Vice President
REMOTE SERVICES, INC.
By: /s/ Gregory G. Landry
----------------------------------
Gregory G. Landry
Executive Vice President
CONVENIENT INDUSTRIES OF AMERICA, INC.
By: /s/ Gregory G. Landry
----------------------------------
Gregory G. Landry
Executive Vice President
CIA FOOD MARTS, INC.
By: /s/ Gregory G. Landry
----------------------------------
Gregory G. Landry
Executive Vice President
QUIK SHOPS, INC.
By: /s/ Gregory G. Landry
----------------------------------
Gregory G. Landry
Executive Vice President
D.M. INSURANCE LIMITED
By: /s/ Gregory G. Landry
----------------------------------
Gregory G. Landry
Executive Vice President
11
<PAGE>
LMC, INC.
By: /s/ Gregory G. Landry
----------------------------------
Gregory G. Landry
Executive Vice President
SNG OF SOUTHERN MINNESOTA, INC.
By: /s/ Gregory G. Landry
----------------------------------
Gregory G. Landry
Executive Vice President
THE LAWSON MILK COMPANY
By: /s/ Gregory G. Landry
----------------------------------
Gregory G. Landry
Executive Vice President
GOLDEN STORES, INC.
By: /s/ Gregory G. Landry
----------------------------------
Gregory G. Landry
Executive Vice President
LAKESIDE WHOLESALE, INC.
By: /s/ Gregory G. Landry
----------------------------------
Gregory G. Landry
Executive Vice President
OPEN PANTRY PROPERTIES, INC.
By: /s/ Gregory G. Landry
----------------------------------
Gregory G. Landry
Executive Vice President
OSCAR EWING, INC.
By: /s/ Gregory G. Landry
----------------------------------
Gregory G. Landry
Executive Vice President
12
<PAGE>
CONVENIENT GASOLINE, INC.
By: /s/ Gregory G. Landry
----------------------------------
Gregory G. Landry
Executive Vice President
JACKSON COUNTY GROCERY CO., INC.
By: /s/ Gregory G. Landry
----------------------------------
Gregory G. Landry
Executive Vice President
GREENWALL GROCERY CO., INC.
By: /s/ Gregory G. Landry
----------------------------------
Gregory G. Landry
Executive Vice President
FOOD MERCHANDISERS, INC.
By: /s/ Gregory G. Landry
----------------------------------
Gregory G. Landry
Executive Vice President
DAIRY MART CONVENIENCE STORES OF OHIO, INC.
By: /s/ Gregory G. Landry
----------------------------------
Gregory G. Landry
Executive Vice President
Accepted:
FLEET BANK, NATIONAL ASSOCIATION,
as Agent
By: /s/ Walter P. Schuppe
------------------------------
Walter P. Schuppe
Vice President
13
<PAGE>
COMPANY PLEDGE AGREEMENT
THIS COMPANY PLEDGE AGREEMENT, dated as of February 25, 1994, made by DAIRY
MART CONVENIENCE STORES, INC., a Delaware corporation (the "Pledgor"), in favor
of FLEET BANK, NATIONAL ASSOCIATION, as agent (in such capacity, the "Agent")
for the ratable benefit of the Agent, as Agent and individually as a bank, and
the other banks and financial institutions parties thereto from time to time
(the "Banks") parties to the Credit Agreement, dated as of February 25, 1994 (as
amended, supplemented or otherwise modified from time to time, the "Credit
Agreement"), among the Pledgor, the Banks and the Agent;
W I T N E S S E T H :
WHEREAS, pursuant to the Credit Agreement, the Banks have severally agreed
to extend credit to the Pledgor upon the terms and subject to the conditions set
forth therein;
WHEREAS, the Pledgor is the legal and beneficial owner of the shares of
Pledged Stock (as hereinafter defined) issued by each of the Pledgor's
Subsidiaries listed on Schedule I hereto (individually, an "Issuer";
collectively the "Issuers"); and
WHEREAS, it is a condition precedent to the obligation of the Banks to make
their respective extensions of credit to the Pledgor under the Credit Agreement
that the Pledgor shall have executed and delivered this Pledge Agreement to the
Agent for the ratable benefit of Agent and the Banks;
NOW, THEREFORE, in consideration of the premises and to induce the Agent
and the Banks to enter into the Credit Agreement and to induce the Agent and the
Banks to make their respective extensions of credit and the Issuing Bank to
issue certain Letters of Credit under the Credit Agreement, the Pledgor hereby
agrees with the Agent, for the ratable benefit of the Banks, as follows:
Section 1. Interpretation of this Agreement.
--------------------------------
(a) Certain Defined Terms. As used in this Agreement, the
---------------------
following terms have the respective meanings set forth below or set forth in the
Section hereof following such term:
Agent -- as defined in the introductory paragraph hereof.
Banks -- as defined in the introductory paragraph hereof.
Code -- the Uniform Commercial Code from time to time in effect in the
State of Connecticut.
Collateral -- the Pledged Stock and all Proceeds.
Credit Agreement -- as defined in the introductory paragraph hereof.
Issuer(s) -- as defined in the second recital paragraph.
<PAGE>
Obligations -- means, at any time, all obligations and undertakings of
the Company under and in respect of the Credit Agreement, including,
without limitation, the Company's obligations and undertakings with respect
to the payment of the principal of, and interest on, the Notes, all of the
Company's Reimbursement Obligations (as such term is defined in the Credit
Agreement) and all other amounts payable, and all other indebtedness owing,
by the Company under each of the Loan Documents.
Pledge Agreement -- this Company Pledge Agreement, as amended,
supplemented or otherwise modified from time to time.
Pledged Stock -- the shares of capital stock of each Issuer listed on
Schedule I hereto, together with all shares, stock certificates, options,
warrants, offers or rights of any nature whatsoever that may be issued or
granted by each Issuer to the Pledgor while this Pledge Agreement is in
effect.
Proceeds -- all "proceeds" as such term is defined in Section 9-306(1)
of the Code on the date hereof and, in any event, shall include, without
limitation, all dividends or other income from the Pledged Stock,
collections thereon or distributions with respect thereto.
(b) Rules for Interpreting Undefined Terms. All capitalized terms
--------------------------------------
used in this Pledge Agreement and not otherwise defined herein shall have the
respective meanings ascribed thereto in the Credit Agreement. All capitalized
terms used in this Pledge Agreement and not defined herein or in the Credit
Agreement but that are defined in the Code shall have the respective meanings
assigned to such terms in the Code.
(c) Headings, etc. The titles of the Sections appear as a matter of
-------------
convenience only, do not constitute an operative part of this Pledge Agreement
and shall not affect the construction hereof. Each covenant contained herein
shall be construed (absent an express contrary provision herein) as being
independent of each other covenant contained herein, and compliance with any one
covenant shall not (absent such an express contrary provision) be deemed to
excuse compliance with one or more other covenants.
(d) Directly or Indirectly. Where any provision in this Pledge
----------------------
Agreement requires or prohibits certain actions by Persons, such provision shall
be applicable regardless of whether such action is taken directly or indirectly
by such Person.
(e) Rules of Construction. The words "herein," "hereof," "hereto"
---------------------
and "hereunder" and other words of similar import refer to this Pledge Agreement
as a whole and not to any particular section, subsection or clause contained in
this Pledge Agreement unless the context requires otherwise. Whenever from the
context it appears appropriate, each term stated in either the singular or the
plural includes the singular and the plural, and pronouns stated in the
masculine, feminine or neuter gender include the masculine, feminine and the
neuter. The word "including" shall mean "including, without limitation."
Unless otherwise specified herein, any reference in this Pledge Agreement to
an existing document, agreement or instrument means such document, agreement
or instrument as it may have been amended, modified, supplemented or restated
from time to time.
2
<PAGE>
(f) Governing Law. THIS PLEDGE AGREEMENT SHALL BE GOVERNED BY, AND
-------------
CONSTRUED AND ENFORCED IN ACCORDANCE WITH, INTERNAL CONNECTICUT LAW.
Section 2. Pledge; Grant of Security Interest. The Pledgor hereby
----------------------------------
unconditionally and irrevocably pledges, assigns and delivers to the Agent, for
the ratable benefit of Agent and the Banks, all the Pledged Stock issued and
outstanding on the date hereof and hereby unconditionally and irrevocably grants
to Agent, for the ratable benefit of the Banks, a first security interest in and
lien upon the Collateral, as collateral security for the prompt and complete
payment and performance when due (whether at the stated maturity, by
acceleration or otherwise) of the Obligations.
Section 3. Stock Powers. Concurrently with the delivery to the Agent of
------------
each certificate representing one or more shares of Pledges Stock to the Agent,
the Pledgor shall deliver an undated stock power covering such certificate, duly
executed in blank by the Pledgor with, if the Agent so requests, signature
guaranteed.
Section 4. Representations and Warranties. The Pledgor represents and
------------------------------
warrants to the Agent and the Banks that:
(a) the shares of Pledged Stock listed on Schedule I constitute all
the issued and outstanding shares of all classes of the capital stock of
each Issuer;
(b) all the shares of the Pledged Stock have been duly and validly
authorized and issued and are fully paid and nonassessable and the
certificates evidencing such shares are in proper form;
(c) the Pledgor is the record and beneficial owner of, and has good
and marketable title to, the Pledged Stock, free of any and all Liens or
options in favor of, or claims of, any other Person, except the Lien
created by this Pledge Agreement;
(d) there are no restrictions upon the voting rights or
transferability of the Pledged Stock and the Pledgor has all requisite
power and authority to execute and deliver this Agreement and to grant the
Liens granted hereby; and
(e) upon delivery to the Agent of the Pledged Stock, the Lien granted
pursuant to this Pledge Agreement will constitute a valid, perfected first-
priority Lien on the Collateral, enforceable as such against all present
and future creditors of the Pledgor and any Persons purporting to purchase
any Collateral (or any interest therein) from the Pledgor.
The Pledgor agrees that the foregoing representations and warranties shall be
deemed to have been made by the Pledgor in a true and correct manner in all
material respects on each date of each extension of credit to the Pledgor.
Section 5. Covenants. The Pledgor covenants and agrees with the Agent and
---------
the Banks that, from and after the date of this Pledge Agreement until the
Obligations are paid in full and the Commitments are terminated:
3
<PAGE>
(a) If the Pledgor shall, as a result of its ownership of the
Pledged Stock, become entitled to receive or shall receive any stock
certificate (including, without limitation, any certificate representing
a stock dividend or a distribution in connection with any
reclassification, increase or reduction of capital or any certificate
issued in connection with any reorganization or recapitalization of any
Issuer), option or rights, whether in addition to, in substitution of, as
a conversion of, or in exchange for any of the Pledged Stock, or
otherwise in respect thereof, the Pledgor shall accept the same as the
agent of the Agent and the Banks, hold the same in trust for the Agent
and the Banks and deliver the same forthwith to the Agent in the exact
form received, duly indorsed by the Pledgor to the Agent, if required,
together with an undated stock power covering such certificate duly
executed in blank by the Pledgor and with, if the Agent so requests,
signature guaranteed, to be held by the Agent, subject to the terms
hereof, as additional collateral security for the Obligations. Any sums
paid upon or in respect of the Pledged Stock upon the liquidation or
dissolution of any Issuer shall be paid over to the Agent to be held by
it hereunder as additional collateral security for the Obligations, and
in case any distribution of capital shall be made on or in respect of the
Collateral or any property shall be distributed upon or with respect to
the Collateral pursuant to the recapitalization or reclassification of
the capital of any Issuer or pursuant to the reorganization thereof, the
property so distributed shall be delivered to the Agent to be held by it
hereunder as additional collateral security for the Obligations. If any
sums of money or property so paid or distributed in respect of the
Pledged Stock shall be received by the Pledgor, the Pledgor shall, until
such money or property is paid or delivered to the Agent, hold such money
or property in trust for the Banks, segregated from other funds of the
Pledgor, as additional collateral security for the Obligations.
(b) Without the prior written consent of the Agent, the Pledgor will
not (i) vote to enable, or take any other action to permit, any Issuer to
issue any stock or other equity securities of any nature or to issue any
other securities convertible into or granting the right to purchase or
exchange for any stock or other equity securities of any nature of such
Issuer, (ii) sell, assign transfer, exchange, or otherwise dispose of, or
grant any option with respect to, the Collateral, or (iii) create, incur or
permit to exist any Lien or option in favor of, or any claim of any Person
with respect to, any of the Collateral, or any interest therein, except for
the Lien provided by this Pledge Agreement. The Pledgor will defend the
right, title and interest of the Agent, and the Banks in and to the
Collateral against the claims and demands of all Persons whomsoever.
(c) At any time and from time to time, upon the written request of
the Agent, and at the sole expense of the Pledgor, the Pledgor will
promptly and duly execute and deliver such further instruments and
documents and take such further actions as the Agent may reasonably request
for the purposes of obtaining or preserving the full benefits of this
Pledge Agreement and of the rights and powers herein granted. If any
amount payable under or in connection with any of the Collateral shall be
or become evidenced by any promissory note, other instrument or chattel
paper, such note, instrument or chattel paper (in each case, as defined
in the Code) shall be immediately delivered to the Agent, duly endorsed
in a manner satisfactory to the Agent, to be held as Collateral pursuant
to this Pledge Agreement.
4
<PAGE>
(d) The Pledgor agrees to pay, and to save the Agent and the Banks
harmless from, any and all liabilities with respect to, or resulting from
any delay in paying, any and all stamp, excise, sales or other taxes which
may be payable or determined to be payable with respect to any of the
Collateral or in connection with any of the transactions contemplated by
this Pledge Agreement.
Section 6. Cash Dividends; Voting Rights. Unless an Event of Default
-----------------------------
shall have occurred and be continuing and the Agent shall have given notice to
the Pledgor of the Agent's intent to exercise its corresponding rights pursuant
to Section 7 below, the Pledgor shall be permitted to receive all cash dividends
paid in the normal course of business of each Issuer and consistent with past
practice to the extent permitted in the Credit Agreement in respect of the
Pledged Stock and to exercise all voting and corporate rights with respect to
the Pledged Stock, provided however, that no vote shall be cast or corporate
right exercised or other action taken which, in the Agent's reasonable judgment,
would impair the Collateral or which would be inconsistent with or result in any
violation of any provision of the Credit Agreement, this Pledge Agreement, the
Notes or any other Loan Document or any other document executed and delivered in
connection therewith or herewith.
Section 7. Rights of the Bank and the Agent. (a) If an Event of Default
--------------------------------
shall occur and be continuing and the Agent shall give notice of its intent to
exercise such rights to the Pledgor, (i) the Agent shall have the right to
receive any and all cash dividends paid in respect of the Pledged Stock and make
application thereof to the Obligations in such order as the Agent may determine
and (ii) all shares of the Pledged Stock shall be registered in the name of the
Agent or its nominee, and the Agent or its nominee may thereafter exercise (A)
all voting, corporate and other rights pertaining to such shares of the Pledged
Stock at any meeting of shareholders of each Issuer or otherwise and (B) any and
all rights of conversion, exchange, subscription and any other rights,
privileges or options pertaining to such shares of the Pledged Stock as if it
were the absolute owner thereof (including, without limitation, the right to
exchange at its discretion any and all of the Pledged Stock upon the merger,
consolidation, reorganization, recapitalization or other fundamental change in
the corporate structure of such Issuer, or upon the exercise by the Pledgor or
the Agent of any right, privilege or option pertaining to such shares of the
Pledged Stock, and in connection therewith, the right to deposit and deliver any
and all of the Pledged Stock with any committee, depositary, transfer agent,
registrar or other designated agency upon such terms and conditions as it may
determine), all without liability except to account for property actually
received by it, but the Agent shall have no duty to the Pledgor to exercise any
such right, privilege or option and shall not be responsible for any failure to
do so or delay in so doing.
(b) The rights of the Agent and the Banks hereunder shall not be
conditioned or contingent upon the pursuit by the Agent or any Bank of any right
or remedy against the Pledgor or against any other Person which may be or become
liable in respect of all or any portion of the Obligations or against any
collateral security therefor, guarantee thereof or right of offset with respect
thereto. Neither the Agent nor any Bank shall be liable for any failure to
demand, collect or realize upon all or any part of the Collateral or for any
delay in doing so, nor shall the Agent be under any obligation to sell or
otherwise dispose of any Collateral upon the request of the Pledgor or any
other Person or to take any other action whatsoever with regard to the
Collateral or any party thereof.
5
<PAGE>
Section 8. Remedies. If an Event of Default shall occur and be
--------
continuing, the Agent, on behalf of the Banks, may exercise, in addition to all
other rights and remedies granted in this Pledge Agreement and in any other
instrument or agreement securing, evidencing or relating to the Obligations, all
rights and remedies of a secured party under the Code. Without limiting the
generality of the foregoing, the Agent, without demand of performance or other
demand, presentment, protest, advertisement or notice of any kind (except any
notice required by law referred to below) to or upon the Pledgor, each Issuer or
any other Person (all and each of which demands, defenses, advertisements and
notices are hereby waived) may in such circumstances forthwith collect, receive,
appropriate and realize upon the Collateral, or any part thereof, and/or may
forthwith sell, assign, grant options to purchase or otherwise dispose of and
deliver the Collateral or any part thereof (or contract to do any of the
foregoing), in one or more parcels at public or private sale or sales, in the
over-the-counter market, at any exchange, broker's board or office of the Agent
or any Bank or elsewhere upon such terms and conditions as Agent may deem
advisable and at such prices as Agent may deem best, for cash or on credit or
for future delivery without assumption of any credit risk. The Agent or any
Bank shall have the right upon any such public sale or sales, and, to the extent
permitted by law, upon any such private sale or sales, to purchase the whole or
any part of the Collateral so sold, free of any right or equity of redemption in
the Pledgor, which right or equity is hereby waived or released. The Agent
shall apply any Proceeds from time to time held by it and the net proceeds of
any such collection, recovery, receipt, appropriation, realization or sale,
after deducting all reasonable costs and expenses of every kind incurred in
respect thereof or incidental to the care or safekeeping of any of the
Collateral or in any way relating to the Collateral or the rights of the Agent
and the Banks hereunder, including, without limitation, reasonable attorneys'
fees and disbursements of counsel to the Agent and the Banks, to the payment in
whole or in part of the Obligations, in such order as the Agent may elect, and
only after such application and after the payment by the Agent of any other
amount required by any provision of law, including, without limitation, Section
9-504(1)(c) of the Code, need the Agent account for the surplus, if any, to the
Pledgor. To the extent permitted by applicable law, the Pledgor waives all
claims, damages and demands it may acquire against the Agent or any Bank arising
out of the exercise by them of any rights hereunder. If any notice of a
proposed sale or other disposition of Collateral shall be required by law, such
notice shall be deemed reasonable and proper if given at least 10 days before
such sale or other disposition. The Pledgor shall remain liable for any
deficiency if the proceeds of any sale or other disposition of Collateral are
insufficient to pay the Obligations and the fees and disbursements of any
attorneys employed by the Agent or any Bank to collect such deficiency.
Section 9. Registration Rights; Private Sales. (a) If the Agent shall
----------------------------------
determine to exercise its right to sell any or all of the Pledged Stock pursuant
to Section 8 hereof, and if in the opinion of the Agent it is necessary or
advisable to have the Pledged Stock, or that portion thereof to be sold,
registered under the provisions of the Securities Act of 1933, as amended (the
"Securities Act"), the Pledgor will cause each such Issuer whose security is to
be so registered to (i) execute and deliver, and cause the directors and
officers of such Issuer to execute and deliver, all such instruments and
documents, and do or cause to be done all such other acts as may be, in the
opinion of the Agent, necessary or advisable to register such Pledged Stock, or
that portion thereof to be sold, under the provisions of the Securities Act,
(ii) cause the registration statement relating thereto to become effective and
to remain effective for a period of one year from the date of the first public
offering of such Pledged Stock, or that portion thereof to be sold and (iii)
make all amendments thereto and/or to the related prospectus which, in the
opinion of the Agent, are necessary or advisable, all in conformity with the
requirements of the
6
<PAGE>
Securities Act and in the rules and regulations of the Securities and Exchange
Commission applicable thereto. The Pledgor agrees to cause each such Issuer to
comply with the provision of the securities or "Blue Sky" laws of any and all
jurisdictions which the Agent shall designate and to make available to its
security holders, as soon as practicable, an earnings statement (which need
not be audited) which will satisfy the provisions of Section 11(a) of the
Securities Act.
(b) The Pledgor recognizes that the Agent may be unable to effect a
public sale of any or all the Pledged Stock, by reason of certain prohibitions
contained in the Securities Act and applicable state securities laws or
otherwise, and may be compelled to resort to one or more private sales thereof
to a restricted group of purchasers which will be obliged to agree, among other
things, to acquire such securities for their own account for investment and not
with a view to the distribution or resale thereof. The Pledgor acknowledges and
agrees that any such private sale may result in prices and other terms less
favorable than if such sale were a public sale and, notwithstanding such
circumstances, agrees that any such private sale shall be deemed to have been
made in a commercially reasonable manner. The Agent shall be under no
obligation to delay a sale of any of the Pledged Stock for the period of time
necessary to permit any Issuer to register such securities for public sale under
the Securities Act or under applicable state securities laws, even if such
Issuer would agree to do so.
(c) The Pledgor further agrees to use its best efforts to do or cause
to be done all such other acts as may be necessary to make such sale or sales of
all or any portion of the Pledged Stock pursuant to this Section 8 valid and
binding and in compliance with any and all other applicable Requirements of Law.
The Pledgor further agrees that a breach of any of the covenants contained in
this Section 8 will cause irreparable injury to the Agent and the Banks, that
the Agent and the Banks have no adequate remedy at law in respect of such breach
and, as a consequence, that each and every covenant contained in this Section 8
shall be specifically enforceable against the Pledgor, and the Pledgor hereby
waives and agrees not to assert any defenses against an action for specific
performance of such covenants except for a defense that no Event of Default has
occurred under the Credit Agreement.
Section 10. Irrevocable Authorization and Instruction to Issuers. The
----------------------------------------------------
Pledgor hereby authorizes and instructs each Issuer to comply with any
instruction received by such Issuer from the Agent in writing that (a) states
that an Event of Default has occurred and (b) is otherwise in accordance with
the terms of this Pledge Agreement, without any other or further instructions
from the Pledgor, and the Pledgor agrees that each Issuer shall be fully
protected in so complying.
Section 11. Authority of Agent. The Pledgor acknowledges that the
------------------
rights and responsibilities of the Agent under this Pledge Agreement with
respect to any action taken by the Agent or the exercise of non-exercise by the
Agent of any option, voting right, request, judgment or other right or remedy
provided for herein or resulting or arising out of this Pledge Agreement shall,
as between the Agent and the Banks, be governed by the Credit Agreement and by
such other agreements with respect thereto as may exist from time to time among
them, but, as between the Agent and the Pledgor, the Agent shall be
conclusively presumed to be acting as agent for the Banks with full and valid
authority so to act or refrain from acting, and neither the Pledgor nor any
Issuer shall be under any obligation, or entitlement, to make any inquiry
respecting such authority.
7
<PAGE>
Section 12. Amendments, etc. with respect to the Obligations. The
------------------------------------------------
Pledgor and the Pledged Stock shall remain subject to the Lien granted hereby,
notwithstanding that, without any reservation of rights against the Pledgor, and
without notice to or further assent by the Pledgor, any demand for payment of
any of the Obligations made by the Agent or any Obligations continued, and the
Obligations, or the liability of any Issuer or any other Person upon or for any
part thereof, or any collateral security or guarantee therefor or right of
offset with respect thereto, may, from time to time, in whole or in part, be
renewed, extended, amended, modified, accelerated, compromised, waived,
surrendered, or released by the Agent or any Bank, and the Credit Agreement, the
Notes and any other Loan Document and any other documents executed and delivered
in connection therewith may be amended, modified, supplemented or terminated, in
whole or part, as the Agent or the Banks (or the Required Banks, as the case may
be) may deem advisable from time to time, and any guarantee, right of offset or
other collateral security at any time held by the Agent or any Bank for the
payment of the Obligations may be sold, exchanged, waived, surrendered or
released. Neither the Agent nor any Bank shall have any obligation to protect,
secure, perfect or insure any other Lien at any time held by it as security for
the Obligations or any property subject thereto. The Pledgor waives any and all
notice of the creation, renewal, extension or accrual of any of the obligations
and notice of or proof of reliance by the Agent or any Bank upon this Pledge
Agreement; the Obligations, and any of them, shall conclusively be deemed to
have been created, contracted or incurred in reliance upon this Pledge
Agreement, and all dealings between any Issuer and the Pledgor on the one hand,
and that the Agent and the Banks, on the other, shall likewise be conclusively
presume to have been had or consummated in reliance upon this Pledge Agreement.
The Pledgor waives diligence presentment protest demand for payment and notice
or default or nonpayment to or upon any Issuer of one Pledgor with respect to
the Obligations.
Section 13. Limitation on Duties Regarding Collateral. The Agent's
-----------------------------------------
sole duty with respect to the custody, safekeeping and physical preservation of
the Collateral in its possession, under section 9-207 of the Code or otherwise,
shall be to deal with it in the same manner as the Agent deals with similar
securities and property for its own account. Neither the Agent, any Bank nor
any of their respective directors, officers, employees or agents shall be liable
for failure to demand, collect or realize upon any of the Collateral or for any
delay in doing so or shall be under any obligation to sell or otherwise dispose
of any Collateral upon the request of the Pledgor or otherwise.
Section 14. Notices. Notices by the Agent to the Pledgor or any Issuer
-------
may be given by hand, by mail, by telex or by facsimile transmission, addressed
or transmitted to the Pledgor, or in the case of any Issuer, in care of the
Pledgor, at the Pledgor's address or transmission number set forth in subsection
10.2 of the Credit Agreement and shall be effective (a) when delivered by hand,
(b) in the case of mail, three days after deposit in the postal system, first
class postage pre-paid and (c) in the case of telecopy notice, when sent. The
Pledgor or any Issuer may change their respective addresses and transmission
numbers by written notice to the Agent.
Section 15. No Waiver; Cumulative Remedies. Neither the Agent nor any
------------------------------
Bank shall by any act (except by a written instrument pursuant to Section 14
hereof) be deemed to have waived any right or remedy hereunder or to have
acquiesced in any Default or Event of Default or in any breach of any of the
terms and conditions hereof. No failure to exercise, nor any delay in
exercising, on the part of the Agent or any Bank, any right, power or
privilege hereunder shall operate as a waiver thereof. No single or partial
exercise of any right, power or privilege
8
<PAGE>
hereunder shall preclude any other or further exercise thereof or the exercise
of any other right or remedy hereunder on any one occasion shall not be
construed as a bar to any right or remedy which the Agent or such Bank would
otherwise have on any future occasion. The rights and remedies herein provided
are cumulative, may be exercised singly or concurrently and are not exclusive of
any other rights or remedies provided by law.
Section 16. Waivers and Amendments; Successors and Assigns. None of the
----------------------------------------------
terms or provisions of this Pledge Agreement may be amended, supplemented or
otherwise modified except by a written instrument executed by the Pledgor and
the Agent, provided that any provision of this Pledge Agreement may be waived by
--------
the Agent in a letter or agreement executed by the Agent or by telex or
facsimile transmission from the Agent. This Pledge Agreement shall be binding
upon the successors and assigns of the Pledgor and shall inure to the benefit of
the Agent and the Banks and their respective successors and assigns.
Section 17. Miscellaneous Provisions.
------------------------
(a) Powers Coupled with an Interest. All authorizations and agencies
-------------------------------
herein contained with respect to the Collateral are irrevocable and powers
coupled with an interest.
(b) Severability. Any provision of this Pledge 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 where such provision is
valid and enforceable.
(c) Integration. This Pledge Agreement represents the agreement of
-----------
the Pledgor with respect to the subject matter hereof, and there are no
promises, undertakings, representations or warranties by the Agent or any Bank
relative to subject matter hereof not expressly set forth or referred to herein
or in the other Loan Documents.
(d) Counterparts. This Pledge Agreement may be executed and
------------
delivered by the parties hereto through the use of two or more original
identical counterparts hereof, each of which shall be deemed to be an original
instrument and all of which shall be deemed to represent but one Pledge
Agreement, fully binding upon and enforceable against the parties hereto.
9
<PAGE>
IN WITNESS WHEREOF, the undersigned has caused this Pledge Agreement to be
duly executed and delivered in Hartford, Connecticut as of the date first above
written.
DAIRY MART CONVENIENCE STORES, INC.
By /s/ Gregory G. Landry
---------------------------------
Gregory G. Landry
Executive Vice President
Accepted:
FLEET BANK, NATIONAL ASSOCIATION
as Agent
By /s/ Walter P. Schuppe
------------------------------
Walter P. Schuppe
Vice President
10
<PAGE>
ISSUER ACKNOWLEDGEMENT AND CONSENT
Each of the undersigned Issuers referred to in the foregoing Pledge
Agreement hereby acknowledges receipt of a copy thereof agree to be bound
thereby and to comply with the terms thereof insofar as such terms are
applicable to such Issuer. Each of the undersigned Issuers agrees to notify the
Agent promptly in writing of the occurrence of any of the events described in
Section 5(a) of the Pledge Agreement with respect to such Issuer. Each of the
undersigned Issuers further agrees that the terms of Section 9(a) of the Pledge
Agreement shall apply to such Issuer, mutatis mutandis, with respect to all
------- --------
actions that may be required of it under or pursuant to or arising out of
Section 9 of the Pledge Agreement.
CONNA CORPORATION
By: /s/ Gregory G. Landry
-----------------------------
Gregory G. Landry
Executive Vice President
DAIRY MART EAST, INC.
By: /s/ Gregory G. Landry
-----------------------------
Gregory G. Landry
Executive Vice President
DAIRY MART FARMS, INC.
By: /s/ Gregory G. Landry
-----------------------------
Gregory G. Landry
Executive Vice President
DAIRY MART, INC.
By: /s/ Gregory G. Landry
-----------------------------
Gregory G. Landry
Executive Vice President
11
<PAGE>
THE LAWSON COMPANY
By: /s/ Gregory G. Landry
-----------------------------
Gregory G. Landry
Executive Vice President
D.M. INSURANCE LIMITED
By: /s/ Gregory G. Landry
-----------------------------
Gregory G. Landry
Executive Vice President
DAIRY MART CONVENIENCE STORES OF OHIO, INC.
By: /s/ Gregory G. Landry
-----------------------------
Gregory G. Landry
Executive Vice President
12
<PAGE>
SCHEDULE 1
TO PLEDGE
AGREEMENT
DESCRIPTION OF PLEDGED STOCK
<TABLE>
<CAPTION>
Stock
Issuer Class of Stock Certificate No. No. of Shares
<S> <C> <C> <C>
CONNA Corporation Common 1 1,000
Dairy Mart East, Inc. Common 2 1,000
Dairy Mart Farms, Inc. Common 2 1,000
Dairy Mart, Inc. Common 1 100
The Lawson Company Common 3 1,000
D.M. Insurance Limited Common 1 119,993
Dairy Mart Convenience Common 2 1,000
Stores of Ohio, Inc.
</TABLE>
13
<PAGE>
SUBSIDIARY PLEDGE AGREEMENT
THIS SUBSIDIARY PLEDGE AGREEMENT, dated as of February 25, 1994, made by
each of the corporations that are signatories hereto (individually, a Pledgor"
and collectively, the "Pledgors"), in favor of FLEET BANK, NATIONAL ASSOCIATION,
as agent (in such capacity, the "Agent") for the ratable benefit of the Agent,
as Agent and individually as a bank, and the other banks and financial
institutions parties thereto from time to time (the "Banks") parties to the
Credit Agreement, dated as of February 25, 1994 (as amended, supplemented or
otherwise modified from time to time, the "Credit Agreement"), among Dairy Mart
Convenience Stores, Inc., a Delaware corporation (the "Company"), the Banks and
the Agent;
W I T N E S S E T H :
WHEREAS, pursuant to the Credit Agreement, the Banks have severally agreed
to extend credit to the Company upon the terms and subject to the conditions set
forth therein;
WHEREAS, each Pledgor is the legal and beneficial owner of the shares of
Pledged Stock (as hereinafter defined) in the amounts set forth on Schedule I
hereto issued by the corporation named therein (individually, an "Issuer";
collectively, the "Issuers");
WHEREAS, each Pledgor has executed and delivered a Subsidiary Guarantee
dated as of February 25, 1994 (as amended, supplemented or otherwise to time,
the "Guarantee") in favor of the Agent for the ratable benefit of the Banks,
pursuant to which such Pledgor has guaranteed the Obligations (as defined in the
Guarantee);
WHEREAS, each Pledgor desires to secure the guarantee made by it in the
pledge of the Pledged Stock listed on Schedule I with the name of such Pledgor;
WHEREAS, the Company owns directly or indirectly all of the issued and
outstanding stock of each Pledgor and each Pledgor will receive substantial
direct and indirect benefit from the Banks' extensions of credit to the Company;
and
WHEREAS, it is a condition precedent to the obligation of the Banks to
extend credit to the Company under the Credit Agreement that each Pledgor shall
have executed and delivered this Pledge Agreement to the Agent for the ratable
benefit of Agent and the Banks.
NOW, THEREFORE, in consideration of the premises and to induce the Agent
and the Banks to enter into the Credit Agreement and to induce the Banks to
extend credit to the Company under the Credit Agreement, each Pledgor hereby
agrees with the Agent, for the ratable benefit of the Banks as follows:
Section 1. Interpretation of this Agreement.
--------------------------------
(a) Certain Defined Terms. As used in this Agreement, the
---------------------
following terms have the respective meanings set forth below or set forth in the
Section hereof following such term:
Agent -- as defined in the introductory paragraph hereof.
Banks -- as defined in the introductory paragraph hereof.
<PAGE>
Code -- the Uniform Commercial Code from time to time in effect in the
State of Connecticut.
Collateral -- the Pledged Stock and all Proceeds.
Credit Agreement -- as defined in the introductory paragraph hereof.
Issuer(s) -- as defined in the second recital paragraph.
Obligations -- means, at any time, all obligations and undertakings of
the Company under and in respect of the Credit Agreement, including,
without limitation, the Company's obligations and undertakings with respect
to the payment of the principal of, and interest on, the Notes, all of the
Company's Reimbursement Obligations (as such term is defined in the Credit
Agreement) and all other amounts payable, and all other indebtedness owing,
by the Company under each of the Loan Documents.
Pledge Agreement -- this Subsidiary Pledge Agreement, as amended,
supplemented or otherwise modified from time to time.
Pledged Stock -- the shares of capital stock of each Issuer listed on
Schedule I hereto, together with all shares, stock certificates, options,
warrants, offers or rights of any nature whatsoever that may be issued or
granted by each Issuer to each respective Pledgor while this Pledge
Agreement is in effect.
Proceeds -- all "proceeds" as such term is defined in Section 9-306(1)
of the Code on the date hereof and, in any event, shall include, without
limitation, all dividends or other income from the Pledged Stock,
collections thereon or distributions with respect thereto.
(b) Rules for Interpreting Undefined Terms. All capitalized terms
--------------------------------------
used in this Pledge Agreement and not otherwise defined herein shall have the
respective meanings ascribed thereto in the Credit Agreement. All capitalized
terms used in this Pledge Agreement and not defined herein or in the Credit
Agreement but that are defined in the Code shall have the respective meanings
assigned to such terms in the Code.
(c) Headings, etc. The titles of the Sections appear as a matter of
convenience only, do not constitute an operative part of this Pledge Agreement
and shall not affect the construction hereof. Each covenant contained herein
shall be construed (absent an express contrary provision herein) as being
independent of each other covenant contained herein, and compliance with any
one covenant shall not (absent such an express contrary provision) be deemed
to excuse compliance with one or more other covenants.
(d) Directly or Indirectly. Where any provision in this Pledge
----------------------
Agreement requires or prohibits certain actions by Persons, such provision shall
be applicable regardless of whether such action is taken directly or indirectly
by such Person.
2
<PAGE>
(e) Rules of Construction. The words "herein," "hereof," "hereto"
---------------------
and "hereunder" and other words of similar import refer to this Pledge Agreement
as a whole and not to any particular section, subsection or clause contained in
this Pledge Agreement unless the context requires otherwise. Whenever from the
context it appears appropriate, each term stated in either the singular or the
plural includes the singular and the plural, and pronouns stated in the
masculine, feminine or neuter gender include the masculine, feminine and the
neuter. The word "including" shall mean "including, without limitation."
Unless otherwise specified herein, any reference in this Pledge Agreement to an
existing document, agreement or instrument means such document, agreement or
instrument as it may have been amended, modified, supplemented or restated from
time to time.
(f) Governing Law. THIS PLEDGE AGREEMENT SHALL BE GOVERNED BY, AND
-------------
CONSTRUED AND ENFORCED IN ACCORDANCE WITH, INTERNAL CONNECTICUT LAW.
Section 2. Pledge; Grant of Security Interest. Each Pledgor hereby
----------------------------------
unconditionally and irrevocably pledges, assigns and delivers to the Agent, for
the ratable benefit of Agent and the Banks, all the Pledged Stock issued and
outstanding on the date hereof and hereby unconditionally and irrevocably grants
to Agent, for the ratable benefit of the Banks, a first security interest in and
Lien upon the Collateral, as collateral security for the prompt and complete
payment and performance when due (whether at the stated maturity, by
acceleration or otherwise) of the Obligations.
Section 3. Stock Powers. Concurrently with the delivery to the Agent of
------------
each certificate representing one or more shares of Pledged Stock to the Agent,
each Pledgor shall deliver an undated stock power covering such certificate,
duly executed in blank by such Pledgor with, if the Agent so requests, signature
guaranteed.
Section 4. Representations and Warranties. Each Pledgor represents and
------------------------------
warrants to the Agent and the Banks that:
(a) the shares of Pledged Stock listed on Schedule I with the name of
such Pledgor constitute all the issued and outstanding shares of all
classes of the capital stock of each Issuer owned by such Pledgor, except
as otherwise set forth on Schedule I;
(b) all the shares of the Pledged Stock listed on Schedule I with the
name of such Pledgor have been duly and validly authorized and issued and
are fully paid and nonassessable and the certificates evidencing such
shares are in proper form;
(c) such Pledgor is the record and beneficial owner of, and has good
and marketable title to, the Pledged Stock listed on Schedule I with the
name of such Pledgor, free of any and all Liens or options in favor of,
or claims of, any other Person, except the Lien created by this Pledge
Agreement;
(d) there are no restrictions upon the voting rights or
transferability of the Pledged Stock and each Pledgor has all requisite
power and authority to execute and deliver this Agreement and to grant the
Liens granted hereby; and
3
<PAGE>
(e) upon delivery to the Agent of the Pledged Stock listed on
Schedule I with the name of such Pledgor, the Liens granted by such Pledgor
pursuant to this Pledge Agreement will constitute valid, perfected first-
priority Liens on such Pledged Stock and the Proceeds thereof, enforceable
as such against all present and future creditors of such Pledgor and any
Persons purporting to purchase such Collateral (or any interest therein)
from such Pledgor.
Each Pledgor agrees that the foregoing representations and warranties shall be
deemed to have been made by such Pledgor in a true and correct manner in all
material respects on each date of each extension of credit to the Company.
Section 5. Covenants. Each Pledgor covenants and agrees with the Agent
---------
and the Banks that, from and after the date of this Pledge Agreement until the
Obligations are paid in full and the Commitments are terminated:
(a) If such Pledgor shall, as a result of its ownership of the
Pledged Stock, become entitled to receive or shall receive any stock
certificate (including, without limitation, any certificate representing
a stock dividend or a distribution in connection with any
reclassification, increase or reduction of capital or any certificate
issued in connection with any reorganization or recapitalization of any
Issuer), option or rights, whether in addition to, in substitution of, as
a conversion of, or in exchange for any of the Pledged Stock, or
otherwise in respect thereof, such Pledgor shall accept the same as the
agent of the Agent and the Banks, hold the same in trust for the Agent
and the Banks and deliver the same forthwith to the Agent in the exact
form received, duly indorsed by such Pledgor to the Agent, if required,
together with an undated stock power covering such certificate duly
executed in blank by such Pledgor and with, if the Agent so requests,
signature guaranteed, to be held by the Agent, subject to the terms
hereof, as additional collateral security for the Obligations. Any sums
paid upon or in respect of the Pledged Stock upon the liquidation or
dissolution of any Issuer shall be paid over to the Agent to be held by
it hereunder as additional collateral security for the Obligations, and
in case any distribution of capital shall be made on or in respect of the
Collateral or any property shall be distributed upon or with respect to
the Collateral pursuant to the recapitalization or reclassification of
the capital of any Issuer or pursuant to the reorganization thereof, the
property so distributed shall be delivered to the Agent to be held by it
hereunder as additional collateral security for the Obligations. If any
sums of money or property so paid or distributed in respect of the
Pledged Stock shall be received by any Pledgor, such Pledgor shall, until
such money or property is paid or delivered to the Agent, hold such money
or property in trust for the Banks, segregated from other funds of such
Pledgor, as additional collateral security for the Obligations.
(b) Without the prior written consent of the Agent, such Pledgor will
not (i) vote to enable, or take any other action to permit, any Issuer to
issue any stock or other equity securities of any nature or to issue any
other securities convertible into or granting the right to purchase or
exchange for any stock or other equity securities of any nature of such
Issuer, (ii) sell, assign transfer, exchange, or otherwise dispose of, or
grant any option with respect to, the Collateral, or (iii) create, incur or
permit to exist any Lien or option in favor of, or any claim of any Person
with respect to, any of the Collateral, or any interest therein, except for
the Lien provided by this Pledge Agreement. Such Pledgor will
4
<PAGE>
defend the right, title and interest of the Agent, and the Banks in and
to the Collateral against the claims and demands of all Persons
whomsoever.
(c) At any time and from time to time, upon the written request of
the Agent, and at the sole expense of such Pledgor, such Pledgor will
promptly and duly execute and deliver such further instruments and
documents and take such further actions as the Agent may reasonably request
for the purposes of obtaining or preserving the full benefits of this
Pledge Agreement and of the rights and powers herein granted. If any
amount payable under or in connection with any of the Collateral shall be
or become evidenced by any promissory note, other instrument or chattel
paper, such note, instrument or chattel paper (in each case, as defined in
the Code) shall be immediately delivered to the Agent, duly endorsed in a
manner satisfactory to the Agent, to be held as Collateral pursuant to this
Pledge Agreement.
(d) Such Pledgor agrees to pay, and to save the Agent and the Banks
harmless from, any and all liabilities with respect to, or resulting from
any delay in paying, any and all stamp, excise, sales or other taxes which
may be payable or determined to be payable with respect to any of the
Collateral or in connection with any of the transactions contemplated by
this Pledge Agreement.
Section 6. Cash Dividends; Voting Rights. Unless an Event of Default
-----------------------------
shall have occurred and be continuing and the Agent shall have given notice to
each Pledgor of the Agent's intent to exercise its corresponding rights pursuant
to Section 7 below, each Pledgor shall be permitted to receive all cash
dividends paid in the normal course of business of each Issuer and consistent
with past practice to the extent permitted in the Credit Agreement in respect of
the Pledged Stock and to exercise all voting and corporate rights with respect
to the Pledged Stock, provided however, that no vote shall be cast or corporate
right exercised or other action taken which, in the Agent's reasonable judgment,
would impair the Collateral or which would be inconsistent with or result in any
violation of any provision of the Credit Agreement, this Pledge Agreement, the
Notes or any other Loan Document or any other document executed and delivered in
connection therewith or herewith.
Section 7. Rights of the Bank and the Agent. (a) If an Event of Default
--------------------------------
shall occur and be continuing and the Agent shall give notice of its intent to
exercise such rights to each Pledgor, (i) the Agent shall have the right to
receive any and all cash dividends paid in respect of the Pledged Stock and make
application thereof to the Obligations in such order as the Agent may determine
and (ii) all shares of the Pledged Stock shall be registered in the name of the
Agent or its nominee, and the Agent or its nominee may thereafter exercise (A)
all voting, corporate and other rights pertaining to such shares of the Pledged
Stock at any meeting of shareholders of each Issuer or otherwise and (B) any
and all rights of conversion, exchange, subscription and any other rights,
privileges or options pertaining to such shares of the Pledged Stock as if it
were the absolute owner thereof (including, without limitation, the right to
exchange at its discretion any and all of the Pledged Stock upon the merger,
consolidation, reorganization, recapitalization or other fundamental change in
the corporate structure of such Issuer, or upon the exercise by such Pledgor
or the Agent of any right, privilege or option pertaining to such shares of
the Pledged Stock, and in connection therewith, the right to deposit and
deliver any and all of the Pledged Stock with any committee, depositary,
transfer agent, registrar or other designated agency upon such terms and
conditions as it may determine), all without liability
5
<PAGE>
except to account for property actually received by it, but the Agent shall
have no duty to such Pledgor to exercise any such right, privilege or option
and shall not be responsible for any failure to do so or delay in so doing.
(b) The rights of the Agent and the Banks hereunder shall not be
conditioned or contingent upon the pursuit by the Agent or any Bank of any right
or remedy against any Pledgor or against any other Person which may be or become
liable in respect of all or any portion of the Obligations or against any
collateral security therefor, guarantee thereof or right of offset with respect
thereto. Neither the Agent nor any Bank shall be liable for any failure to
demand, collect or realize upon all or any part of the Collateral or for any
delay in doing so, nor shall the Agent be under any obligation to sell or
otherwise dispose of any Collateral upon the request of any Pledgor or any other
Person or to take any other action whatsoever with regard to the Collateral or
any party thereof.
Section 8. Remedies. If an Event of Default shall occur and be
--------
continuing, the Agent, on behalf of the Banks, may exercise, in addition to all
other rights and remedies granted in this Pledge Agreement and in any other
instrument or agreement securing, evidencing or relating to the Obligations, all
rights and remedies of a secured party under the Code. Without limiting the
generality of the foregoing, the Agent, without demand of performance or other
demand, presentment, protest, advertisement or notice of any kind (except any
notice required by law referred to below) to or upon the Pledgors, each Issuer
or any other Person (all and each of which demands, defenses, advertisements and
notices are hereby waived) may in such circumstances forthwith collect, receive,
appropriate and realize upon the Collateral, or any part thereof, and/or may
forthwith sell, assign, grant options to purchase or otherwise dispose of and
deliver the Collateral or any part thereof (or contract to do any of the
foregoing), in one or more parcels at public or private sale or sales, in the
over-the-counter market, at any exchange, broker's board or office of the Agent
or any Bank or elsewhere upon such terms and conditions as Agent may deem
advisable and at such prices as Agent may deem best, for cash or on credit or
for future delivery without assumption of any credit risk. The Agent or any
Bank shall have the right upon any such public sale or sales, and, to the extent
permitted by law, upon any such private sale or sales, to purchase the whole or
any part of the Collateral so sold, free of any right or equity of redemption in
the Pledgors, which right or equity is hereby waived or released. The Agent
shall apply any Proceeds from time to time held by it and the net proceeds of
any such collection, recovery, receipt, appropriation, realization or sale,
after deducting all reasonable costs and expenses of every kind incurred in
respect thereof or incidental to the care or safekeeping of any of the
Collateral or in any way relating to the Collateral or the rights of the Agent
and the Banks hereunder, including, without limitation, reasonable attorneys'
fees and disbursements of counsel to the Agent and the Banks, to the payment in
whole or in part of the Obligations, in such order as the Agent may elect, and
only after such application and after the payment by the Agent of any other
amount required by any provision of law, including, without limitation, Section
9-504(1) (c) of the Code, need the Agent account for the surplus, if any, to the
Pledgors. To the extent permitted by applicable law, each Pledgor waives all
claims, damages and demands it may acquire against the Agent or any Bank arising
out of the exercise by them of any rights hereunder. If any notice of a
proposed sale or other disposition of Collateral shall be required by law, such
notice shall be deemed reasonable and proper if given at least 10 days before
such sale or other disposition. Each Pledgor shall remain liable for any
deficiency if the proceeds of any sale or other disposition of Collateral are
insufficient to pay the Obligations and the fees and disbursements of any
attorneys employed by the Agent or any Bank to collect such deficiency.
6
<PAGE>
Section 9. Registration Rights; Private Sales. (a) If the Agent shall
----------------------------------
determine to exercise its right to sell any or all of the Pledged Stock pursuant
to Section 8 hereof, and if in the opinion of the Agent it is necessary or
advisable to have the Pledged Stock, or that portion thereof to be sold,
registered under the provisions of the Securities Act of 1933, as amended (the
"Securities Act"), each Pledgor will cause each such Issuer whose security is to
be so registered to (i) execute and deliver, and cause the directors and
officers of such Issuer to execute and deliver, all such instruments and
documents, and do or cause to be done all such other acts as may be, in the
opinion of the Agent, necessary or advisable to register such Pledged Stock, or
that portion thereof to be sold, under the provisions of the Securities Act,
(ii) cause the registration statement relating thereto to become effective and
to remain effective for a period of one year from the date of the first public
offering of such Pledged Stock, or that portion thereof to be sold and (iii)
make all amendments thereto and/or to the related prospectus which, in the
opinion of the Agent, are necessary or advisable, all in conformity with the
requirements of the Securities Act and the rules and regulations of the
Securities and Exchange Commission applicable thereto. Each Pledgor agrees to
cause each such Issuer to comply with the provisions of the securities or "Blue
Sky" laws of any and all jurisdictions which the Agent shall designate and to
make available to its security holders, as soon as practicable, an earnings
statement (which need not be audited) which will satisfy the provisions of
Section 11(a) of the Securities Act.
(b) Each Pledgor recognizes that the Agent may be unable to effect a
public sale of any or all the Pledged Stock, by reason of certain prohibitions
contained in the Securities Act and applicable state securities laws or
otherwise, and may be compelled to resort to one or more private sales thereof
to a restricted group of purchasers which will be obliged to agree, among other
things, to acquire such securities for their own account for investment and not
with a view to the distribution or resale thereof. Each Pledgor acknowledges
and agrees that any such private sale may result in prices and other terms less
favorable than if such sale were a public sale and, notwithstanding such
circumstances, agrees that any such private sale shall be deemed to have been
made in a commercially reasonable manner. The Agent shall be under no
obligation to delay a sale of any of the Pledged Stock for the period of time
necessary to permit any Issuer to register such securities for public sale under
the Securities Act, or under applicable state securities laws, even if such
Issuer would agree to do so.
(c) Each Pledgor further agrees to use its best efforts to do or
cause to be done all such other acts as may be necessary to make such sale or
sales of all or any portion of the Pledged Stock pursuant to this Section 9
valid and binding and in compliance with any and all other applicable
Requirements of Law. Each Pledgor further agrees that a breach of any of the
covenants contained in this Section 9 will cause irreparable injury to the Agent
and the Banks, that the Agent and the Banks have no adequate remedy at law in
respect of such breach and, as a consequence, that each and every covenant
contained in this Section 9 shall be specifically enforceable against each
Pledgor, and each Pledgor hereby waives and agrees not to assert any defenses
against an action for specific performance of such covenants except for a
defense that no Event of Default has occurred under the Credit Agreement.
Section 10. No Subrogation. Notwithstanding any payment or payments made
--------------
by the Pledgors hereunder, or any setoff or application of funds of the Pledgors
by the Agent or any Bank, or the receipt of any amounts by the Agent or any Bank
with respect to any of the Collateral, the Pledgors shall not be entitled to be
subrogated to any of the rights of the Agent
7
<PAGE>
or any Bank against the Company or against any other collateral security held
by the Agent or any Bank for the payment of the Obligations, nor shall any
Pledgor seek any reimbursement from the Company in respect of payments made by
such Pledgor in connection with the Collateral, or amounts realized by the
Agent or any Bank in connection with the Collateral, until all amounts owing
to the Agent and the Banks on account of the Obligations are paid in full and
the Commitments are terminated. If any amount shall be paid to any Pledgor on
account of such subrogation rights at any time when all of the Obligations
shall not have been paid in full, such amount shall be held by such Pledgor in
trust for the Agent and the Banks, segregated from other funds of such
Pledgor, and shall, forthwith upon receipt by such Pledgor, be turned over to
the Agent in the exact form received by such Pledgor (duly indorsed by such
Pledgor to the Agent, if required) to be applied against the Obligations,
whether matured or unmatured, in such order as the Agent may determine.
Section 11. Irrevocable Authorization and Instruction to Issuers. Each
----------------------------------------------------
Pledgor hereby authorizes and instructs each Issuer to comply with any
instruction received by such Issuer from the Agent in writing that (a) states
that an Event of Default has occurred and (b) is otherwise in accordance with
the terms of this Pledge Agreement, without any other or further instructions
from such Pledgor, and each Pledgor agrees that each Issuer shall be fully
protected in so complying.
Section 12. Authority of Agent. Each Pledgor and the Pledged Stock
------------------
acknowledges that the rights and responsibilities of the Agent under this Pledge
Agreement with respect to any action taken by the Agent or the exercise of non-
exercise by the Agent of any option, voting right, request, judgment or other
right or remedy provided for herein or resulting or arising out of this Pledge
Agreement shall, as between the Agent and the Banks, be governed by the Credit
Agreement and by such other agreements with respect thereto as may exist from
time to time among them, but, as between the Agent and such Pledgor, the Agent
shall be conclusively presumed to be acting as agent for the Banks with full and
valid authority so to act or refrain from acting, and neither such Pledgor nor
any Issuer shall be under any obligation, or entitlement, to make any inquiry
respecting such authority.
Section 13. Amendments, etc. with respect to the Obligations. Each
------------------------------------------------
Pledgor shall remain obligated hereunder, and the Collateral shall remain
subject to the Lien granted hereby, notwithstanding that, without any
reservation of rights against such Pledgor, and without notice to or further
assent by such Pledgor, any demand for payment of any of the Obligations made by
the Agent or any Bank may be rescinded by the Agent or such Bank, and any of the
Obligations continued, and the Obligations, or the liability of any Issuer or
any other Person upon or for any part thereof, or any collateral security or
guarantee therefor or right of offset with respect thereto, may, from time to
time, in whole or in part, be renewed, extended, amended, modified,
accelerated, compromised, waived, surrendered, or released by the Agent or any
Bank, and the Credit Agreement, the Notes and any other Loan Document and any
other documents executed and delivered in connection therewith may be amended,
modified, supplemented or terminated, in whole or part, as the Agent or the
Banks (or the Required Banks, as the case may be) may deem advisable from time
to time, and any guarantee, right of offset or other collateral security at
any time held by the Agent or any Bank for the payment of the Obligations may
be sold, exchanged, waived, surrendered or released. Neither the Agent nor any
Bank shall have any obligation to protect, secure, perfect or insure any other
Lien at any time held by it as security for the Obligations or any property
subject thereto. Each Pledgor waives any and all
8
<PAGE>
notice of the creation, renewal, extension or accrual of any of the obligations
and notice of or proof of reliance by the Agent or any Bank upon this Pledge
Agreement; the Obligations, and any of them, shall conclusively be deemed to
have been created, contracted or incurred in reliance upon this Pledge
Agreement, and all dealings between any Issuer and any Pledgor on the one hand,
and the Agent and the Banks, on the other, shall likewise be conclusively
presumed to have been had or consummated in reliance upon this Pledge Agreement.
Each Pledgor waives diligence, presentment, protest, demand for payment and
notice of default or of nonpayment to or upon any Issuer or any Pledgor with
respect to the Obligations.
Section 14. Limitation on Duties Regarding Collateral. The Agent's sole
-----------------------------------------
duty with respect to the custody, safekeeping and physical preservation of the
Collateral in its possession, under Section 9-207 of the Code or otherwise,
shall be to deal with it in the same manner as the Agent deals with similar
securities and property for its own account. Neither the Agent, any Bank nor
any of their respective directors, officers, employees or agents shall be liable
for failure to demand, collect or realize upon any of the Collateral or for any
delay in doing so or shall be under any obligation to sell or otherwise dispose
of any Collateral upon the request of any Pledgor or otherwise.
Section 15. Notices. Notices by the Agent to any Pledgor or any Issuer
-------
may be given by hand, by mail, by telex or by facsimile transmission, addressed
or transmitted to such Pledgor, or in the case of any Issuer, in care of such
Pledgor, at such Pledgor's address or transmission number set forth in
subsection 10.2 of the Credit Agreement and shall be effective (a) when
delivered by hand, (b) in the case of mail, three days after deposit in the
postal system, first class postage pre-paid and (c) in the case of telecopy
notice, when sent. Any Pledgor or any Issuer may change their respective
addresses and transmission numbers by written notice to the Agent.
Section 16. No Waiver; Cumulative Remedies. Neither the Agent nor any
------------------------------
Bank shall by any act (except by a written instrument pursuant to Section 15
hereof) be deemed to have waived any right or remedy hereunder or to have
acquiesced in any Default or Event of Default or in any breach of any of the
terms and conditions hereof. No failure to exercise, nor any delay in
exercising, on the part of the Agent or any Bank, any right, power or privilege
hereunder shall operate as a waiver thereof. No single or partial exercise of
any right, power or privilege hereunder shall preclude any other or further
exercise thereof or the exercise of any other right or remedy hereunder on any
one occasion shall not be construed as a bar to any right, power or privilege.
A waiver by the Agent or any Bank of any right or remedy which the Agent or such
Bank would otherwise have on any future occasion. The rights and remedies
herein provided are cumulative, may be exercised singly or concurrently and are
not exclusive of any other rights or remedies provided by law.
Section 17. Waivers and Amendments; Successors and Assigns. None of the
----------------------------------------------
terms or provisions of this Pledge Agreement may be amended, supplemented or
otherwise modified except by a written instrument executed by each Pledgor and
the Agent, provided that any provision of this Pledge Agreement may be waived by
--------
the Agent in a letter or agreement executed by the Agent or by telex or
facsimile transmission from the Agent. This Pledge Agreement shall be binding
upon the successors and assigns of each Pledgor and shall inure to the benefit
of the Agent and the Banks and their respective successors and assigns.
9
<PAGE>
Section 18. Miscellaneous Provisions.
------------------------
(a) Powers Coupled with an Interest. All authorizations and agencies
-------------------------------
herein contained with respect to the Collateral are irrevocable and powers
coupled with an interest.
(b) Severability. Any provision of this Pledge 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 where such provision is
valid and enforceable.
(c) Integration. This Pledge Agreement represents the agreement of
-----------
each Pledgor with respect to the subject matter hereof, and there are no
promises, undertakings, representations or warranties by the Agent or any Bank
relative to subject matter hereof not expressly set forth or referred to herein
or in the other Loan Documents.
(d) Counterparts. This Pledge Agreement may be executed and
------------
delivered by the parties hereto through the use of two or more original
identical counterparts hereof, each of which shall be deemed to be an original
instrument and all of which shall be deemed to represent but one Pledge
Agreement, fully binding upon and enforceable against the parties hereto.
10
<PAGE>
IN WITNESS WHEREOF, the undersigned has caused this Pledge Agreement to be
duly executed and delivered in Hartford, Connecticut as of the date first above
written.
CONNA CORPORATION
By: /s/ Gregory G. Landry
-----------------------------
Gregory G. Landry
Executive Vice President
CONVENIENT INDUSTRIES OF AMERICA, INC.
By: /s/ Gregory G. Landry
-----------------------------
Gregory G. Landry
Executive Vice President
REMOTE SERVICES, INC.
By: /s/ Gregory G. Landry
-----------------------------
Gregory G. Landry
Executive Vice President
THE LAWSON COMPANY
By: /s/ Gregory G. Landry
-----------------------------
Gregory G. Landry
Executive Vice President
GOLDEN STORES, INC.
By: /s/ Gregory G. Landry
-----------------------------
Gregory G. Landry
Executive Vice President
Accepted:
FLEET BANK, NATIONAL ASSOCIATION,
as Agent
By: /s/ Walter P. Schuppe
-----------------------------
Walter P. Schuppe
Vice President
11
<PAGE>
ISSUER ACKNOWLEDGEMENT AND CONSENT
Each of the undersigned Issuers referred to in the foregoing Pledge
Agreement hereby acknowledges receipt of a copy thereof, and agrees to be bound
thereby and to comply with the terms thereof insofar as such terms are
applicable to such Issuer. Each of the undersigned Issuers agrees to notify the
Agent promptly in writing of the occurrence of any of the events described in
Section 5(a) of the Pledge Agreement with respect to such Issuer. Each of the
undersigned Issuers further agrees that the terms of Section 9 (c) of the Pledge
Agreement shall apply to such Issuer, mutatis mutandis, with respect to all
------- --------
actions that may be required of it under or pursuant to or arising out of
Section 9 of the Pledge Agreement.
CONVENIENT INDUSTRIES OF AMERICA, INC.
By: /s/ Gregory G. Landry
------------------------------
Gregory G. Landry
Executive Vice President
REMOTE SERVICES INC.
By: /s/ Gregory G. Landry
------------------------------
Gregory G. Landry
Executive Vice President
OSCAR EWING, INC.
By: /s/ Gregory G. Landry
------------------------------
Gregory G. Landry
Executive Vice President
QUIK SHOPS, INC.
By: /s/ Gregory G. Landry
------------------------------
Gregory G. Landry
Executive Vice President
THE LAWSON MILK COMPANY
By: /s/ Gregory G. Landry
------------------------------
Gregory G. Landry
Executive Vice President
12
<PAGE>
LMC, INC.
By: /s/ Gregory G. Landry
------------------------------
Gregory G. Landry
Executive Vice President
SNG OF SOUTHERN MINNESOTA, INC.
By: /s/ Gregory G. Landry
------------------------------
Gregory G. Landry
Executive Vice President
GOLDEN STORES, INC.
By: /s/ Gregory G. Landry
------------------------------
Gregory G. Landry
Executive Vice President
LAKESIDE WHOLESALE, INC.
By: /s/ Gregory G. Landry
------------------------------
Gregory G. Landry
Executive Vice President
CIA FOOD MARTS, INC.
By: /s/ Gregory G. Landry
------------------------------
Gregory G. Landry
Executive Vice President
FOOD MERCHANDISERS, INC.
By: /s/ Gregory G. Landry
------------------------------
Gregory G. Landry
Executive Vice President
GREENWELL GROCERY CO., INC.
By: /s/ Gregory G. Landry
------------------------------
Gregory G. Landry
Executive Vice President
13
<PAGE>
JACKSON COUNTY GROCERY CO., INC.
By: /s/ Gregory G. Landry
------------------------------
Gregory G. Landry
Executive Vice President
CONVENIENT GASOLINE, INC.
By: /s/ Gregory G. Landry
------------------------------
Gregory G. Landry
Executive Vice President
OPEN PANTRY PROPERTIES, INC.
By: /s/ Gregory G. Landry
------------------------------
Gregory G. Landry
Executive Vice President
14
<PAGE>
SCHEDULE I
TO PLEDGE
AGREEMENT
---------
DESCRIPTION OF PLEDGED STOCK
----------------------------
<TABLE>
<CAPTION>
===============================================================================
Stock
Class of Certificate No. of
Pledgors Issuer Stock No(s). Sharexit
<S> <C> <C> <C> <C>
- - --------------------------------------------------------------------------------
CONNA Corporation Convenient Common C 26058 2,000
Industries of C 26064 2,000
America, Inc.
Oscar Ewing, Inc. Common 26 733
Preferred 12 350
Remote Services, Common 11 114
Inc.
--------------------------------------------------------------------------------
The Lawson Company Quik Shops, Inc. Common 3 500
The Lawson Milk Common 1 500
Company Common 2 100
LMC, Inc. Common 2 500
SNG of Southern Common 10 125
Minnesota, Inc.
Golden Stores, Common 2 100
Inc. 3 400
Lakeside Wholesale Common 2 500
- - ---------------------------------------------------------------------------------
Convenient Industries of CIA Food Marts, Common 1 100
America, Inc. Inc.
Food Common 1 100
Merchandisers,
Inc.
Greenwall Grocery Common 5 100
Co., Inc.
Jackson County Common 5 100
Co., Inc.
- - ----------------------------------------------------------------------------------
Remote Services, Inc. Convenient Common 1 10
Gasoline, Inc.
- - ----------------------------------------------------------------------------------
Golden Stores, Inc. Open Pantry Common 1 100
Properties, Inc.
==================================================================================
</TABLE>
15
<PAGE>
SECURITY AGREEMENT
THIS SECURITY AGREEMENT, dated as of February 25, 1994 (as amended,
supplemented or otherwise modified from time to time, this "Security
Agreement"), made by DAIRY MART CONVENIENCE STORES, INC., a Delaware corporation
(the "Company"), in favor of FLEET BANK, NATIONAL ASSOCIATION, a national
banking association organized and existing under the laws of the United States
of America, as agent (the "Agent") for the ratable benefit of the Agent, as
Agent and individually as a bank, and the other banks and financial institutions
parties thereto from time to time (the "Banks") that are parties to the Credit
Agreement (as hereinafter defined);
W I T N E S S E T H:
WHEREAS, the Company is party to a certain Credit Agreement, dated as of
February 25, 1994, with the Agent and the Banks (as the same may from time to
time be amended, supplemented or otherwise modified, the "Credit Agreement");
WHEREAS, pursuant to the terms of the Credit Agreement and the other Loan
Documents (as hereinafter defined), the Banks have severally agreed to extend
credit to the Company upon the terms and subject to the conditions set forth
therein, to be evidenced by the Notes issued by the Company thereunder; and
WHEREAS, it is a condition precedent to the obligation of the Banks to make
their respective extensions of credit to the Company under the Credit Agreement
that the Company shall have executed and delivered this Security Agreement to
the Agent for the ratable benefit of the Banks;
NOW THEREFORE, in consideration of the premises and to induce the Agent and
the Banks to enter into the Credit Agreement and to induce the Banks to make
their respective loans to the Company under the Credit Agreement, the Company
hereby agrees with the Agent, for the ratable benefit of the Banks, as follows:
Section 1. Interpretation of this Agreement.
--------------------------------
(a) Certain Defined Terms. As used in this Agreement, the following
---------------------
terms have the respective meanings set forth below or set forth in the Section
hereof following such terms:
Agent -- as defined in the introductory paragraph hereof.
Banks -- as defined in the introductory paragraph hereof.
Code -- means the Uniform Commercial Code as in effect from time to
time in the State of Connecticut.
Collateral -- means all of the following Property, whether now owned
or hereafter acquired:
(a) all General Intangibles;
<PAGE>
(b) all proceeds and products of the General Intangibles in whatever
form, including, but not limited to: cash, deposit accounts (whether or not
comprised solely of proceeds), certificates of deposit, negotiable
instruments and other instruments for the payment of money, chattel paper,
security agreements or documents; and
(c) all of the Company's ledger sheets, files, records, books of
account, business papers, computers, computer software and programs, and
documents relating to the Property referred to in the foregoing clauses (a)
and (b).
Company -- as defined in the introductory paragraph hereof.
General Intangibles -- means all loans, advances and extensions of
credit from time to time advanced or extended by the Company to any direct
or indirect Subsidiary of the Company and all right, title and interest of
the Company in and to all choses in action, causes of action and all other
general intangibles (as such term is defined in the Code) now or hereafter
relating to such loans, advances or extensions of credit.
Lien -- means any interest in Property securing an obligation owed to,
or a claim by, a Person other than the owner of the Property, whether such
interest is based on the common law, statute or contract, and including but
not limited to the security interest lien arising from a mortgage, deed of
trust, encumbrance, pledge, conditional sale or trust receipt or a lease,
consignment or bailment for security purposes, and the filing of any
financing statement under the Uniform Commercial Code of any jurisdiction,
or an agreement to give any of the foregoing. The term "Lien" does not
include negative pledge clauses in connection with the borrowing of money.
Loan Documents -- as defined in the Credit Agreement.
Notes -- as defined in the Credit Agreement.
Property -- means any interest in any kind of property or asset,
whether real, personal or mixed, and whether tangible or intangible.
Secured Obligations -- means, at any time, all obligations and
undertakings of the Company under and in respect of the Credit Agreement,
including, without limitation, the Company's obligations and undertakings
with respect to the payment of the principal of, and interest on, the
Notes, all of the Company's Reimbursement Obligations (as such term is
defined in the Credit Agreement) and all other amounts payable, and all
other indebtedness owing, by the Company under each of the Loan Documents.
Security -- has the same meaning as in Section 2(1) of the Securities
Act of 1933, as amended.
Security Agreement -- has the meaning specified in the introductory
sentence hereof.
(b) Rules for Interpreting Undefined Terms. All capitalized terms
--------------------------------------
used and not otherwise defined herein shall have the respective meanings
ascribed thereto in the Credit
2
<PAGE>
Agreement. All capitalized terms used in this Security Agreement and not defined
herein or in the Credit Agreement but that are defined in the Code shall have
the respective meanings assigned to such terms in the Code.
(c) Headings, etc. The titles of the Sections appear as a matter of
-------------
convenience only, do not constitute an operative part of this Security Agreement
and shall not affect the construction hereof. Each covenant contained herein
shall be construed (absent an express contrary provision herein) as being
independent of each other covenant contained herein, and compliance with any one
covenant shall not (absent such an express contrary provision) be deemed to
excuse compliance with one or more other covenants.
(d) Directly or Indirectly. Where any provision in this Security
----------------------
Agreement requires or prohibits certain actions by Persons, such provision shall
be applicable regardless of whether such action is taken directly or indirectly
by such Person.
(e) Rules of Construction. The words "herein," "hereof," "hereto"
---------------------
and "hereunder" and other words of similar import refer to this Security
Agreement as a whole and not to any particular section, subsection or clause
contained in this Security Agreement unless the context requires otherwise.
Whenever from the context it appears appropriate, each term stated in either the
singular or the plural includes the singular and the plural, and pronouns stated
in the masculine, feminine or neuter gender include the masculine, feminine and
the neuter. The word "including" shall mean "including, without limitation."
Unless otherwise specified herein, any reference in this Security Agreement to
an existing document, agreement or instrument means such document, agreement or
instrument as it may have been amended, modified, supplemented or restated from
time to time.
(f) Governing Law. THIS SECURITY AGREEMENT SHALL BE GOVERNED BY, AND
-------------
CONSTRUED AND ENFORCED IN ACCORDANCE WITH, INTERNAL CONNECTICUT LAW.
Section 2. Grant of Security Interest. As security for the payment by the
--------------------------
Company of the Secured Obligations and the performance by the Company of its
other obligations and undertakings under this Security Agreement and under the
other Loan Documents, the Company does hereby grant, bargain, convey, assign,
transfer, mortgage, hypothecate, pledge, confirm and grant a continuing security
interest to the Agent (for the ratable benefit of the Agent and the Banks) in
and to the Collateral. This Security Agreement is executed as security for the
Secured Obligations, and, therefore, the execution and delivery of this Security
Agreement shall not subject the Agent or any Bank to, or transfer or pass to
Agent or any Bank, or in any way affect or modify, the liability of the Company
under any instrument or agreement relating to the Collateral, it being
understood and agreed that notwithstanding this Security Agreement or any
subsequent assignment, all of the obligations of the Company to each and every
other party under each and every one of said instruments and agreements shall be
and remain enforceable by such other party, its successors and assigns, against,
but only against, the Company or Persons other than the Agent or the Banks and
their respective successors and assigns.
Section 3. Representations and Warranties: The Company hereby
------------------------------
represents and warrants to the Agent and the Banks that:
3
<PAGE>
(a) Title: No Other Liens. Except for the Lien granted to the Agent
----------------------
for the ratable benefit of the Banks pursuant to this Security Agreement,
the Company owns each item of the Collateral free and clear of any and all
Liens or claims of others. No security agreement, financing statement or
other public notice with respect to all or any part of the Collateral is on
file or of record in any public office, except such as may have been filed
in favor of the Agent, for the ratable benefit of the Banks, pursuant to
this Security Agreement.
(b) Chief Executive Office. The Company's chief executive office and
----------------------
chief place of business is located at One Vision Drive, Enfield,
Connecticut 06082.
Section 4. Covenants. The Company covenants and agrees with the Agent and
---------
the Banks that, from and after the date of this Security Agreement until the
Obligations are paid in full and the Commitments are terminated:
(a) Further Documentation: Pledge of Instruments and Chattel Paper.
---------------------------------------------------------------
At any time and from time to time, upon the written request of the Agent,
and at the sole expense of the Company, the Company will promptly and duly
execute and deliver such further instruments and documents and take such
further action as the Agent may reasonably request for the purpose of
obtaining or preserving the full benefits of this Security Agreement and of
the rights and powers herein granted, including, without limitation, the
filing of any financing or continuation statements under the Uniform
Commercial Code in effect in any jurisdiction with respect to the Liens
created hereby on the Collateral described herein. The Company also hereby
authorizes the Agent (as the Company's attorney-in-fact) to file any such
financing or continuation statement without the signature of the Company to
the extent permitted by applicable law. A carbon, photographic or other
reproduction of this Security Agreement shall be sufficient as a financing
statement for filing in any jurisdiction. If any Collateral or any amount
payable under or in connection with any of the Collateral shall be or
become evidenced by any Instrument or Chattel Paper, such Instrument or
Chattel Paper shall be immediately delivered to the Agent, duly endorsed in
a manner satisfactory to the Agent, to be held as Collateral pursuant to
this Security Agreement.
(b) Indemnification. The Company agrees to pay, and to save the
---------------
Agent and the Banks harmless from, any and all liabilities and reasonable
costs and expenses (including, without limitation, legal fees and expenses)
(i) with respect to, or resulting from, any delay in paying, any and all
excise, sales or other taxes which may be payable or determined to be
payable with respect to any of the Collateral, (ii) with respect to, or
resulting from, any delay in complying with any Requirement of Law
applicable to any of the Collateral or (iii) in connection with any of the
transactions contemplated by this Security Agreement.
(c) Maintenance of Records. The Company will keep and maintain at its
----------------------
own cost and expense satisfactory and complete records of the Collateral.
The Company will mark that portion of its books and records pertaining to
the Collateral and any Instruments evidencing Collateral or the proceeds
thereof to evidence this Security Agreement and the security interests
granted hereby.
4
<PAGE>
(d) Right of Inspection. The Agent and the Banks shall at all times
-------------------
have full and free access during normal business hours to all the books,
correspondence and records of the Company, and the Agent and the Banks and
their respective representatives may examine the same, take extracts
therefrom and make photocopies thereof, and the Company agrees to render to
the Agent and the Banks, at the Company's cost and expense, such clerical
and other assistance as may be reasonably requested with regard thereto.
(e) Compliance with Laws, etc. The Company will comply in all
--------------------------
material respects with all Requirements of Law applicable to the Collateral
or any part thereof or to the operation of the Company's business;
provided, however, that the Company may contest any Requirement of Law in
any reasonable manner which shall not, in the sole opinion of the Agent,
adversely affect the Agent's or the Banks' rights or the priority of their
Liens on the Collateral.
(f) Compliance with Terms of Contracts, etc. The Company will
----------------------------------------
perform and comply in all material respects with all its obligations under
the contractual obligations relating to the Collateral.
(g) Limitation on Liens on Collateral. The Company will not create,
---------------------------------
incur or permit to exist, will defend the Collateral against, and will take
such other action as is necessary to remove, any Lien or claim on or to the
Collateral, other than the Liens created hereby and will defend the right,
title and interest of the Agent and the Banks in and to any of the
Collateral against the claims and demands of all Persons whomsoever.
(h) Limitations on Dispositions and Alterations of Collateral. The
---------------------------------------------------------
Company will not sell, transfer, lease or otherwise dispose of any of the
Collateral, or attempt, offer or contract to do so, or modify or amend (or
acquiesce in any modification or amendment of) any instrument, document or
agreement evidencing or relating to the obligations constituting General
Intangibles or any Person's liability therefor.
(i) Further Identification of Collateral. The Company will furnish
------------------------------------
to the Agent and the Banks from time to time statements and schedules
further identifying and describing the Collateral and such other reports in
connection with the Collateral as the Agent may reasonably request, all in
reasonable detail.
(j) Notices. The Company will advise the Agent and the Banks
-------
promptly, in reasonable detail, at their respective addresses set forth in
the Credit Agreement, (i) of any Lien (other than Liens created hereby or
permitted under the Credit Agreement) on, or claim asserted against, any of
the Collateral and (ii) of the occurrence of any other event which could
have a reasonably be expected to have a material adverse effect on the
aggregate value of the Collateral or An the Liens created hereunder.
(k) Changes in Locations, Names, etc. The Company will not (i) change
---------------------------------
the location of its chief executive office/chief place of business from
that specified in Section 3(b) hereof or remove its books and records from
the location specified in Section 3(b) hereof or (ii) change its name,
identity or corporate structure to such an extent that any financing
statement filed by the Agent in connection with this Security Agreement
would
5
<PAGE>
become seriously misleading, unless it shall have given the Agent and the
Banks at least 30 days' prior written notice thereof.
Section 5. Agent's Appointment as Attorney-in-Fact.
---------------------------------------
(a) Powers. The Company hereby irrevocably constitutes and appoints
------
the Agent and any officer or agent thereof, with full power of substitution, as
its true and lawful attorney-in-fact with full irrevocable power and authority
in the place and stead of the Company and in the name of the Company or in its
own name, from time to time in the Agent's discretion, for the purpose of
carrying out the terms of this Security Agreement, to take any and all
appropriate action and to execute any and all documents and instruments which
may be necessary or desirable to accomplish the purposes of this Security
Agreement, and, without limiting the generality of the foregoing, the Company
hereby gives the Agent the power and right, on behalf of the Company, without
notice to or assent by the Company, to do the following:
(i) at any time when any Event of Default shall have occurred
and is continuing, in the name of the Company or its own name, or
otherwise, to take possession of and endorse and collect any checks,
drafts, notes, acceptances or other instruments for the payment of moneys
due in respect of the Collateral and to file any claim or to take any other
action or proceeding in any court of law or equity or otherwise deemed
appropriate by the Agent for the purpose of collecting any and all such
moneys due in respect thereof whenever payable;
(ii) to pay or discharge taxes and Liens levied or placed on or
threatened against the Collateral; and
(iii) upon the occurrence and during the continuance of any
Event of Default, (A) to direct any party liable for any payment in respect
of any of the Collateral to make payment of any and all moneys due or to
become due thereunder directly to the Agent or as the Agent shall direct;
(B) to ask or demand for, collect, receive payment of and receipt for, any
and all moneys, claims and other amounts due or to become due at any time
in respect of or arising out of any Collateral; (C) to commence and
prosecute any suits, actions or proceedings at law or in equity in any
court of competent jurisdiction to collect all or any portion of the
Collateral and to enforce any other right in respect of any Collateral; (D)
to defend any suit, action or proceeding brought against the Company with
respect to any Collateral; (E) to settle, compromise or adjust any suit,
action or proceeding described in clause (D) above, and, in connection
therewith, to give such discharge or releases as the Agent may deem
appropriate; and (F) generally, to sell, transfer, pledge and make any
agreement with respect to, or otherwise deal with, any of the Collateral,
as fully and completely as though the Agent were the absolute owner thereof
for all purposes, and to do, at the Agent's option and the Company's
expense, at any time, or from time to time, all acts and things which the
Agent deems necessary to protect, preserve or realize upon the Collateral
and the Agent's and the Banks' Liens thereon and to effect the intent of
this Security Agreement, all as fully and effectively as the Company might
do.
The Company hereby ratifies all that said attorneys shall lawfully do or cause
to be done by virtue hereof. This power of attorney is a power coupled with an
interest and shall be irrevocable.
6
<PAGE>
(b) Other Powers. The Company also authorizes the Agent and the
------------
Banks, at any time and from time to time, to execute, in connection with the
sale provided for in Section 8 hereof, any endorsements, assignments or other
instruments of conveyance or transfer with respect to the Collateral.
(c) No Duty on Agent or Banks' Part. The powers conferred on the
-------------------------------
Agent and the Banks hereunder are solely to protect the Agent's and the Banks'
interests in the Collateral and shall not impose any duty upon the Agent or any
Bank to exercise any such powers. The Agent and the Banks shall be accountable
only for amounts that they actually receive as a result of the exercise
directors, employees or agents shall be responsible to the Company for any act
or failure to act hereunder, except for their own gross negligence or willful
misconduct.
Section 6. Performance by Agent of Company's Obligations. If the Company
---------------------------------------------
fails to perform or comply with any of its agreements contained herein and the
Agent, as provided for by the terms of this Security Agreement, shall itself
perform or comply, or otherwise cause performance or compliance, with such
agreement, the expenses of the Agent incurred in connection with such
performance or compliance, together with interest thereon at a rate per annum
applicable to Prime Rate Loans under the Credit Agreement, shall be payable by
the Company to the Agent on demand and shall constitute Secured Obligations.
Section 7. Proceeds. If an Event of Default shall occur and be continuing
--------
(a) all proceeds received by the Company consisting of cash, checks and other
near-cash items shall be held by the Company in trust for the Agent and the
Banks, segregated from other funds of the Company, and shall, forthwith upon
receipt by the Company, be turned over to the Agent in the exact form received
by the Company (duly endorsed by the Company to the Agent, if required), and (b)
any and all such proceeds received by the Agent (whether from the Company or
otherwise) may, in the sole discretion of the Agent, be held by the Agent for
the ratable benefit of the Banks as collateral security for, and/or then or at
any time thereafter may be applied by the Agent against, the Obligations
(whether matured or unmatured), such application to be in such order as the
Agent shall elect. Any balance of such proceeds remaining after the obligations
shall have been paid in full and the Commitments shall have been terminated
shall be paid over to the Company or to whomsoever may be lawfully entitled to
receive the same.
Section 8. Remedies. If an Event of Default shall occur and be
--------
continuing, the Agent, on behalf of the Banks may exercise, in addition to all
other rights and remedies granted to them in this Security Agreement and in any
other instrument or agreement securing, evidencing or relating to the
Obligations, all rights and remedies of a secured party under the Code. Without
limiting the generality of the foregoing, the Agent, without demand of
performance or other demand, presentment, protest, advertisement or notice of
any kind (except any notice required by law referred to below) to or upon the
Company or any other Person (all and each of which demands, defenses,
advertisements and notices are hereby waived), may in such circumstances
forthwith collect, receive, appropriate and realize upon the Collateral, or any
part thereof, and/or may forthwith sell, lease, assign, grant options to
purchase, or otherwise dispose of and deliver the Collateral or any part thereof
(or contract to do any of the foregoing), in one or more parcels at public or
private sale or sales, at any exchange, broker's board or office of the Agent or
any Bank or elsewhere upon such terms and conditions as it may deem advisable
and at such prices as it may deem best, for cash or on credit or for future
delivery without assumption of any credit
7
<PAGE>
risk. The Agent or any Bank shall have the right upon any such public sale or
sales, and, to the extent permitted by law, upon any such private sale or sales,
to purchase the whole or any part of the Collateral so sold, free of any right
or equity of redemption in the Company, which right or equity is hereby waived
or released. The Company further agrees, at the Agent's request, to assemble the
Collateral and make it available to the Agent at places which the Agent shall
reasonably select, whether at the Company's premises or elsewhere. The Agent
shall apply the net proceeds of any such collection, recovery, receipt,
appropriation, realization or sale, after deducting all reasonable costs and
expenses of every kind incurred therein or incidental to the care or safekeeping
of any of the Collateral or in any way relating to the Collateral or the rights
of the Agent and the Banks hereunder, including, without limitation, reasonable
attorneys' fees and disbursements, to the payment in whole or in part of the
Obligations, in such order as the Agent may elect, and only after such
application and after the payment by the Agent of any other amount required by
any provision of law, including, without limitation, Section 9-504(1)(c) of the
Code, need the Agent account for the surplus, if any, to the Company. To the
extent permitted by applicable law, the Company waives all claims, damages and
demands it may acquire against the Agent or any Bank arising out of the exercise
by them of any rights hereunder. If any notice of a proposed sale or other
disposition of Collateral shall be required by law, such notice shall be deemed
reasonable and proper if given at least 10 days before such sale or other
disposition. The Company shall remain liable for any deficiency if the proceeds
of any sale or other disposition of the Collateral are insufficient to pay the
Secured Obligations and the fees and disbursements of any attorneys employed by
the Agent or any Bank to collect such deficiency.
Section 9. Limitation on Duties Regarding Preservation of Collateral. The
---------------------------------------------------------
Agent's sole duty with respect to the custody, safekeeping and physical
preservation of the Collateral in its possession, under Section 9-207 of the
Code or otherwise, shall be to deal with it in the same manner as the Agent
deals with similar property for its own account. Neither the Agent, any Bank,
nor any of their respective directions, officers, employees or agents shall be
liable for failure to demand, collect or realize upon all or any part of the
Collateral or for any delay in doing so or shall be under any obligation to sell
or otherwise dispose of any Collateral upon the request of the Company or
otherwise.
Section 10. Notices. Notices hereunder may be given by hand, by mail, by
-------
telex or by facsimile transmission, addressed or transmitted to the Person to
which it is being given at such Person's address or transmission number set
forth in subsection 10.2 of the Credit Agreement and shall be effective (a) when
delivered by hand (b) in the case of mail, three days after deposit in the
postal system, first class postage pre-paid and (c) in the case of telecopy
notices, when sent. The Company may change its address and transmission number
by written notice to the Agent, and the Agent or any Bank may change its address
and transmission number by written notice to the Company and, in the case of a
Bank, to the Agent.
Section 11. No Waiver; Cumulative Remedies. Neither the Agent nor any
------------------------------
Bank shall by any act (except by a written instrument pursuant to Section 10
hereof), delay, indulgence, omission or otherwise be deemed to have waived any
right or remedy hereunder or to have acquiesced in any Default or Event of
Default or in any breach of any of the terms and conditions hereof. No failure
to exercise, nor any delay in exercising, on the part of the Agent or any Bank,
any right, power or privileges hereunder shall operate as a waiver thereof. No
single or partial exercise of any right, power or privilege hereunder shall
preclude any other or further exercise thereof or the exercise of any other
right, power or privilege. A waiver by the Agent or any Bank
8
<PAGE>
of any right or remedy hereunder on any one occasion shall not be construed as a
bar to any right or remedy which the Agent or such Bank would otherwise have on
any future occasion. The rights and remedies herein provided are cumulative, may
be exercised singly or concurrently and are not exclusive of any rights or
remedies provided by law.
Section 12. Waivers and Amendments; Successors and Assignee. None of the
-----------------------------------------------
terms or provisions of this Security Agreement may be waived, amended,
supplemented or otherwise modified except by a written instrument executed by
the Company and the Agent, provided that any provision of this Security
Agreement may be waived by the Agent in a written letter or agreement executed
by the Agent or by telex or facsimile transmission from the Agent. This
Security Agreement shall be binding upon the successors and assigns of the
Company and shall inure to the benefit of the Agent and the Banks and their
respective successors and assigns.
Section 13. Miscellaneous Provisions.
------------------------
(a) Powers Coupled with an Interest. All authorizations and agencies
-------------------------------
herein contained with respect to the Collateral are irrevocable and powers
coupled with an interest.
(b) Severability. Any provision of this Security 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.
(c) Integration. This Security Agreement represents the agreement of
-----------
the Company with respect to the subject matter hereof, and there are no
promises, undertakings, representations or warranties by the Agent or any Bank
relative to subject matter hereof not expressly set fort or referred to herein
or in the other Loan Documents.
(d) Counterparts. This Pledge Agreement may be executed and
------------
delivered by the parties hereto through the use of two or more original
identical counterparts hereof, each of which shall be deemed to be an original
instrument and all of which shall be deemed to represent but one Pledge
Agreement, fully binding upon and enforceable against the parties hereto.
9
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Security Agreement to be
duly executed and delivered as of the date first above written.
DAIRY MART CONVENIENCE
STORES, INC.
By /s/ Gregory G. Landry
------------------------
Name: Gregory G. Landry
Title: Exec. Vice President
Accepted:
FLEET BANK, NATIONAL ASSOCIATION
as Agent
By: /s/ Walter P. Schuppe
-----------------------------
Walter P. Schuppe
Vice President
10
<PAGE>
PLEASE TYPE THIS FORM
UNIFORM COMMERCIAL CODE-FINANCING STATEMENT FORM UCC.1 STATE OF CONNECTICUT
INSTRUCTIONS
1. Remove Secured Party and Debtor copies and send other 4 copies with inter-
leaved carbon paper to the Secretary of the State. Enclose filing fee.
2. If the space provided for any item(s) on the form is inadequate the item(s)
should be continued on additional sheets, preferably 8" x 10". Only one copy
of such additional sheets need be presented to the filing officer with a
set of four copies of Form UCC-1 Long schedules of collateral, indentures,
etc. may be on any size paper that is convenient for the secured party. Do
not attach to UCC-1 form.
3. If collateral covers timber, minerals including oil and gas or accounts
financed at the wellhead or minehead, this financial statement shall show
that it covers this type of collateral, shall recite that it is to be filed
in the real estate records and the financing statement shall contain a
description of the real estate.
4. When a copy of the security agreement is used as a financing statement, it
is requested that it be accompanied by a completed but unsigned set of
UCC-1 forms without extra fee. Do not attach to UCC-1 form.
5. At the time of original filing, filing officer will return third copy as an
acknowledgement. At a later time, secured party may date and sign
Termination Legend and use third copy as a Termination Statement.
This Financing Statement is filed with Office of the Secretary of the State,
Uniform Commercial Code Div., 30 Trinity St., Hartford, Conn 06106.
- - --------------------------------------------------------------------------------
NAME AND ADDRESS OF DEBTOR (Or Assignor)
Dairy Mart Convenience Stores, Inc.
One Vision Drive
Enfield, Connecticut 06082
- - --------------------------------------------------------------------------------
NAME AND ADDRESS OF SECURED PARTY (Or Assignee)
Fleet Bank, National Association, As Agent
One Constitution Plaza
Hartford, Connecticut 06115
- - --------------------------------------------------------------------------------
FOR FILING OFFICE (Date, Time, Number)
- - --------------------------------------------------------------------------------
1. This financing statement covers the | 5. Assignee(s) of Secured Party
following types (or items) of property | and Address(es)
(Describe) |_________________________________
See attached collateral description on Schedule A.
- - --- ----------
- - --------------------------------------------------------------------------------
2. (If collateral is crops) the above described crops are growing or are to be
grown on (describe real estate above or on a separate sheet).
3. (If applicable) the above goods are to become fixtures on (describe real
estate above or on a separate sheet) and filing statement is to be filed
for record in the real estate records.
(If debtor does not have an interest of record) the name of the owner
is _____________________________________________
4. [X] (If products of collateral are claimed) products of collateral are
also covered.
1 Number of additional sheets presented.
---
[ ] Debtor is a transmitting utility as defined in 42a-9-402 Conn, General
Statutes
- - --------------------------------------------------------------------------------
WHICHEVER | DAIRY MART CONVENIENCE STORES, INC.
IS | By: /s/ Gregory G. Landry Exec. V.P.
APPLICABLE | ---------------------------------
| Signature of Debtor (Or Assignor)
- - --------------------------------------------------------------------------------
| FLEET BANK, NATIONAL ASSOCIATION
| By:
| ----------------------------------------
| Signature of Secured Party (Or Assignee)
- - --------------------------------------------------------------------------------
Part (1) Filing Officer Copy - Alphabetical
STANDARD FORM - UNIFORM COMMERCIAL CODE - FORM UCC-1
(LOGO OF UNIFORM PRINT &
SUPPLY, INC. APPEARS HERE)
- - --------------------------------------------------------------------------------
Part (4) Secured Party Copy ORIGINATOR - Remove this copy and forward balance
of form intact for filing.
- - --------------------------------------------------------------------------------
Part (5) Debtor Copy ORIGINATOR - Remove this copy and forward balance of
form intact for filing.
- - --------------------------------------------------------------------------------
<PAGE>
SCHEDULE A
TO
UCC-1 FINANCING STATEMENT
DEBTOR: DAIRY MART CONVENIENCE STORES, INC.
SECURED
PARTY: FLEET BANK, NATIONAL ASSOCIATION, AS AGENT FOR THE BANKS AND OTHER
FINANCIAL INSTITUTIONS FROM TIME TO TIME PARTIES TO THAT CERTAIN
CREDIT AGREEMENT DATED FEBRUARY 25, 1994, AMONG DEBTOR, FLEET BANK,
NATIONAL ASSOCIATION, AS AGENT, AND SAID BANKS AND OTHER FINANCIAL
INSTITUTIONS
All of the following property:
(a) all loans, advances and extensions of credit from time to time
advanced or extended by the Company to any direct or indirect Subsidiary of
the Company and all right, title and interest of the Company in and to all
choses in action, causes of action and all other general intangibles (as such
term is defined in the Code) now or hereafter relating to such loans, advances
or extensions of credit.
(b) all proceeds and products of the property described in clause (a)
above in whatever form, including, but not limited to: cash, deposit accounts
(whether or not comprised solely of proceeds), certificates of deposit,
negotiable instruments and other instruments for the payment of money, chattel
paper, security agreements or documents; and
(c) all of Debtor's ledger sheets, files, records, books of account,
business papers, computers, computer software and programs, and documents
relating to the property referred to in the foregoing clauses (a) and (b).
As used herein, a "Subsidiary" shall mean any corporation, partnership
or other entity of which shares of stock or other ownership interests having
ordinary voting power (other than stock or such other ownership interests
having such power only by reason of the happening of a contingency) to elect a
majority of the board of directors or other managers of such corporation,
partnership or other entity are at the time owned, or the management of which
is otherwise controlled, directly or indirectly through one or more
intermediaries, or both, by Debtor.
<PAGE>
RECEIPT
DAIRY MART CONVENIENCE STORES, INC.
Reference is made to that certain Credit Agreement dated February 25, 1994
(the "Credit Agreement") among DAIRY MART CONVENIENCE STORES, INC. (the
"Company"), each of the banks listed on Schedule I thereto (collectively, the
"Banks") and FLEET BANK, NATIONAL ASSOCIATION, as agent (the "Agent").
Capitalized terms used and not defined herein have the meanings specified
in the Credit Agreement.
The Agent, on behalf of the Banks, hereby acknowledges receipt from the
Company of a Revolving Credit Notes, dated the date hereof, in the form
attached as Exhibit A to the Credit Agreement, in the principle amount set
forth opposite each such Bank's name on Schedule I to the Credit Agreement.
Dated: February 25, 1994
FLEET BANK, NATIONAL ASSOCIATION,
as Agent on behalf of the Banks
By: /s/ Walter P. Schuppe
------------------------------
Walter P. Schuppe
Vice President
<PAGE>
8(a)
<PAGE>
[LETTERHEAD OF SCHATZ & SCHATZ, RIBICOFF & KOTKIN APPEARS HERE]
February 25, 1994
To each of the banks and other
financial institutions from
time to time parties to the
Credit Agreement dated as of
February 25, 1994, among Dairy
Mart Convenience Stores, Inc.,
said banks and other financial
institutions and Fleet Bank,
National Association, as agent
for said banks and other
financial institutions.
Dear Sirs:
We have acted as counsel for Dairy Mart Convenience Stores, Inc., a
Delaware corporation (the "Company"), and for the Designated Subsidiaries, in
connection with the execution and delivery of the Credit Agreement, dated as
of February 25, 1994 (the "Credit Agreement"), among the Company, the banks
and other financial institutions parties thereto from time to time (the
"Banks") and Fleet Bank, National Association, as agent (in such capacity, the
"Agent") and the execution and delivery pursuant thereto of the Subsidiary
Guarantee, the Pledge Agreements, the Company Security Agreement, the Notes,
and the other Loan Documents referred to in the Credit Agreement.
This opinion is delivered to you pursuant to subsection 5.1(g) of the
Credit Agreement. Terms used herein which are defined in the Credit Agreement
shall have the respective meanings set forth in the Credit Agreement, unless
otherwise defined herein.
In connection with this opinion, we have reviewed executed copies of each
of the Credit Agreement, the Revolving Credit Notes, the Subsidiary Guarantee,
the Company Pledge Agreement, the Company Security Agreement, the Subsidiary
Pledge Agreement and the documents listed on Schedule A attached hereto. In
stating our opinion, we have assumed without investigation the genuineness of
all signatures of, and the authority of, persons signing on behalf
<PAGE>
Schatz & Schatz, Ribicoff & Kotkin
-2-
of parties thereto other than the Company and its Designated Subsidiaries, the
authenticity of all documents submitted to us as originals and the conformity
to authentic original documents of all documents submitted to us as certified,
conformed or photostatic copies, and that each of the Banks will act in good
faith and deal fairly with the Company in enforcing their rights under the
Credit Agreement.
We note that (a) no opinion is expressed with respect to (i) the
enforceability of any jury trial waiver (in that such waivers are not
necessarily enforceable in Connecticut) or any provision providing for a
method of service of process, or (ii) whether a right of setoff is enforceable
with respect to certain specially designated bank accounts, (b) availability
of your remedies under the Subsidiary Pledge Agreement with respect to the
stock of Financial Opportunities, Inc. and the Company Pledge Agreement with
respect to the stock of CONNA Corporation is subject to compliance with the
procedures of, and to the approval of, the Small Business Administration, and
(c) references herein to our knowledge refer to matters disclosed to us by the
Company in connection herewith or which are otherwise within our actual
knowledge, but not any other documents or information.
We further note that we are familiar with the laws of Connecticut and the
United States and with the corporate laws of Delaware (the "Covered
Jurisdictions") and that the opinions set forth herein are subject to the
effects that the laws of any other jurisdictions may have thereon. This
opinion is also subject to the assumptions and limitations set forth on
Schedule B attached hereto.
Based on the foregoing, we are of the opinion that:
1. Except as set forth in Schedule C attached hereto, each of the
Company and its Designated Subsidiaries is duly organized, validly existing
and in good standing under the laws of the jurisdiction of its incorporation.
2. The Company has the corporate power and authority, and the legal
right, to make, deliver and perform the Credit Agreement, the Notes, and the
other Loan Documents to which it is a party, to borrow under the Credit
Agreement and the Notes and to grant the Liens pursuant to the Company Pledge
Agreement and the Company Security Agreement and has taken all necessary
corporate action to authorize the borrowings on the terms and conditions of the
Credit Agreement and the Notes, the grant of the Liens pursuant to the
Company Pledge Agreement and the Company Security Agreement and the execution,
delivery and performance of the Credit Agreement, the Notes, and each other
Loan Document to which it is a party. Each Designated Subsidiary has the
corporate power and authority, and the legal right, to make, deliver and
perform each of the Loan Documents to which such Designated Subsidiary is a
party and to
<PAGE>
Schatz & Schatz, Ribicoff & Kotkin
-3-
grant the Liens pursuant to the Subsidiary Pledge Agreement and has taken all
necessary corporate action to authorize the grant of the Liens pursuant to the
Subsidiary Pledge Agreement and the execution, delivery and performance of
each of the Loan Document to which such Designated Subsidiary is a party.
3. Each Loan Document has been duly executed and delivered on behalf of
the Company or the Designated Subsidiary party thereto. Each of the Credit
Agreement, the Pledge Agreements, the Company Security Agreement, the
Revolving Credit Notes delivered at the Closing, and each other Loan Document
(except for Notes subsequently delivered) constitutes a legal, valid and
binding obligation of the Company or such subsidiary enforceable against the
Company or such subsidiary in accordance with its terms, except as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, fraudulent conveyance, moratorium or similar laws affecting
the enforcement of creditors' rights generally and by general equitable
principles (whether enforcement is sought by proceedings in equity or at law).
4. The execution, delivery and performance of the Credit Agreement, the
Notes, and each other Loan Document, the grant of the Liens pursuant to the
Pledge Agreements and the Company Security Agreement, the borrowings under the
Credit Agreement and the Notes and the use of the proceeds thereof will not
violate any Requirement of Law in the Covered Jurisdictions and will not
result in, or require, the creation or imposition of any Lien on any of its or
their respective properties or revenues pursuant to any such Requirement of
Law in the Covered Jurisdictions, other than such Liens created by the Credit
Agreement or other Loan Documents.
5. No consent or authorization of, filing with or other act by or in
respect of, any Governmental Authority in the Covered Jurisdictions is
required in connection with the extensions of credit under the Credit
Agreement and the Notes, the grant of the Liens pursuant to the Pledge
Agreements, the Company Security Agreement or the execution, delivery,
performance, validity or enforceability of the Credit Agreement, the Notes,
each Application or any other Loan Document.
6. Neither the Company nor any Subsidiary is an "investment company," or
a company "controlled" by an "investment company," within the meaning of the
Investment Company Act of 1940, as amended. Neither the Company nor any
Subsidiary is subject to regulation under any statute in the Covered
Jurisdictions or regulation which limits its ability to incur Indebtedness.
7. The provisions of each Pledge Agreement are effective to create in
favor of the Agent for the ratable benefit of the Banks a legal, valid and
enforceable security interest in all right, title and interest of the pledgor
in the Collateral as described therein. When the Pledged Stock (as defined in
each such Pledge
<PAGE>
Schatz & Schatz, Ribicoff & Kotkin
-4-
Agreement) has been delivered to the Agent, each such Pledge Agreement will
constitute a fully perfected lien on, and security interest in, all right,
title and interest of the pledgor in the Collateral described therein, subject
to no prior security interest under the Uniform Commercial Code assuming
continuous possession by the Agent of the Pledged Stock.
8. Assuming the proceeds of the extensions of credit under the Credit
Agreement are used solely for the purposes set forth in, and in accordance
with the provisions of, the Credit Agreement, neither such extensions of
credit nor the use of the proceeds thereof violates the provisions of
Regulation U of the Board of Governors of the Federal Reserve System.
9. The provisions of the Company Security Agreement are effective to
create in favor of the Agent for the ratable benefit of the Banks a legal,
valid and enforceable security interest in all right, title and interest of the
Company in the Collateral described therein.
10. The extensions of credit under the Credit Agreement and the Notes
constitute Senior Debt under and as defined in the Subordinated Indenture and
the Senior Subordinated Indenture.
This letter is given pursuant to the Credit Agreement as of the date
hereof and we do not undertake to update it. It may not be used for any other
purpose or disclosed to or relied upon by anyone other than the Banks and the
Agent and their professional advisors, auditors, and attorneys and as
otherwise required under applicable law or regulation.
Very truly yours,
/s/ Schatz & Schatz, Ribicoff & Kotkin
Schatz & Schatz, Ribicoff & Kotkin
<PAGE>
Schatz & Schatz, Ribicoff & Kotkin
Schedule A
----------
For the Company and for each of the Designated Subsidiaries:
(1) Certificates of Incorporation;
(2) Bylaws;
(3) UCC lien searches;
(4) Certificates of good standing in the state of incorporation;
(5) Minutes of resolutions approving the Credit Agreement;
(6) Officers' certificates;
(7) Incumbency certificates; and
(8) Stock powers.
<PAGE>
Schatz & Schatz, Ribicoff & Kotkin
Schedule B
----------
This opinion is further subject to the following assumptions and
limitations:
(a) There has not been any mutual mistake of fact or misunderstanding,
fraud, duress or undue influence.
(b) The constitutionality or validity of a relevant statute, rule,
regulation or agency action is not in issue unless a reported
decision in the jurisdictions covered by the opinion has
specifically addressed but not resolved, or has established, its
unconstitutionality or invalidity.
(c) Limitations based upon laws and regulations relating to the
operation and conduct of the business of the Bank.
(d) There are no agreements or understandings among the parties, written
or oral, and there is no usage of trade or course of prior dealing
among the parties, that would, in either case, define, supplement or
qualify the terms of the documents.
(e) The parties will obtain all permits and approvals required in the
future, and take all actions similarly required, relevant to
subsequent performance of the Loan Documents.
(f) Each document obtained from a government agency is accurate,
authentic and complete and all official public records (including
their proper indexing and filing) are accurate and complete.
As used herein, "general principles of equity" include, without
limitation, principles:
(a) governing the availability of specific performance, injunctive
relief or other equitable remedies, which generally place the award
of such remedies, subject to certain guidelines, in the discretion
of the court to which application for such relief is made;
(b) affording equitable defenses (e.g., waiver, laches and estoppel)
against a party seeking enforcement;
(c) requiring good faith and fair dealing in the performance and
enforcement of a contract by the party seeking its enforcement;
<PAGE>
Schatz & Schatz, Ribicoff & Kotkin
-2-
(d) requiring reasonableness in the performance and enforcement of an
agreement by the party seeking enforcement of the contract;
(e) requiring consideration of the materiality of (i) a breach and
(ii) the consequences of the breach to the party seeking
enforcement;
(f) requiring consideration of the impracticability or impossibility of
performance at the time of attempted enforcement; and
(g) affording defenses based upon the unconscionability of the enforcing
party's conduct after the parties have entered into the contract.
The opinions set forth herein do not address any of the following legal
issues:
(a) The statutes and ordinances, administrative decisions, and the
rules and regulations of counties, towns, municipalities and special
political subdivisions, and judicial decisions to the extent that
they deal with any of the foregoing;
(b) fraudulent transfer and fraudulent conveyance laws;
(c) Federal and state antitrust, securities, tax, health and safety,
labor and environmental laws and regulations;
(d) Federal and state land use and subdivision laws and regulations;
(e) Federal patent, copyright and trademark, state trademark, and other
Federal and state intellectual property laws and regulations; and
(f) pension and employee benefits laws and regulations.
<PAGE>
Schatz & Schatz, Ribicoff & Kotkin
Schedule C
----------
We express no opinion as to whether SNG of Southern Minnesota, Inc. and
D.M. Insurance Limited are in good standing.
<PAGE>
8(b)
<PAGE>
[LETTERHEAD OF DAIRY MART APPEARS HERE]
February 25, 1994
To each of the banks and other financial
institutions from time to time parties to the
Credit Agreement dated as of February 25,
1994, among Dairy Mart Convenience
Stores, Inc., said banks and other financial
institutions and Fleet Bank, National
Association, as agent for said banks and
other financial institutions.
Dear Sirs:
I have acted as counsel for Dairy Mart Convenience Stores, Inc., a
Delaware corporation (the "Company"), and for the Designated Subsidiaries, in
connection with the execution and delivery of the Credit Agreement, dated as
of February 25, 1994 (the "Credit Agreement"), among the Company, the banks
and other financial institutions parties thereto from time to time (the
"Banks") and Fleet Bank, National Association, as agent (in such capacity, the
"Agent") and the execution and delivery pursuant thereto of the Subsidiary
Guarantee, the Pledge Agreements, the Notes, the Company Security Agreement,
and the other Loan Documents referred to in the Credit Agreement.
This opinion is delivered to you pursuant to subsection 5.1(q) of the
Credit Agreement. Terms used herein which are defined in the Credit Agreement
shall have the respective meanings set forth in the Credit Agreement, unless
otherwise defined herein.
In connection with this opinion, I have reviewed executed copies of each
of the Credit Agreement, the Revolving Credit Notes, the Subsidiary Guarantee,
the Company Pledge Agreement, the Company Security Agreement, the Subsidiary
Pledge Agreement, the certificates representing the Pledged Stock (as defined
in the Pledge Agreement), the records of all relevant shareholder and
directors actions of Company and Designated Subsidiaries and such other
documents as were necessary for me to render this opinion. In stating my
opinion, I have assumed without investigation the genuineness of all
signatures of, and the authority of, persons signing on behalf of parties
thereto other than the Company and the Designated Subsidiaries and its
originals and the conformity to authentic original documents of all documents
submitted to me as certified, conformed or photostatic copies, and that each
of the Banks will act in good faith and deal fairly with the Company in
enforcing their rights under the Credit Agreement.
<PAGE>
[LETTERHEAD OF DAIRY MART APPEARS HERE]
I note that (a) no opinion is expressed with respect to (i) the
enforceability of any jury trial waiver (in that such waivers are not
necessarily enforceable in Connecticut) or any provision providing for a
method of service of process if such method is not permitted by law, or (ii)
whether a right of setoff is enforceable with respect to certain specially
designated bank accounts, (b) availability of your remedies under the
Subsidiary Pledge Agreement with respect to the stock of Financial
Opportunities, Inc. is subject to compliance with the procedures of, and to
the approval of, the Small Business Administration, and (c) references herein
to my knowledge refer to matters disclosed to me by the Company in connection
herewith or which are otherwise within my actual knowledge, but not any other
documents or information.
I further note that I am familiar with the laws of Connecticut and the
United States and with the corporate laws of Delaware (the "Covered
Jurisdictions") and that the opinions set forth herein are subject to the
effects that the laws of any other jurisdictions may have thereon.
Based on the foregoing, I am of the opinion that:
1. Each of the Company and its Designated Subsidiaries is duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation, and (a) has the corporate power and
authority, and the legal right, to own and operate its property, to lease the
property its operates as lessee and to conduct the business in which it is
currently engaged, and (b) is duly qualified as a foreign corporation and in
good standing under the laws of each jurisdiction where its ownership, lease
or operation of property or the conduct of its business requires such
qualification, except to the extent that the failure to so qualify would not
have a Material Adverse Effect.
2. No consent or authorization of, filing with or other act by or in
respect of, any Governmental Authority in the Covered Jurisdictions or, to the
best of my knowledge, any other Person, is required in connection with the
extensions of credit under the Credit Agreement and the Notes, the grant of
the Liens pursuant to the Pledge Agreements, the Company Security Agreement or
the execution, delivery, performance, validity or enforcement of the Credit
Agreement, the Notes, or enforcement of the Credit Agreement, the Notes, or
any other Loan Document, except to the extent that the failure to obtain such
consent or authorization, or the failure to make any filing, would not have a
Material Adverse Effect.
3. The execution, delivery and performance of the Credit Agreement, the
Notes and each Loan Document, the grant of the Liens pursuant to the Company
Security Agreement and the Pledge Agreements, the borrowings under the Credit
Agreement and the Notes and the use of the proceeds thereof will not violate
any Requirement of Law in the Covered Jurisdictions or, to the best of my
knowledge, any Contractual Obligation of the Company of any of its Designated
Subsidiaries and will not result in, or require, the creation or imposition of
any Lien on any of its or their respective properties or revenues pursuant of
any such Requirement of Law in the Covered Jurisdictions or, to the best of my
knowledge, any Contractual Obligation, other thant such Liens created by the
Credit Agreement of other Loan Documents.
2
<PAGE>
[LETTERHEAD OF DAIRY MART APPEARS HERE]
4. To the best of my knowledge, no litigation, investigation or
proceeding of or before any arbitrator or Governmental Authority is pending or
threatened by or against the Company or any of its Subsidiaries or against any
of its or their respective properties or revenues (a) with respect to the
Credit Agreement, the Notes, any Application or any other Loan Document or any
of the transactions contemplated thereby, or (b) which could have a Material
Adverse Effect (except for matters disclosed in Schedule VII of the Credit
Agreement).
5. The shares of the Pledged Stock have been duly authorized and are
validly issued, fully paid, and non-assessable. The certificates representing
such shares are in proper form.
This letter is given pursuant to the Credit Agreement as of the date
hereof and I do not undertake to update it. It may not be used for any other
purpose or disclosed to or relied upon by anyone other than the Banks and the
Agent and their professional advisors, auditors, and attorneys and as
otherwise required under applicable law or regulation.
Very truly yours,
DAIRY MART CONVENIENCE STORES, INC.
/s/ Gregory Wozniak
Gregory Wozniak
Vice President, Corporate Counsel
GW:mag
3
<PAGE>
[LETTERHEAD OF FLEET BANK APPEARS HERE]
March 7, 1994
Dairy Mart Convenience Stores, Inc.
One Vision Drive
Enfield, Connecticut 06082
Attention: Gregory Wozniak, Esq.
Vice President and General Counsel
Re: Credit Agreement by and among Dairy Mart Convenience Stores, Inc.,
Fleet Bank, National Association and Society National Bank dated
as of February 25, 1994
Dear Greg:
This letter shall acknowledge our receipt of the stock certificates (and
related stock powers) listed on Schedule A attached hereto, as Agent for the
----------
Banks under the above-referenced Credit Agreement.
Very truly yours,
FLEET BANK, NATIONAL ASSOCIATION
By /s/ Walter P. Schuppe
------------------------------
Walter P. Schuppe
Vice President
cc: Peter H. Levine, Esq.
Gerald M. Smith, Esq.
<PAGE>
SCHEDULE A
<TABLE>
<CAPTION>
Stock
Class of Certificate No. of
Issuer Stock No(s). Shares
<S> <C> <C> <C>
CIA Food Marts, Inc. Common 1 100
CONNA Corporation Common 1 1,000
Convenient Gasoline, Inc. Common 1 10
Convenient Industries of America, Inc. Common C 26058 2,000
Common C 26064 2,000
D.M. Insurance Limited Common 1 119,993
Dairy Mart East, Inc. Common 2 1,000
Dairy Mart, Inc. Common 1 100
Dairy Mart Farms, Inc. Common 2 1,000
Dairy Mart Convenience Stores of Ohio, Inc. Common 2 1,000
Food Merchandisers, Inc. Common 1 100
Golden Stores, Inc. Common 2 100
Common 3 400
Greenwell Grocery Co., Inc. Common 5 100
Jackson County Co., Inc. Common 5 100
Lakeside Wholesale Common 2 500
LMC, Inc. Common 2 500
Open Pantry Properties, Inc. Common 1 100
Oscar Ewing, Inc. Common 26 733
Preferred 12 350
Quik Shops, Inc. Common 3 500
Remote Services, Inc. Common 11 114
SNG of Southern Minnesota, Inc. Common 10 125
The Lawson Milk Company Common 1 500
Common 2 100
The Lawson Company Common 3 1,000
</TABLE>
<PAGE>
DAIRY MART CONVENIENCE STORES, INC.
CLOSING CERTIFICATE
The undersigned, Gregory Wozniak, does hereby certify that he is the Vice
President, Corporate Counsel and Assistant Secretary, of Dairy Mart Convenience
Stores, Inc., a Delaware corporation (the "Company"), and that, as such, he is
authorized to execute and deliver this Certificate in the name and on behalf of
the Company, and that:
1. This certificate is being delivered pursuant to subsection 5.1(l) of
that certain Credit Agreement dated as of February 25, 1994 (the "Credit
Agreement") by and between the Company, Fleet Bank, National Association, as
agent, and the banks listed on Schedule I thereto (the "Banks"). The terms
used in this Certificate and not defined herein shall have the respective
meanings ascribed to them in, or pursuant to the provisions of the Credit
Agreement.
2. The representations and warranties contained in Section 4 of the
Credit Agreement are (except as affected by transactions contemplated by the
Credit Agreement) true and correct in all material respects on the date hereof
with the same effect as though made on and as of the date hereof.
3. No event or condition has occurred or is continuing which with the
giving of notice, the lapse of time, or both, would constitute an Event of
Default.
4. The Company has performed and compiled with all agreements and
conditions contained in the Credit Agreement which are required to be
performed of compiled with by the Company before or at the date hereof.
IN WITNESS WHEREOF, I have executed this Certificate in the name and on
behalf of the Company this 4th day of March, 1994.
DAIRY MART CONVENIENCE STORES, INC.
By /s/ Gregory Wozniak
---------------------------------
Gregory Wozniak
Its Vice President - Corporate
Counsel and Assistant Secretary
<PAGE>
DAIRY MART CONVENIENCE STORES, INC.
OFFICER'S CERTIFICATE
The undersigned hereby certifies that:
1. He is the duly qualified, elected, and acting Executive Vice President
and Chief Financial Officer of Dairy Mart Convenience Stores, Inc., a Delaware
corporation (the "Company").
2. This Certificate is being delivered pursuant to subsection 5.1(r) of
that certain Credit Agreement ("Credit Agreement") dated as of February 25,
1994 by and among the Company, Fleet Bank, National Association, as agent, and
the banks listed on Schedule I thereto. The terms used in this Certificate
and not defined herein shall have the respective meanings ascribed to them in,
or pursuant to the provisions of, the Credit Agreement.
3. All consents, authorizations, notices and filings necessary or
advisable in connection with the financings contemplated by the Credit
Agreement and the continuing operations of the Company, have been obtained and
are in full force and effect, except where the failure to obtain such
consents, authorizations, notices or filings would not have a Material Adverse
Effect.
IN WITNESS WHEREOF, the undersigned has executed this Certificate this
25th day of February, 1994.
/s/ Gregory G. Landry
-------------------------
Gregory G. Landry
Executive Vice President
and Chief Financial
Officer
<PAGE>
EXHIBIT 21
DAIRY MART CONVENIENCE STORES, INC. AND SUBSIDIARIES
SUBSIDIARIES OF THE REGISTRANT
Dairy Mart, Inc. (a Massachusetts corporation)
Dairy Mart Farms, Inc. (a Connecticut corporation)
Dairy Mart East, Inc. (a Rhode Island corporation)
The Lawson Company (a Delaware corporation)
CONNA Corporation (a Kentucky corporation)
<PAGE>
EXHIBIT 23
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
-----------------------------------------
As independent public accountants, we hereby consent to the incorporation
of our reports included in this Form 10-K, into the Company's previously filed
Registration Statements on Forms S-8, File No. 33-8209 and File No. 33-47893.
ARTHUR ANDERSEN & CO.
Hartford, Connecticut
April 21, 1994
